Excellent Dean Baker/Brink Lindsey Diablog
I’m still catching up from my recent trip to Italy, so I just got around to this two week old Bloggingheads:
The most relevant sections are from 29 minutes to 46 minutes (fortunately they are separated by topic, and easy to click on.)
I wasn’t surprised by Brink’s comments, as he told me he is sympathetic to the quasi-monetarist argument. And by the way, watching how uncomfortable he was using the term ‘quasi-monetarist’ convinced me we absolutely need a new term. Should we steal ‘new monetarist’ from Stephen Williamson? Or something completely different?
I was more surprised by how much Dean Baker echoed the taking points of this blog, as I very much doubt he reads it. Baker made two points I’ve emphasized quite often:
1. Bernanke’s statements about Japan strongly suggest that he actually wants to do more than he is doing.
2. Obama dropped the ball by not nominating people for the Fed more quickly. (I blame Summers.) He noted that the GOP has tried to block one nominee, but also noted that it doesn’t excuse Obama failing to even nominate people for a number of the empty seats.
Brink’s views are even closer to mine, and you’ll see a number of talking points that appeared in this blog. Some of these (like the Bernanke/Japan angle) were originally brought to my attention by commenters like Marcus Nunes, who now has a very good blog himself.
Tags:
12. September 2011 at 18:58
Scott
If you “steel” from S. Williamson we´ll all be “contaminated”!
And I think Lars “MM” suggestion is quite “Ã propos”
12. September 2011 at 19:04
Nominal Income Targeters (NITs)
12. September 2011 at 19:11
PW
Very quickly that´ll turn into “NUTS”
12. September 2011 at 19:36
For those few who never had contact with the “Bernanke/Japan angle”, here´s the link:
http://www.princeton.edu/~pkrugman/bernanke_paralysis.pdf
12. September 2011 at 19:55
Let’s call you “UnFed Monetarists”
It doesn’t even remotely sound like you want to print money.
You need to make it 100% about removing power from the Fed, letting a computer set interest rates so there are no more easy money booms.
12. September 2011 at 20:12
How about neo-monetarist?
12. September 2011 at 20:33
“NGDP Nutter”
12. September 2011 at 20:34
How about “equilibrialist” or some less clunky version thereof?
I’m unrepentant about monetarism (at least of the Patinkin sort) but the term just puts a lot of very intelligent people off. In the UK, for instance, “monetarism” is very often used as a synonym for “Thatcherism” and no-one left of Maggie would accept it as a label. It would be like calling quasi-monetarism “quasi-Reaganism” in the US.
On the other hand, “equilibrialist” gets at the theoretical foundation of NGDP targeting (which isn’t specifically monetarist) which is monetary equilibrium & disequilibrium. We want the supply of money to match the demand to hold money, such that NGDP grows steadily at some given rate (let’s not call it k-percent).
Apparentely, that’s an agenda that a Keynesian like Brad Delong, an Austrian like George Selgin, and a monetarist like Scott Sumner can all agree upon. We don’t need to limit its appeal needlessly by suggesting that wanting that kind of supply-demand relation is restricted to one particular macreconomic school.
12. September 2011 at 21:27
“Representative Barney Frank, the ranking member of the House Financial Services Committee, is working on legislation that would transform the Federal Reserve’s decision-making process. Frank plans to submit a bill that would remove the votes of the five regional Federal Reserve presidents from the 12-member Federal Open Markets Committee (FOMC), which sets interest rates, and replace them with five appointees that would be nominated by the president and confirmed by the Senate. Frank is concerned that the process is undemocratic because the regional Fed presidents are not elected or appointed by elected representatives, and he believes that regional Fed presidents are overly likely to focus on guarding against inflation at the expense of more adequately tackling the country’s unemployment crisis.
See the following link:
http://www.huffingtonpost.com/2011/09/12/barney-frank-federal-reserve_n_959120.html
Right on Barney! Allowing representatives of the bankers to usurp the monetary policy process from the elected representatives of the people is undemocratic.
12. September 2011 at 21:30
Priorities Update:
1. My several jobs.
I’m getting way more money than I anticipated at UD. Furthermore my students totally think I am God. And who am I to disillusion them? Things are looking up.
2. Dealing with weeds in my garden.
I am in more pain than ever. Aaargh!!! My rampant perfectionism has actually led to me weeding in the rain and dark. God help me! Thank heavens for headlamps.
3. Dealing with emails and mail people send me for comments.
Mostly I’m still overwhelmed with the task of telling people to think for themselves and leave me the $%^& alone.(Please go away!!!)
4. Fix my gutters.
My next door neigbors, evidently like me a great deal (I can’t for the life of me understand why) and have gotten together to contribute to the repair of my gutters. Evidently I have a strange following in my community. It sort of makes me feel a little like George Bailey in “It’s a Wonderful Life.” I’ve promised to pay them back when I make it big (like that’ll ever happen).
