The Pierre Menard of the economics profession

When I was young, I knew a small businessman that used to deal with quite a lot of currency.  He marked the corner of each note that passed through his hands with a pen.  I think he was interested in seeing how often the notes came back to him.

I thought of this when doing a recent post over at Econlog, on monetary offset. (BTW, the post is recommended.)  Suppose someone wanted to figure out if he were having any influence on the broader economic discussion.  One technique would be to “mark” each important concept with a different name. Thus you could relabel “monetary dominance” as “monetary offset”.  Or “the identification problem” could be relabeled “never reason from a price change.”  If these new names caught on, then it would suggest that you might have somehow influenced the conversation.  Even better, the relabeler might have independently rediscovered the concepts, something that occurs quite often in the history of economics.

Why might a new name catch on?  Perhaps the importance of monetary dominance was forgotten, and the idea was revived under a new name.  Or perhaps the full implications of the identification problem were often overlooked, and the new term applied it to unfamiliar situations.  In any case, a successful relabelling would be an indication of some sort of flaw in the economic profession, a blind spot.

PS.  Here’s Bloomberg:

Such a move, which would put the U.S. president and its central bank at odds, is called a monetary offset.


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20 Responses to “The Pierre Menard of the economics profession”

  1. Gravatar of Cmot Cmot
    11. January 2017 at 09:38

    What does the first Lt. Governor of the state of Illinois have to do with monetary offset?

    (Yes, I get that it’s a reference to a Borges story, but I gotta represent for Original Pierre.)

  2. Gravatar of Britonomist Britonomist
    11. January 2017 at 10:32

    You invented that term? I honestly had no idea.

  3. Gravatar of Scott Freelander Scott Freelander
    11. January 2017 at 11:56

    Very interesting. Don’t know how you didn’t pull your hair out as most in your profession, including many Nobelists, ignored basic tenents of economics at the worst possible time. You’re more patient than I am.

    I thank you, because I’ve learned more reading this blog, along with those of Beckworth, Rowe, etc., than I learned in the 3 undergrad macroecon courses I took. I came out of those classes with lots of dumb misconceptions and half-baked concepts, despite making good grades and not struggling to pass at all.

    I hate to say it, but my impression is that much of undergrad macro offered is extremely poorly taught, from textbooks to the presentations professors give.

  4. Gravatar of bid.shader bid.shader
    11. January 2017 at 12:15

    https://www.google.ca/trends/explore?date=all&q=%22monetary%20offset%22

  5. Gravatar of ssumner ssumner
    11. January 2017 at 13:21

    Cmot, Hmm, I learn something new everyday.

    Britonomist, I doubt that I invented it first, but I re-invented it. :)

    Thanks Scott, and I apologize for the previous times where I was rude to you.

    bid, Interesting graph.

  6. Gravatar of Ray Lopez Ray Lopez
    11. January 2017 at 13:55

    OMG, Sumner’s mystery writing continues: (Sumner) “Thus you could relabel “monetary dominance” as “monetary offset”.  Or “the identification problem”” – WTF? Either this is way over my head (and I study economics as a hobby and aced Econ101, 102 in college), or, more likely, Sumner has a fetish of neologisms. “Monetary Offset” (without even Googling it) is the mistaken believe by monetarists that any expansionary effect by the economy, such as, (in theory), cutting taxes, can be reined back by raising interest rates or otherwise constricting the money supply. None of this is true (neither the fiscal nor monetary aspects) but that’s why ‘monetary offset’ is. Yet Sumner calls it ‘dominance’ and ‘identification problem’, citing some kooky corner grocery store owner who defaced bills. THIS is why I keep coming back to read this blog. The man is a kook!

  7. Gravatar of Stephen Kirchner Stephen Kirchner
    11. January 2017 at 14:25

    Trump has mainstreamed the Sumner critique. Who would have thought?

  8. Gravatar of ssumner ssumner
    11. January 2017 at 15:17

    Ray, It’s fun seeing you get confused.

