I recently talked about his list of policy preferences in dealing with a recession the other day. While his preferences unsurprisingly are quite from mine there is some level of agreement.
http://diaryofarepublicanhater.blogspot.com/2015/02/sumner-tells-us-where-hes-willing-to.html
Again, I don't get why he places 'tight money'-that is tighter money than actual monetary policy since 2009 as preferable to fiscal stimulus without monetary stimulus and didn't really get him to answer my question there. Part of it as I said in the above link, that when you-and probably even more me as Sumner and I have never exactly been buddies-really want Sumner to answer a question it's best to just ask him one.
He did, however, answer my question regarding the last 6 years of policy: where does it rank vs. his list?
"About the same as 4, it depends how wasteful the government spending is. If it’s the trillion dollars they are spending on jet fighters I’d say almost totally wasteful. If it’s infrastructure, much better. Wages subsidies for the poor, even better."
http://www.themoneyillusion.com/?p=28580&cpage=2#comment-378780
So here at least Sumner and I agree. His point though is hisusual one that for him fiscal policy is not really the appropriate level for stabilization-there may be other good reasons to do infrastructure like if lots of schools or bridges are dilapidated there is value in repairing them-but stabilization itself is for the monetary authority.
After reading his blog for 4 years, I still don't get him here. I mean even if monetary policy is preferable why if the monetary authority doesn't do its job wouldn't fiscal policy be preferable to nothing?
Nick Rowe has written a lot lately himself about the preference of monetary to fiscal policy. I appreciate Nick at least getting into the weeds more than Sumner on this point. I mean there's no question that mainstream economists for the last 25 years have preferred monetary to fiscal policy-even the alleged Keynesians, like Simon Wren-Lewis.
"There are a significant group of people who think that monetary policy must be the right answer even in a liquidity trap because of the centrality of money in macroeconomics, and because of ‘basic’ ideas like money neutrality. Call them market monetarists if you like. They dislike fiscal stimulus because - in their view - it just has to be second best, or a fudge, compared to monetary policy. Their view is not ideological, but essentially based on macro theory. Now it may not be very relevant to the real world, but for many holding the theoretical high ground is important, because it colours their view of the real world."
http://mainlymacro.blogspot.com/2014/12/money-impotence-in-context.html
Note though the fine print even in a liquidity trap. So if it's not a liquidity trap WL, Delong, Krugman, et. al agree that monetary policy is preferable. So the preference has wide currency. I still don't really get why though.I don't find monetary offset very persuasive, especially as the Fed has actually asked for fiscal stimulus during the recession and slow recovery.
I find Nick's arguments interesting-fiscal policy is somehow a makeshift band-aid for a car with a bad transmission, whereas taking it to the shop is monetary policy.
I admit it's a cool analogy but I still don't get what makes monetary policy more primary. Why is monetary policy taking it to the mechanic and fiscal policy trying to make do with duct tape and glue? That I still don't get-perhaps I never will.
http://diaryofarepublicanhater.blogspot.com/2015/02/sumner-tells-us-where-hes-willing-to.html
Again, I don't get why he places 'tight money'-that is tighter money than actual monetary policy since 2009 as preferable to fiscal stimulus without monetary stimulus and didn't really get him to answer my question there. Part of it as I said in the above link, that when you-and probably even more me as Sumner and I have never exactly been buddies-really want Sumner to answer a question it's best to just ask him one.
He did, however, answer my question regarding the last 6 years of policy: where does it rank vs. his list?
"About the same as 4, it depends how wasteful the government spending is. If it’s the trillion dollars they are spending on jet fighters I’d say almost totally wasteful. If it’s infrastructure, much better. Wages subsidies for the poor, even better."
http://www.themoneyillusion.com/?p=28580&cpage=2#comment-378780
So here at least Sumner and I agree. His point though is hisusual one that for him fiscal policy is not really the appropriate level for stabilization-there may be other good reasons to do infrastructure like if lots of schools or bridges are dilapidated there is value in repairing them-but stabilization itself is for the monetary authority.
After reading his blog for 4 years, I still don't get him here. I mean even if monetary policy is preferable why if the monetary authority doesn't do its job wouldn't fiscal policy be preferable to nothing?
Nick Rowe has written a lot lately himself about the preference of monetary to fiscal policy. I appreciate Nick at least getting into the weeds more than Sumner on this point. I mean there's no question that mainstream economists for the last 25 years have preferred monetary to fiscal policy-even the alleged Keynesians, like Simon Wren-Lewis.
"There are a significant group of people who think that monetary policy must be the right answer even in a liquidity trap because of the centrality of money in macroeconomics, and because of ‘basic’ ideas like money neutrality. Call them market monetarists if you like. They dislike fiscal stimulus because - in their view - it just has to be second best, or a fudge, compared to monetary policy. Their view is not ideological, but essentially based on macro theory. Now it may not be very relevant to the real world, but for many holding the theoretical high ground is important, because it colours their view of the real world."
http://mainlymacro.blogspot.com/2014/12/money-impotence-in-context.html
Note though the fine print even in a liquidity trap. So if it's not a liquidity trap WL, Delong, Krugman, et. al agree that monetary policy is preferable. So the preference has wide currency. I still don't really get why though.I don't find monetary offset very persuasive, especially as the Fed has actually asked for fiscal stimulus during the recession and slow recovery.
I find Nick's arguments interesting-fiscal policy is somehow a makeshift band-aid for a car with a bad transmission, whereas taking it to the shop is monetary policy.
I admit it's a cool analogy but I still don't get what makes monetary policy more primary. Why is monetary policy taking it to the mechanic and fiscal policy trying to make do with duct tape and glue? That I still don't get-perhaps I never will.
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