In my previous piece I discussed the NKers and what I see as their somewhat inadequate response to Sumner-I think that like him or not he's had a big impact on the pubic discussion on fiscal and monetary policy, the best way to deal with stabilizing the economy, etc.
I must admit to being quite gratified that Dr. W-L has responded. He feels I've perhaps mis-characterized the NK response to Sumner.
The idea of nominal GDP targeting goes back to James Meade at least. It has been endorsed by many NKs - most notably Mike Woodford. But we do not have this kind of religious devotion to it that MMs have. And of course, we also do not have this phobia about fiscal policy.
"You imply we should debate more with MMs. My experience of this has not been good. A couple of years ago now when I tried to point out what was really a schoolboy error on savings and investment in one of his posts, he came out guns blazing - its difficult to have a serious discussion under those conditions."
"I had a similar experience with Mark Sadowski recently, which I wrote about here:
http://mainlymacro.blogspot.co.uk/2014/06/good-and-bad-blog-debates.html
"I should add that this is not true of all MMs. For example I think David Beckworth does try to be constructive (see http://mainlymacro.blogspot.co.uk/2014/07/synthesis-david-beckworths-insurance.html), and I'm happy to discuss things with Nick Rowe anytime because I learn a lot."
"So my policy is that if I think there is an issue where I have got something new to say, or where I can help clarify something, or where there is a genuine misunderstanding that others might make, I'll write about that, but not as part of a debating contest. I did see Sumner's reply to my latest post, and I did not really understand the stuff on inflation. Pretty well everyone doing academic work on macro nowadays models the welfare cost of inflation, and they are not 'confusing inflation with NGDP growth'. Most work is based on Woodford's analysis, which looks at misallocation costs due to relative price changes. So either this is simply wrong in a very obvious way, or I have just misunderstood, but in either case it didn't seem worth pursuing."
http://diaryofarepublicanhater.blogspot.com/2014/09/scott-sumner-vs-simon-wren-lewis-on.html?showComment=1410566812082#c2781958556079180301
No doubt, Sumner does tend to come out with guns blazing-I recall the very discussion WL refers to here-it was where Sumner tried to prove John Cochrane was right or mayve that Krugman and W-L were wrong by referring to the identity S=I.
http://diaryofarepublicanhater.blogspot.com/2012/01/scott-sumner-becomes-even-more-shrill.html
I'm not much of a fan Sumner;s style either-my personal dealings with him when I've commented on this blog have been basically always unpleasant as he usually answers any question or point of mine with unmitigated snark. He doesn't seem to appreciate any skepticism very much and when he can't answer something, his fallback position is to say what do I know I'm not an economist.
Nevertheless I do think that Sumner can't simply be ignored. For one thing. if he's able to shout down all critics he will better able to carry the day in the public debate. I do think he's had a big impact for perhaps good and ill-I think it has been productive to the extent that laypeople like me were unaware of this whole dimension of economic policy prior to him in particular and the monetary blogs more generally.
He has pretty much said his goal is to bury all who would contradict him.
http://diaryofarepublicanhater.blogspot.com/2014/01/sumner-vows-to-bash-anyone-standing-in.html
It's clear that Sumner sees himself as in a war against what he calls 'Keynesianism.' Mr W-L on the other hand sees Sumner as an annoying school boy throwing spit balls in class.-just ignore him and he'll go away. Except he most certainly hasn't gone away. Why does it matter? Well when Krugman says that 'sorta kind NKers' like himself have gotten this Great Recession right or most right, Sumner is the one who most credibly claims that this is not so.
I'm not saying Sumner is right just that he is probably the most effective conservative ideologist today. If there is anything I disagree with him most on besides the fiscal multiplier and 'monetary offset' is something else I've often heard him say: he says that he takes people at their word and criticizes those-basically liberals-who read nefarious motives beneath what they're actual words say.
People like Mark Sadowski have suggested that I'm almost delusional in my paranoia but as it has been said just because you're paranoid doesn't mean they aren't out to get you. I would say I respect Sumner's intellect, what I don't do is trust him. At the end of the day I believe he has a very determined political agenda that masquerades as a purely technocratic economic one. What he wants to deny is the very existence of what used to be called political economy.
One result of his religious preference for monetary policy over fiscal is the political abrogation of the public's right to have any say in one of the most important social question of all-their own economy. I haven't seen anyone really reflect on what an anti-democratic jibe Sumner's claim that there is no such thing as public opinion in economics really is.
So W-L's dismissal of Sumner as a loudmouth is understandable but problematic. Even in his comment to me he admits that he may not understand Sumner's point about inflation.
So my policy is that if I think there is an issue where I have got something new to say, or where I can help clarify something, or where there is a genuine misunderstanding that others might make, I'll write about that, but not as part of a debating contest. I did see Sumner's reply to my latest post, and I did not really understand the stuff on inflation. Pretty well everyone doing academic work on macro nowadays models the welfare cost of inflation, and they are not 'confusing inflation with NGDP growth'. Most work is based on Woodford's analysis, which looks at misallocation costs due to relative price changes. So either this is simply wrong in a very obvious way, or I have just misunderstood, but in either case it didn't seem worth pursuing.
So it's at least possible that Sumner made a good point that went over his head. At least this is how Sumner would spin this I have no doubt. What Sumner is saying is that NGDP is the better gauge than inflation as inflation can be 'good or bad'-whether it's good or bad depends on for instance:
1. Where we are in the business cycle.
2. Whether we have supply side or demand side inflation-or for that matter deflation.
His argument is that if policymakers focused on NGDP they would only in effect be targeting the 'right kind' of inflation, that which is associated with the demand side rather than the supply side.
What I had argued in my previous piece is that this si something that it would help for a NK type like W-L to clarify.
Another point is Sumner's disparaging of Keynesians as wrongly focusing on interest rates as the sole or main lever of interest rates while he argues that they are merely an 'epiphenomenon'-now this point I don't think is new to Sumner, it goes back to Friedman, it's a Monetarist jibe. However, if Sumner is wrong then Keynesians of any stripe need to clarify where.
I should finish by saying that as W-L admits not all the MMers are personally as obnoxious-to those who disagree with him-as Sumner. Actually, most MMers other than Sumner are pretty polite, and charming folks-Nick Rowe, certainly David Glasner, Scott is kind of the exception.
He's not all bad but he sees himself as in a war. Is it all hyperbole? I don't find much that reassures me of that. I feel if Sumner's in a war I want the other side..
The reason for that is because as I said above, I just don't trust him. Sumner says we should take people at their word. For this reason I very much take him at his word when he talks about dancing on the grave of Keynesianism.