5. Deal with bloody crap in general.
You’ll still just have to wait.
Sure, Capitalism is superior to Socialism. But I still like to post depressing songs:
http://www.youtube.com/watch?v=GHS8hj4TdT8&feature=player_embedded
In short, things are getting just a wee bit better.
P.S. You can still send me spare shillings if you wish.
12. September 2011 at 22:06
Mark, I’ll give you $10 if you write a post demanding all thinking people vote Rick Perry, and laughing at Obama for never having a real job… and find a way to rhyme, “Michele Obama is a hypocrite.”
500 words. Signed in your name. $10.
Professional blogging is in your grasp. Answer the the door.
12. September 2011 at 23:21
It’s probably a good idea to settle the name question quickly.
Neo-M or New-M sounds good to me, easy to spell, remember and pronounce. According to the first page of a google search, no one has claimed neo-monetarism.
Post-monetarism?
Rational Expectations Monetarism – REM?
And if you decide to change the name, make sure all ‘new name’ bloggers use the new name often to hammer it in! =)
12. September 2011 at 23:36
“Rational Expectations Monetarism – REM?”
That has the amazing attribute of setting off three explosive buttons in the UK- “rational expectations”, “monetarism” and “ERM”.
13. September 2011 at 00:08
How about ‘money realists’?
13. September 2011 at 01:06
I think MMT rhetoric has given ‘reality’ a bad name recentely…
13. September 2011 at 01:16
Scott,
“2. Obama dropped the ball by not nominating people for the Fed more quickly. (I blame Summers.) He noted that the GOP has tried to block one nominee, but also noted that it doesn’t excuse Obama failing to even nominate people for a number of the empty seats.”
If you’ve seen Koo’s book, ‘the holy grail of macroeconomics’, and are familiar with its arguments you’ll see the following praise by Summers:
“There will probably never be a last word on the Japanese financial catastrophe of the 1990s but Richard Koo”²s book may be the most significant analysis ever published. Agree or disagree, any analyst of the current United States situation must consider Koo”²s arguments.”
Koo argues there – with very convincing graphs – that monetary policy is impotent without fiscal policy. I wouldn’t be surprised if that explains Summers inaction: he did not want to spend Obama’s political capital on something that he thought would probably have no effect.
As for the name: what’s wrong with ‘Quasi-Monetarist’? It stuck, didn’t it? That’s all that matters. The fact that it is uncomfortable is that it is new and that it is simple.
Another reason might be that QM lacks a formalized mathematical model that has been tested against the data. The informal and the formal non-mathematical arguments are convincing and that is why it’s part of the discourse.
13. September 2011 at 01:20
@W.Peden
“That has the amazing attribute of setting off three explosive buttons in the UK- “rational expectations”, “monetarism” and “ERM”.”
That would be fun. Now just to get a sponsorship from Soros for that and you’re set to take the UK by storm.
13. September 2011 at 02:24
Scott, take a look at your inbox and your question has been answered;-)
13. September 2011 at 03:00
Monetarism 2.0
or
“It’s the NGDP, stupid!”-monetarism
Perhaps best to stick with quasi-monetarism after all…
13. September 2011 at 03:58
I strongly propose NOT using quasi, new, neo, pseudo ANYTHING. It makes you look like a tagalong. Think of this not as an academic, but as a marketer. You need your own term, and I suggest this:
Nominalism. That makes you a Nominalist. You are the founder of Nominal Economics.
This is fully consistent with your beliefs:
1) Inflation is impossible to really measure, and “real” GDP growth is thus impossible to really measure
2) Sure, there is a real rate, but what the heck is it? How do you build policy around it?
3) Monetary policy should ONLY concern itself with the nominal variables, which address demand side stabilization. Contingent on this, fiscal policy should stop worrying about nominal variables, and worry entirely about structural (supply side) variables. Instead of arguing about stimulus, fiscal should worry about ROI on all spending.
You can now write a book on Nominal Economics.
13. September 2011 at 04:02
“be bold and mighty forces will come to your aid”
13. September 2011 at 04:40
I like nominalism.
“Hayekian macro” (as opposed to Keynesian macro) would be entertaining but probably a terrible marketing decision.
Or, in the tradition of Keynes, simply be bold and call it economics or macroeconomics, so as to assert that what you’re doing is the true science, and the other schools are doing something else. Do you want to study “Keynesian economics” or do you want to study “economics”? Instead of being on the defensive about what to call your views by labeling them in some esoteric way, confidently assert your views are the correct, mainstream views.
13. September 2011 at 04:43
I like nominalism, if only because it would mean that an anti-platonistic economist could call himself a “nominalist nominalist”.
