There's more than 1 way to thread a needle-or drive to Albuquerque-and in 2009 apparently Sumner and Krugman both foresaw the future of a low inflation, a slow recovery, and especially near-zero interest rates travelling 2 very different roads. Krugman gets there via: what else? IS-LM.
Sumner says he got there by watching markets:
"I have a very low opinion of the IS-LM model; indeed I blame a lot of our policy failures on that model. I think it led too many economists to write off monetary policy in late 2008, right when we desperately needed monetary stimulus. But I reached the same conclusions as Krugman, for somewhat different reasons."
http://www.themoneyillusion.com/?p=29523#comments
As that ultimate patron saint of the Right, Ronald Reagan, once said: 'There you go again.'
Krugman didn't lose any 'prestige' in 2013; this is a figment of Sumner's imagination. Let's be clear: as far as prestige goes, whatever Sumner has is smallest drop in the bucket relative to Krugman, whatever is alleged to have taken place in 2013.
However, for the record, Sumner didn't 'win any bet'-he claims that Krugman's criticism of the sequester was wrong because we didn't have a double dip recession; but this is setting a very low bar to win this 'bet'; you can't show that austerity had no ill effects as we didn't have a literal recession, you'd have to prove that the economy would have been no better if we hadn't had the contraction in 2013.
I''d argue that whatever prestige Sumner had was further damaged by the way he strutted over this imaginary victory. The GDP-or NGDP-numbers of 2013 were very noisy and to declare victory Sumner had to do some creative cherrypicking and then make some very heavy weather.
Sumner gives us his endgame-a world where Say's Law-which isn't true in reality-will act as if it is true:
"Krugman sees traders as drug-crazed yuppies. I see economists and Fed officials as stupid bulls that need a ring in their noses. Then you attach the rings to the markets, and let those 22-27 year old drug-addled traders lead us to a glorious world where expected NGDP growth is always on target and where bailouts and fiscal stimulus aren’t needed. A world where Say’s Law is true even though it’s not really true (I stole that last one from Brad DeLong.)"
As long as he's at it, maybe he can ask those druggie traders about NGDP futures-they'll probably explain to him why they don't work.
Sumner says he got there by watching markets:
"I have a very low opinion of the IS-LM model; indeed I blame a lot of our policy failures on that model. I think it led too many economists to write off monetary policy in late 2008, right when we desperately needed monetary stimulus. But I reached the same conclusions as Krugman, for somewhat different reasons."
"Since late 2008, I’ve consistently wanted more, more and more, but not for IS-LM reasons. Rather I’m a market monetarist, and in my view the markets have been signaling a need for more, more and more. I’m also a Lars Svensson-style, “target the forecast” guy, which means I always, at every single moment, want the instruments of monetary policy set at a position where expected NGDP growth equals desired NGDP growth. Since 2008 we’ve consistently fallen short.
In contrast, Paul Krugman is much more skeptical of the market view:
Kevin O’Rourke has a post, What do markets want, raising the same issues I’ve been discussing about debt, austerity, etc.
But never mind all that: read the comments, specifically this one:
The markets want money for cocaine and prostitutes. I am deadly serious.Most people don’t realize that “the markets” are in reality 22-27 year old business school graduates, furiously concocting chaotic trading strategies on excel sheets and reporting to bosses perhaps 5 years senior to them. In addition, they generally possess the mentality and probably intelligence of junior cycle secondary school students. Without knowledge of these basic facts, nothing about the markets makes any sense—and with knowledge, everything does.
"That’s about as far from my view of markets as it’s possible to get, although I suspect that Krugman himself doesn’t really quite believe it. Maybe it’s just my imagination, but on occasion I think I see him “peeking” at markets, to confirm his (often excellent) intuition about where things are going. And when he fails to do so, as in early 2013, he pays a heavy price in lost prestige."
http://www.themoneyillusion.com/?p=29523#comments
As that ultimate patron saint of the Right, Ronald Reagan, once said: 'There you go again.'
Krugman didn't lose any 'prestige' in 2013; this is a figment of Sumner's imagination. Let's be clear: as far as prestige goes, whatever Sumner has is smallest drop in the bucket relative to Krugman, whatever is alleged to have taken place in 2013.
However, for the record, Sumner didn't 'win any bet'-he claims that Krugman's criticism of the sequester was wrong because we didn't have a double dip recession; but this is setting a very low bar to win this 'bet'; you can't show that austerity had no ill effects as we didn't have a literal recession, you'd have to prove that the economy would have been no better if we hadn't had the contraction in 2013.
I''d argue that whatever prestige Sumner had was further damaged by the way he strutted over this imaginary victory. The GDP-or NGDP-numbers of 2013 were very noisy and to declare victory Sumner had to do some creative cherrypicking and then make some very heavy weather.
Sumner gives us his endgame-a world where Say's Law-which isn't true in reality-will act as if it is true:
"Krugman sees traders as drug-crazed yuppies. I see economists and Fed officials as stupid bulls that need a ring in their noses. Then you attach the rings to the markets, and let those 22-27 year old drug-addled traders lead us to a glorious world where expected NGDP growth is always on target and where bailouts and fiscal stimulus aren’t needed. A world where Say’s Law is true even though it’s not really true (I stole that last one from Brad DeLong.)"
As long as he's at it, maybe he can ask those druggie traders about NGDP futures-they'll probably explain to him why they don't work.
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