An excellent new monetary blog

It’s getting harder and harder to keep up.  In addition to the new David Glasner blog, there is another noteworthy blog that I overlooked, called Free Banking.  This blog has about a dozen distinguished monetary economists, mostly working in the Austrian/free banking tradition.  I’ve been critical of some of the pop Austrianism on the internet, but these economists are very thoughtful.  George Selgin is the name most frequently mentioned over here, and of course he favors a productivity norm, which is not all that different from NGDP targeting.

I’m sure most of the people at Free Banking think I’m slightly unhinged in my relentless claim that money is actually far too tight.  But on many other issues we would tend to agree–such as distrust of having the Fed trying to fine tune the economy, and the need for monetary rules.  Kevin Dowd and I both published papers on CPI futures targeting.


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12 Responses to “An excellent new monetary blog”

  1. Gravatar of Lars Christensen Lars Christensen
    9. July 2011 at 01:05

    I totally agree with the positive assessment of Free Banking theorists like George Selgin and Larry White. However, I have a very hard time seeing the economics of George Selgin as Austrian. To me its much closer to what you like to call Quasi Monetarism (to me its just monetarism) or the monetarism of people like Leland Yeager or David Laidler. Why do they insist on calling themselves Austrian? That might of course also be wrong – they might just see themselves as Austrian inspired? And who would not like to be inspired by von Mises or Hayek?

    I must say that there is a bit of missing piece in the discussion about the monetary target. Or rather I think that we need to differentiate between on the one hand the target and on the other hand the instruments of monetary policy.

    To me Selgin’s productivity norm is NGDP targeting – the difference between the Sumner version and the Selgin version is whether we should have zero or 5% growth in NGDP. Fundamentally I can’t see why we should not go fro Selgin’s version, but in the given macro situation in the US where expectations of market participants have been “synchronised” to 5% NGDP growth we are facing a transition issue from one target to another, but lets say the Fed announced 5%-NGDP target, but then at the same time announce a swift to a 0% target after lets say 2015 or 2018. Scott, how do you see this? To me quasi monetarists are not inflationists so there is no real reason to argue for inflation once monetary equilibrium is reestalished.

  2. Gravatar of Scott Sumner Scott Sumner
    9. July 2011 at 04:39

    Lars, I agree about Selgin, and indeed I am pretty sure that he doesn’t consider himself an Austrian.

    I have doubts about a 0% NGDP growth rate. The only country I am aware of that has gone that route is Japan (where NGDP has been fairly stable since 1993.) It just seems like there is too much downward wage inflexibility. The new AER has an article discussing that problem, and suggests that the Phillips curve flattens out at very low inflation rates.

    That doesn’t mean I am wedded to 5%, if we reformed our monetary policy regime (went to level targeting) I’d be happy with Woolsey’s proposal for 3%. It seems to me that below about 3% the gains from lower inflation (or more rapid deflation) are outweighed by deteriorating real wage flexibility.

    BTW, I would prefer that economists stop talking about “inflation” as I view it as merely a construct of government bureaucrats, which doesn’t connect up with anything important in the real world. Everywhere we talk about inflation in economics textbooks, I’d switch over to NGDP growth. The only exception is living standards. If you ask people how much better off they are than 10 years ago, you are implicitly asking them what the inflation rate has been (when subtracted from NGDP growth.) But NGDP growth minus the public’s subjective estimate of how much better off they are doesn’t seem like a very interesting piece of data.

  3. Gravatar of Bill Woolsey Bill Woolsey
    9. July 2011 at 06:13

    Selgin doesn’t call himself “Austrian,” though there are economists who do (White and Horowitz, for example) whose views on economics are very similar.

    Scott, I agree that having a monetary authority try to stabilize the “cost of living” is a big mistake.

    I have difficulty giving up real interest rates, real wages,
    and so on.

  4. Gravatar of Lars Christensen Lars Christensen
    9. July 2011 at 06:34

    Bill – that makes good sense. I have always found it odd that Horwitz and White would call themselves Austrians.

    Horwitz’s Microfoundation and macroeconomics – An Austrian Perspective is the least Austrian Austrian book I read;-) And that is good and I do not consider Rothbardian business cycle theory to make much sense.

    In terms I Selgin his economics is pretty close to Yeager and Scott for that matter…at least that is how I see it. And that I have a lot of sympathy for.

    Anyway, who cares what schools people affiliates them with – Horwitz, White and Selgin are all excellent economists in my book.

  5. Gravatar of Lars Christensen Lars Christensen
    9. July 2011 at 06:34

    Bill – that makes good sense. I have always found it odd that Horwitz and White would call themselves Austrians.

