Roger Farmer on the Difference Between Monetary and Fiscal Policy

     Farmer is someone who I find interesting though he's also come out with some rather questionable things. One of the silliest stunts was his 'Open Letter to Krugman' which accused Krugman of stealing all his ideas from Farmer without attribution. Is there anything in this claim? Well let's quote Farmer a little bit and you tell me:

   "I may be the only self-professed Keynesian who is not actively campaigning for large public infrastructure projects. Don’t get me wrong; I believe repairing a few bridges or building an oil pipeline or two would be good things to do. But it is unhelpful to confuse arguments for public investment with plans to restore full employment."

   "Would a big-state investment programme increase employment? Yes. Would it be cheap, since interest rates are low? Absolutely. But it is much easier to increase the size of government than to shrink it."

   "The Keynesians are right: we need to increase demand. But what is the best way to do that? I prefer to see the creation of more private sector jobs, not more government jobs. One way to do that is through managing the value of financial wealth, an approach that offers a creative alternative to more government spending in a time of austerity."

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    There are a couple of questions begged here. I mean, I just don't see Krugman here at all. Listen you know I like calling out Sumner but got to say his open letter was a thousand times better than Farmer's.

    http://www.themoneyillusion.com/?p=349

    Krugman of course totally shot him down here. 

    http://krugman.blogs.nytimes.com/2009/03/02/a-quick-response-to-scott-sumner/?_php=true&_type=blogs&_r=0

. Farmer is not just unoriginal but completely wrong. What's funny is that Krugman's answer to Sumner was 'Did you mean to address this to someone else?' whereas that applies doubly or triply to Farmer. 

    There's no resemblance with Krugman here whatsoever. You can read his OL to Krugman and Krugman's response at Farmer's site. 

     http://www.rogerfarmer.com/

     Farmer has all his other publications and papers here-and it's a great read. I have to assume that his OL was just a publicity stunt and in that vein it seems to have succeeded-he does have a higher profile now. Moving beyond this absurd 'Krugman stole everything from me' gag, I have to wonder why he calls himself a Keynesian Heretic-rather than a Monetarist. 

     There is a lot of debate now about what makes a Keynesian.

     http://uneasymoney.com/2014/02/13/what-does-keynesian-mean/#comment-44577

     I sure don't see what makes Farmer a Keynesian here. If it's because he understands it's an AD problem well Monetarists say that too, so what makes this Keynesian? What interested me actually, though, is that he seems to be saying that the reason we should prefer monetary policy is that it will create private sector jobs and fiscal policy will create govt. jobs. 

    Now let's take this rather extreme claim that basically we can create 1 million jobs with either FP and get 1 million government sector jobs or do MP and get 1 million private sector jobs, what is the necessary reason we should prefer PS to GS jobs? I mean just for argument sake. To be clear I just want the jobs. But don't see why there's this implicit disparagement of GS jobs. It would vouchsafe my argument that Sumner's goal is just to shrink the govt sector. 

    However, I think this is a very extreme assumption. One thing is we likely would never get such a clear choice. Let's say we agree we'd rather get 1 million PS jobs to 1 million GS jobs. Would we prefer 750,000 PS jobs to 1 million GS jobs? What about 500,000 PS jobs to 1 million GS jobs or 250,000 to million? I mean how much more value do we impute to a PS job than a GS job?

    In reality FP can create private sector employment as well. Take the MMT job guarantee idea. There the government is the employer of last resort, It gets a job for everyone who wants one, however, not all the jobs will be in the government sector. Some will be in the nonprofit sector some will indeed be in the private sector. So the choice is not so stark. 

   I think the real question is how many jobs in whatever sector MP vs. FP creates-after we get those numbers, the PS vs. GS distinction might be interesting as a subdivision. I think it depends on what type-not all FP or MP is created equal. I mean if we do 1 billion dollars of FS in tax cuts that's different than 1 billion dollars in government spending in goods and services for example. 

   I think the type of MP can make a difference too-though maybe the Sumner MM claim is that it doesn't matter what the CB does as long as the market thinks it will work. I mean how many jobs does QE create? A study on that would be fascinating.