Earl Thompson, R.I.P.

I was saddened to hear that Earl Thompson just passed away, at the age of 71.  Although I never met Professor Thompson, I found him to be one of the most brilliant and original thinkers in the field of macroeconomics.  Unfortunately for him, he was far ahead of his time, and his insights still have not been incorporated into macro theory.  Last year I pointed out that he was one of the few economists who understood that tight money in 2008 was behind the current economic crisis.  Here is an obituary from UCLA, where he taught.

I was disappointed that the obit didn’t even mention his innovative work on monetary policy.  He was one of the first to call for nominal wage targeting to minimize employment fluctuations, and developed an approach to overcome policy lags that was close to my futures targeting idea.  I believe he may have been the first economist to ever propose this idea, but the paper was never published.  A year later Robert Hall published a different method of using market expectations to implement a price level target.

He also did excellent work on the role of gold in the Great Depression.  I don’t know much about his work in other fields, but the UCLA obituary has a good summary.

My sympathy to his wife Velma Montoya, and their son.



14 Responses to “Earl Thompson, R.I.P.”

  1. Gravatar of JimP JimP
    31. July 2010 at 15:22

    And two interesting recent articles from him:



  2. Gravatar of JimP JimP
    31. July 2010 at 15:40

    And here is a response Thompson made to a comment in one of those articles:

    begin quote
    loved your Mencken quotes, and your Munchausen-by-proxy analogy, and highly recommend your piece to all AT readers. But Hoover was substantially different than Roosevelt in the political interest groups that he served in that Hoover was captured by bankers and like-minded creditors while Roosevelt was more of a genuine populist who was sensitive to the social costs of bankruptcy and the sufferings of his nation’s debtors. That’s why Roosevelt didn’t mind appreciating gold and correspondingly raising the prices of other goods. At first, his inflationary policies made Roosevelt a national hero in that, in a matter of just three years, his policies recovered our nation from a great depression. Then, he relaxed, trusted another banker-type with unsupervised control over the Federal Reserve, and allowed him to create the ’37-38 monetary contraction and inevitable recession.
    end quote


    Hoover and Bernanke were/are bankers – creditors – who love deflation.

    Roosevelt understood that he was a Democrat – and that he therefore worked for the debtors.

    Obama has just never known what a Democrat actually is. But Boehner sure does know what a Republican is. And the gross failures of the Obama administration may well give the Republicans the congress soon enough.

  3. Gravatar of scott sumner scott sumner
    31. July 2010 at 16:59

    Thanks Jim, I like both of those articles. I discussed the first one last year in my blog.

  4. Gravatar of Benjamin Cole Benjamin Cole
    31. July 2010 at 18:40

    I must confess to not knowing about Earl Thompson. My loss. What a terrific article (I read the first one).

  5. Gravatar of JimP JimP
    31. July 2010 at 18:47

    And here is a really odd paper. He sure does cover a lot of ground.

    But the part about impoverishing a no-longer necessary middle class, by tax increases and then a series of stock market and real estate bubbles, in which trend following middle class investors lose their money to the banksters, does seem a bit on point.


  6. Gravatar of scott sumner scott sumner
    1. August 2010 at 04:55

    Benjamin, Tyler Cowen also has a nice post on him.

    JimP, Thanks for that as well. The paper’s first footnote (at the back) has an interesting take on the Depression.

  7. Gravatar of Luis H Arroyo Luis H Arroyo
    1. August 2010 at 11:34

    I read the article “No reason for optimism”, and I really enjoyed it. The argument is very clear, and I would say is a beautiful way of writing: with precision and style. You can imagine all the economic pieces playing their role in the model.
    I confess since I read you (and Thompson), it is the first time I hear to talk so bad about Bernanke; This stuns me a little, I think that in America the majority had assumed that he is the main responsable of not to fall in another Great Depression.
    It is true that Bernanke has not use QE until 2009 Mars, and now all this money is hoarded in banks & corporate, but I
    don´t see the situation so bad. GDP has growth 2,4% in IIQ, and non residential investment (and capital goods imports) is growing fast.
    I´ve seen also that this first quarters following a recession are stronger than in 1991 and 2003.
    I don´t know is all that is a sign of robust and durable growth.
    On the other hand, I visited the BEA web, where I see that NGDP & GDP permormed not so bad. (See http://1.bp.blogspot.com/_UlqNAo7QxaA/TFXH-gqLNPI/AAAAAAAABPI/UplZb1O7okM/s1600/difz.gif, or in my recent post in mi blog)
    Yes, NGDP continue to accelerate its growth rate, from 2,8% to 4% in last quarter, the high rate since 2007. I don´t see so near a deflation risk. To promote an expectation of a 11% growth in NGDP seems to me quite hazardous.
    I think the best policy measure now would be to submit a credible plan to consolidate public debt -preferably focused on the stabilization of long-term expenditure.

  8. Gravatar of RIP, Earl Thompson « Truth on the Market RIP, Earl Thompson « Truth on the Market
    1. August 2010 at 18:24

    […] especially with regard to the recent financial crisis.  Here are tributes and reflections from Scott Sumner and Tyler Cowen.  He will be […]

  9. Gravatar of JimP JimP
    1. August 2010 at 19:24

    Another really amazing paper. Whatever you thought to be true Earl thought was false. Amazing.


  10. Gravatar of TGGP TGGP
    1. August 2010 at 20:54

    His ideas on taxing capital seem to gel with my (devil’s advocate) side of our argument on neoliberalism as beggar-thy-neighbor.

    Another fan of Earl Thompson: David Friedman.

  11. Gravatar of scott sumner scott sumner
    2. August 2010 at 04:41

    Luis, The most recent (revised) numbers I saw suggest that NGDP growth slowed from 4.8% in the first quarter to 4.3% in the second.

    I agree with you that outright deflation is unlikely, but it is a growing risk as inflation expectations keep falling.

    The recoveries from 1991 and 2001 were also extremely week, but it wasn’t noticed as much because the recessions were very mild.

    All severe recessions (before this one) were followed by fast GDP growth.

    JimP, Thanks, that looks interesting. I don’t know enough about the history of intervention to comment.

    TGGP, I remember that discussion. But the race to the bottom is different from Thompson’s argument, isn’t it? And how do you explain the extremely neoliberal Nordic countries, which do well in international trade? They have low taxes on capital and free trade. Have they participated in a race to the bottom?

  12. Gravatar of TGGP TGGP
    2. August 2010 at 21:44

    Thompson thinks that capital should be taxed highly because it benefits from national defense. Neoliberalism has led to “tax competition” and lower taxes on capital. Thompson also said that free trade is bad.

  13. Gravatar of scott sumner scott sumner
    3. August 2010 at 05:16

    TGGP, I obviously don’t agree with Thompson on trade. Taxes on capital actually tend to fall on labor in the long run anyway, so all they do is add inefficiency to the economy.

  14. Gravatar of Earl Thompson « Uneasy Money Earl Thompson « Uneasy Money
    24. July 2012 at 14:28

    […] Some appreciations and recollections of Earl are available on the web (e.g, from Tyler Cowen, Scott Sumner, Josh Wright, and Thomas […]

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