    Horwitz’s Microfoundation and macroeconomics – An Austrian Perspective is the least Austrian Austrian book I read;-) And that is good and I do not consider Rothbardian business cycle theory to make much sense.

    In terms I Selgin his economics is pretty close to Yeager and Scott for that matter…at least that is how I see it. And that I have a lot of sympathy for.

    Anyway, who cares what schools people affiliates them with – Horwitz, White and Selgin are all excellent economists in my book.

  6. Gravatar of Lars Christensen Lars Christensen
    9. July 2011 at 06:34

    Bill – that makes good sense. I have always found it odd that Horwitz and White would call themselves Austrians.

    Horwitz’s Microfoundation and macroeconomics – An Austrian Perspective is the least Austrian Austrian book I read;-) And that is good and I do not consider Rothbardian business cycle theory to make much sense.

    In terms I Selgin his economics is pretty close to Yeager and Scott for that matter…at least that is how I see it. And that I have a lot of sympathy for.

    Anyway, who cares what schools people affiliates them with – Horwitz, White and Selgin are all excellent economists in my book.

  7. Gravatar of Scott Sumner Scott Sumner
    9. July 2011 at 08:04

    Bill, I don’t want to give them up, but redefine them. Call the real wage “relative wages”–the ratio of nominal hourly wages to nominal GDP. When it goes up sharply, as in 2009–we are in big trouble.

    Lars, Off topic, but do you know of any recent books that discuss all the recent neoliberal reforms in Denmark/Sweden/etc?

  8. Gravatar of Lars Christensen Lars Christensen
    9. July 2011 at 09:32

    Well Scott there are not much in terms of the reforms in Denmark. We have had a so-called centre-right government for nearly a decade and that have been a major disappointment and very few reforms. However, in terms of Sweden the centre-right government have done much more on reforms. I don’t no of any good books on Scandinavian economic and political reforms, but I will happy to help.

  9. Gravatar of Lars Christensen Lars Christensen
    9. July 2011 at 09:44

    In terms of Scandinavia I think three things should be noted.

    First, there is a very strong free trade tradition in all the Scandinavian countries. They have always been very open economies and there has been very few restrictions on trade historically.

    Second, for Denmark the labour market has always been extremely liberal. There is for example no minimum wage laws in Denmark and firing and hiring rules are equally liberal. Thats not the case for the other Scandinavian countries, but despite rather strong labour unions the labour markets are generally not very regulated compared to other European countries.

    The public sector is large in all three Scandinavian countries, but that has historically not been the case. In the mid-60ties the public sector in Denmark and Sweden was smaller than in the US as share of GDP. Hence, the Scandinavian countries only expanded the “welfare state” in the 70ties.

    On top of that since the 90ties (for Denmark since the 80ties) there has been significant fiscal reforms and fiscal conservatism is now consensus among policy makers from left to right.

    So yes, the Scandinavian countries clearly are socialist in terms of redistribution, but in terms of foreign trade, labour market and product market regulation there Scandinavian countries are rather Anglo-Saxon.

  10. Gravatar of Alexander Hudson Alexander Hudson
    9. July 2011 at 10:12

    Ahh!! There are too many excellent economics blogs to keep up with! I’m having trouble just keeping up with this one. Scott is writing these posts faster than I can read them.

    I’m glad I’m not the only one who finds the association between economist like Selgin and the Austrian school to be somewhat tenuous. But in any case, what one calls oneself isn’t terribly relevant. As Lars says above, those guys are all excellent economists. In the end, that’s what matters.

  11. Gravatar of Scott Sumner Scott Sumner
    9. July 2011 at 18:41

    Lars, Thanks for that info. Has Denmark followed Swedish reforms of education? (vouchers, etc.)

    Alexander, I’ll slow down soon. People used to complain I wrote excessively long posts. My response was “if I have time to write them, you have time to read them” :)

  12. Gravatar of david glasner david glasner
    10. July 2011 at 13:31

    I am not in a position to speak about George Selgin’s current views, but he got his Ph.D. from NYU, writing under Larry White and part of the Austrian economics program that was started at NYU by Israel Kirzner. So the relationship between George and Austrian economics is far from tenuous. Now experience has shown that many great economists who embraced the Austrian business cycle in their youth, later either disavowed it entirely or in part. A partial list would include Gottfried Haberler, Fritz Machlup, Lionel Robbins, J. R. Hicks, Nicholas Kaldor, Abba Lerner, and G. L. S. Shackle. But I am sure that there were others. At any rate, George would be in some pretty good company if he has backed away from his youthful indiscretions.

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