Mark Sadowski Admits that Market Monetarism Says Nothing New

     I've often said that MM is just old wine in new bottles. Mark says as much in a recent comment over at Sumner.

    "So, the first sentence tells you that MM believes in NGDPLT. The second sentence seems primarily designed to point out that MM is not your grandfather’s monetarism. The third sentence tells you that MM rejects the focus on interest rates as the primary instrument of monetary policy. The fourth tells you that MM prefers NGDPLT because of rational expectations, and what I like to call (thanks to Noah Smith) the “random markets idea” (i.e. EMH)."

    "With the sole exception of NGDPLT all of these beliefs are standard textbook monetary economics of the type that you will find in Mishkin’s “The Economics of Money, Banking and Financial Markets”.

    "In other words, when you get right down to it, Market Monetarism is simply standard textbook monetary economics with the addition of NGDPLT."

    "This is in fact how I view what Scott Sumner has been trying to do the last few years. He is trying to get the (monetary) economics profession to climb out of the collective amnesia it seemed to fall into with the start of the Great Recession. Up until 2008, apart from NGDPLT, none of these ideas were considered strange or new."

     "In many ways this is deja vu all over again, as in the Great Depression most economists forgot all that they seemed to know, as exemplified by the ideas of Hawtrey and Cassel, only a few years previously."

     http://www.themoneyillusion.com/?p=26304

     Of course, Mark doesn't mean this pejoratively and I kind of do see it in pejorative terms. My trouble is that I'm not particularly a fan of the Fed's policy during the GM. We had low inflation yes, but unemployment was generally higher than during the Keynesian Golden Age era-1945-1970 and we had lower productivity and growth along with stagnant median wages. 

     Sumner often says that he was fine with monetary policy from about 1983 through to 2008 before that September meeting that's getting so much ink. 

      http://diaryofarepublicanhater.blogspot.com/2014/03/regarding-fomc-september-meeting.html

      I hardly look at that period as something we want to get back to. He seems to think things were fine until then. This is hardly the case. I also notice that Mark is saying that MM is about more than simply one policy recommendation-NGDPLT. That's the only new aspect-in fact, even that was around before as Sumner himself will tell you Bennett McCallum was discussing it 20 years ago. 

      This is something that MMers themselves tend to forget when I've had debates with them. I will say that when you come down to it we've basically done the MM playbook for the last 4 years. They will then scornfully say they didn't notice any NGDPLT. Yet that's not the whole of MM. What MM is really is a certain way of looking at AD shortages. You can have a MM policy that doesn't do NGDPLT. During the GM the Fed basically did MM even though the policy was inflation targeting rather than NGDP targeting. 

      I describe the last 4 years as MM as we've done what it prescribes-no fiscal stimulus in fact significant fiscal contraction along with lots of QE and now forward guidance. Even factoring in ARRA we've done a lot more monetary stimulus, and are actually net contractionary in fiscal policy.