The bottom line is that I think I get Sumner's point. I don't wholly agree or disagree with it. He probably wants people only that wholly agree with it but it is what it is. Sumner basically believes-like any good monetarist-that monetary policy is what it's about. When you consider the sharp recovery of 1933-34 he believes the main cause was FDR getting us off the gold standard.
The original disagreement between him and Kimel started based on a post he wrote criticizing a book about Keynes written by Skidelsky. Skidelsky gave monetary policy, particularly getting off the gold standard very short thrift. Sumner reacted to that and said he was all wet. This was over a year ago, but then Kimel happened to read it recently.
Recently I attempted to get to the bottom of the dispute. Here is my attempt
http://diaryofarepublicanhater.blogspot.com/2011/11/i-try-to-get-to-bottom-of-sumner-kimel.html
The trouble is that I still find Kimel's bottom line elusive, ironically as I think I probably agree with him more in principle. He however seems to me to get so stuck into particulars and details that the more I read him the further I feel we are from getting to the point. I was just reading a debate between Keynes and Hayek in "The Collected Works of F.A. Hayek Volume 9: Contra Keynes and Cambridge."
What I appreciate in Keynes is that while Hayek quibbles for page after page (pgs 121-46), Keynes quickly bottom lines the difference (pgs. 147-58). Whereas Hayek endlessly questions the exact meaning of Keynes' terminology-'what do you mean by investments'-Keynes showed that the important difference is not these smaller points but that Hayek's notion of "forces savings" was not shared by Keynes.
The last I spoke to Kimel he says he is coming out with a clarifying post soon. I look forward to it, I don't mean to scorn his style.. I actually suspect he has some real points of substance to make but approaches it in a different way and takes a while to get what I look for-the bottom line.
I also get that he draws a lot on his own experience when discussing the dollar devaluation as someone who lived in South America and is used to currency devaluations and sky high inflation. So the gloss he is taking on FDR's move on gold is quite different. I think it may prove very original and interesting and look forward to it. What I can't get is whether because of this he is very opposed to inflation and whether he thinks monetary stimulus doesn't work at all or-as I and Eggertsson think, it works but, unlike Sumner, fiscal stimulus also has a part to play.
I wonder if he is being targeted by right wing trolls as they were some nasty profanity and slurs in the comments last night and someone kept resending the same profanity laden comments.
For my conversations with him please see http://www.angrybearblog.com/2011/11/gold-index-april-1933-february-1934.html#comment-form
in the comments section
I've been following the debate closely, and I think it boils down to Sumner's dismissal of Keynesian theory that fiscal stimulus can have a major impact on righting an economy suffering from demand side constraints. I don't know what Kimel's economic philosophy is, but he is a data driven guy, and is very thorough in his analysis. I'm not speaking for him, but I think he doesn't buy the argument that monetary policy was more of a factor during the 30's than fiscal side stimulus was. I've seen it argued, by Krugman, that we don't really know if true Keynesian stimulus works because "we haven't ever tried it." If the current group of deficit/debt proponents get their way in Congress, we'll see which policy matters more. (I'm with the fiscal stimulus crowd.)
ReplyDeleteBack to the Kimel/Sumner debate: I was trying to see if there was a correlation between and increase in imports and a decline in exports during the time frame under discussion, and the gold standard/devaluation policy. Granted, correlation does not equal causation, and I'm still looking at the BLS data before making any assumptions. In case you missed my comment, I'm not an economist,historical or otherwise. Just an interested observer.
Appreciate you checking in Nanute. I did see your comment at Angry Bear. I clearly agree with you about fiscal stimulus and I think that Kimel also does as you say.
ReplyDeleteI appreciate that he's thorough and data-driven I was just saying that his comments tended to shed more light for me. As long as he's not wholly denying monetary stimulus he and I agree as well.
What you say about Sumner I think is right-but this stance of his is par for the course with monetarists who argue that we should only do monetary stimulus. The piece by Eggertsson agrees that generaly it's true that a fsical sitmulus will be neutralized but during depression conditions-deflation, the zero lower bound this is no longer the case.
Please drop by again soon!
Mike,
ReplyDeleteI doubt seriously that Mike denies the role that monetary stimulus can play. What will be interesting to see is whether monetary policy can offset bad, and I do mean bad, fiscal policy that seems to be on the near horizon. The Fed can only do so much, and politically speaking, there is a faction in congress, that would like to neutralize or eliminate the Fed. We are living in seriously dangerous times, in my view.
In a somewhat related vein with regard to the gold/monetary effect on policy I found this recently: http://www.dartmouth.edu/~dirwin/w15142.pdf This deals with the Fed and Treasury "sterilizing" gold in 37' which had a major impact on the downturn in the economy that followed. Interesting.
A fellow New Yorker,
Nanute
I agree wholeheartedly about the bad fiscal policy. That's why someone like Krugman has gone along with the idea that monetary policy is the best hope right now. I don't know that the Fed can do it on its own either. Even Bernanke was basically saying Congress should pass more stimulus.
ReplyDeleteThanks for the link. I certainly agree we are living in a dangerous time.