    Stephen, Every cloud . . .

  9. Gravatar of bid.shader bid.shader
    11. January 2017 at 16:26

    Interestingly, working from my home computer, I see a different version of the google trends results – when I accessed it at work today it showed a spike at Sep 2009, and now the first spike shows at June 2011.

  10. Gravatar of Benjamin Cole Benjamin Cole
    11. January 2017 at 18:28

    Scott Sumner and the MM group have pushed the dial a bit on monetary policy understanding and deserve credit—-monetary offset is one example.

    But remember, the Philipps Curve is pretty much prone these days….

  11. Gravatar of ChrisA ChrisA
    11. January 2017 at 22:45

    Funny how monetary offset as a reason not to do fiscal expansion only becomes a thing when there is a Republican president…

  12. Gravatar of ssumner ssumner
    12. January 2017 at 06:08

    Bid, My graph shows the first spike at January 2010.

    Chris, I noticed that too.

  13. Gravatar of Scott Freelander Scott Freelander
    12. January 2017 at 06:30

    Scott,

    I was rude at times as well, even when I didn’t intend to be. I likewise apologize. It’s too easy for me to become jaded online and forget there real people on the other end of my comments. And for all I know, one of them is occasionally going through a hard time. And anyway, I am continuing to learn that a more sensitive approach tends to yield better discussions, but I still screw up occasionally.

  14. Gravatar of Philo Philo
    12. January 2017 at 07:01

    Your names are punchier, more colorful, more memorable. You are a gifted publicist (as well as a pretty good economist).

  15. Gravatar of Ray Lopez Ray Lopez
    12. January 2017 at 23:07

    ECONOMICS as RELIGION: from Samuelson to Chicago and Beyond (2001) by Robert H. Nelson – should have a special chapter on Sumner, the high priest of faith-based economics.

  16. Gravatar of Bob Murphy Bob Murphy
    13. January 2017 at 09:42

    Whoa, I didn’t realize you branded it “monetary offset,” Scott. That’s cool. (I saw your caveats in the comments; I get that it’s a nuanced history.)

    And FWIW, that term conveys much better what you’ve been talking about. “Monetary dominance” makes it sound like, “In practice, ignore fiscal policy because monetary is so much more potent,” which is not the same as saying, “The central bank will adjust the potency of monetary policy to ensure that fiscal policy is impotent.”

  17. Gravatar of anon anon
    13. January 2017 at 12:30

    I have to agree with Bob Murphy that the terms “monetary offset” and “never reason from a price change” are particularly well chosen, and that this has contributed to their popularity. “Monetary dominance” does not really suggest why we should think that monetary policy dominates fiscal. “The monetary authority moves last” is another phrase I’ve seen used and that’s much better, but “monetary offset” seems best. (Of course having too many idiosyncratic terms for the same thing can be bad for scholarship, but using a confusing name simply because it was coined first is not good, either!)

  18. Gravatar of ssumner ssumner
    13. January 2017 at 15:22

    Thanks everyone. There is also a term “fiscal dominance” which is often used to describe situations like Zimbabwe.

    Ray, Yes, a whole chapter on ME!

  19. Gravatar of anon anon
    13. January 2017 at 20:39

    Indeed, “fiscal dominance” is also commonly spoken of in connection to the so-called “fiscal theory of the price level”. I think it’s not overly wrong to recast it as “failure of monetary offset” – as an assumption that the monetary authority will ultimately be subservient to fiscal policy goals or perceived constraints, if only in expectation.

    Sometimes “fiscal dominance” also obtains if we choose to recast some operations that are generally regarded as monetary policy (e.g. quantitative easing) as “fiscal” changes. I think the MMT folks have their own version of “fiscal dominance” that’s more like this, but I don’t understand it very well.

  20. Gravatar of ssumner ssumner
    14. January 2017 at 08:42

    anon, You said:

    “I think the MMT folks have their own version of “fiscal dominance” that’s more like this, but I don’t understand it very well.”

    Join the club. :)

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