In a recent post I complained that ‘quasi-monetarism’ was a horrible label and that we needed to change it. I have considered ideas like ‘new monetarism’ and ‘post monetarism,’ but none of the alternatives seems satisfactory. Now frequent commenter Lars Christensen has suggested ‘market monetarism.’ But he’s also done much more, he’s written an entire article on the quasi-, er market monetarist movement in the blogosphere. It’s well worth reading for those who want an overview of the movement. Marcus Nunes allowed Lars to do a guest post explaining his idea.
An economic school’s name naturally should represent the key views of the school. The Monetarist part is obvious as there is a very significant overlap with traditional monetarism. The difference between Market Monetarism and traditional monetarism, however, is the rejection of money supply targeting and the assumption about the stability of velocity is at the core of Market Monetarists’ reformulation of monetarism.
Instead of monetary aggregates and stability of velocity, Market Monetarists advocate the use of markets as an indicator of monetary disequilibrium. Furthermore, Market Monetarists advocate using market instruments such as NGDP futures – and in the case of William Woolsey Free Banking – as a tool to stabilise the policy objective (nominal GDP).
I am intrigued by this label, although I want to see what the other quasi-monetarists think before switching over. As far as I can tell there are some subtle differences between the various quasi-monetarists in the blogosphere:
1. David Beckworth, Nick Rowe, Bill Woolsey and Josh Hendrickson seem to focus a bit more on Yeager-style monetary disequilibrium models.
2. Woolsey, David Glasner, Marcus Nunes and I focus on the need for NGDP future contracts (or perhaps wage contract in Glasner’s case.) Beckworth recently mentioned the idea.
3. Some of the quasi-monetarists may be a bit closer to old style monetarism than I am, whereas Glasner is probably a bit further way. I’m not too sure exactly where Kantoos fits in. I’ve been so busy I haven’t always kept up with the various blogs.
It’s not clear what the essence of quasi-monetarism actually is. Nick Rowe doesn’t focus on US monetary policy quite as much as the rest of us (he’s in Canada), so I don’t know his precise policy views. I think it’s fair to say the rest of us are all opposed to the Fed’s decision to allow NGDP to plunge sharply in 2009, and there seems to be general consensus that level targeting is the way to go. We are all skeptical of interest rate targeting. As far as using NGDP futures contracts, there seems to be varying degrees of enthusiasm. It seems to me that the term ‘market’ is an implied critique of old-style monetarists like Anna Schwartz and Allan Meltzer, who have warned of the threat of inflation, even as both past movements in NGDP, and market forecasts of future gains, suggest money is too tight. Indeed even though I am a big fan of Milton Friedman, I think one weakness of his approach was that he’d sometimes predict high inflation based on past money supply growth, even when market participants saw low inflation ahead. Late in his life he endorsed Robert Hetzel’s proposal to have the Fed target TIPS spreads.
BTW, I’ve left out non-blogging quasi-monetarists, as it’s unclear where to draw the line. I should add that even within the blogsphere it’s not obvious where to place various figures. People like George Selgin share some of the perspectives of the quasi-monetarists. In this respect quasi-monetarism is no different from the other “isms,” there are almost as many varieties as there are members. And that’s good; we should never try to enforce ideological uniformity.
I’d like to see what other quasi-monetarists think before making any sort of name change. But we can’t let Krugman label us any longer!
PS. Josh Hendrickson has a new article in National Review.
Update: I keep forgetting to include Niklas Blanchard, who is also a quasi (market?) monetarist. Perhaps I forget because Karl Smith tends to dominate that blog. It’s interesting how many of us there are—surely a sizeable fraction of all monetary economics bloggers.
Tags: Milton Friedman