This article in the National Review is a very fair and balanced look at the pro- and anti-monetary stimulus camps. Ramesh Ponnuru points out that a number of economists generally regarded as right of center have favored monetary stimulus and/or a higher inflation target. He mentions John Makin, Greg Mankiw, David Beckworth and yours truly. There are others as well, many of whom have blogs (Bill Woolsey, etc—I won’t try to mention all the names because I’m never sure who likes being called conservative. I prefer the term ‘right-wing liberal.’) The article also mentions George Selgin’s productivity norm. BTW, people have asked me about his co-authored piece on the Fed (which is excellent) and I plan a post soon.
The article points out that the left is also split, although among professional economists I think liberals are significantly more in favor of stimulus. Brad DeLong has a new post that shows the famous graph of NGDP growth falling far short of trend, and then makes this point:
The problem with our economy is not that something bad happened to our productive capacity while the flow of nominal spending continued to blip along, it is that something bad happened to the flow of nominal spending and that carried real production and employment down with it. At the moment our flow of nominal spending at $14.7 trillion per year is some 12% below its pre-2008 trend. And in the absence of any 12% decline in prices and wages, that shortfall in spending has to produce our current macroeconomic distress: there is not enough “money” to support enough of a flow of spending to chase all the goods we could produce. We don’t have a deficiency of real supply (for whatever reason). We have a deficiency of nominal demand.
That’s what John Walter Bagehot would say. That’s what Irving Fisher would say. That’s what Jacob Viner would say. That’s what Milton Friedman would say.
And they would say that it is a central bank’s business to intervene in asset markets to boost the flow of nominal spending back to what everybody expected it to be and counted on it being
Excellent points. But before DeLong does too much conservative bashing, he might want to ask which two blogs were best known for presenting quite similar arguments for monetary stimulus in February 2009, and what was the political orientation of those two bloggers. And by late 2009 you could have added Bill Woolsey.
HT: JimP, for both links.