13. September 2011 at 05:38
Statsguy,
+1 on “nominalism” even though it’s been claimed by philosophy already as W. Peden notes.
Snarky version: “numinalism” …
13. September 2011 at 06:05
W & mbk – yes, they have nominalism first, but philosophical nominalism is surprisingly consistent with nominal economics…
One could also use “nominal economics” and not nominalism. So:
Nominal Economics
Nominal Economist
“Nominalist” does have a better ring to it, though. Eventually, someone will start using “nominalism”, and the field of economics can march forward with its usual imperialism, in its quest to claim all ‘isms’ in the world.
13. September 2011 at 06:10
post-monetarism sounds pretty accurate.
monetary equilibrium (ism?) (Selgin has that one, though I think there is a continuum between Sumner and Selgin and I am somewhere on it.)
monetary disequilibrium (ism?)
Lars’ proposal of market monetarism does point to some important aspects of the view.
13. September 2011 at 06:14
Your blog is The Money Illusion. You are obviously an Illusionist.
13. September 2011 at 06:34
How about Yeagarism? Problem: while we all agree with Leland Yeagar and he came first, most of us haven’t read him. I know I haven’t yet, anyway.
As far as ‘monetary equilibrium’ goes, I don’t think there are any CORE difference between Sumner and Selgin. Like I said: there are a lot of people who thinking about monetary economics in this way. They come from different schools, but the uniting theoretical core is a concern with avoiding too little or too much money relative to the demand to hold money.
Statsguy,
The term “nominalism” is out of fashion in philosophy right now anyway, so it’s a good time to pinch it.
As for all the monetarisms- I love monetarism, I really do. But you’d get further from a marketing point of view calling it Monetary Keynesianism, Hayekianism, New Marxism, or Neo-Georgism. Monetarism is just not fashionable. If we were in the 1970s or even 1980s, I’d leap at the chance to call it “quasi-monetarism” or “post monetarism” &c.
13. September 2011 at 06:37
By-the-by, it’s interesting to see where Scott Sumner fits on the much-loved (by me, at least) Macro-Cube:
http://ritwikpriya.blogspot.com/2010/01/macro-cube-1.html
http://ritwikpriya.blogspot.com/2010/01/macro-cube-2.html
13. September 2011 at 06:50
http://krugman.blogs.nytimes.com/2011/09/13/the-problem-with-quasi-monetarism/
‘Quasi-monetarism’ is here to stay as the name of the game.
13. September 2011 at 06:57
“Quasi-monetarism” sounds fine, and “nominalist economics” is clever. But most of all, someone like Williamson who seems to disregard monetary policy should be called “not a monetarist”.
13. September 2011 at 07:07
I think DeKrugman has given me another super clear reason he is wrong:
“What that means is that when people are hoarding money, they’re no longer doing so because of its moneyness “” the liquidity it provides, which makes money different from other assets. They’ve already got all the liquidity they want, since liquidity is free “” you don’t have to sacrifice interest earnings to get more, so people are saturated. So at the margin, they’re holding money simply as a store of value.”
1. The people with money WANT it to be storehouse of value.
2. The people with money are the ones who matter.
3. The people without money don’t matter.
4. The people without money don’t want to work for cheap, cheap, cheap.
So, the Fed’s job (which it is doing), the government’s job (which it is not doing) is to push the people who don’t have any money to work cheap, cheap, cheap.
It is SUPER OBVIOUS.
The problem DeKrugman has is EXACTLY the problem MMT has – they do not understand who matters and who doesn’t matter.
It keeps them from properly doing economics.
13. September 2011 at 07:28
W. Penden, nice find.
13. September 2011 at 07:43
Well, Paul Krugman is one who refers to Scott’s body-of-thought as quasi-monetarism. And he has a post up critical of the idea:
http://krugman.blogs.nytimes.com/2011/09/13/the-problem-with-quasi-monetarism/
Mainly he seems to say that the Fed really doesn’t have traction at the zero-lower bound.
Scott, in this current economic climate, would NGDP targeting (if credible) convince people that money shouldn’t be held as a store of value? Is that the “transmission mechanism”?
And is getting that credibility the challenge that Krugman argues can’t be overcome?
13. September 2011 at 07:49
Morgan,
“The people without money don’t matter.”
Screw you too.
Sincerely,
Humanity.
13. September 2011 at 07:52
To give so details to Martins comment linking to Krugman:
“Nor does focusing on nominal GDP instead of M2 or whatever really bridge the gap. The point about M2-based monetarism was that it was supposed to give the Fed a target it could clearly control “” although in a liquidity trap it turns out that even that isn’t true. Whatever else it is, and whatever virtues it may have, nominal GDP isn’t that kind of target.
My broader take on this is that the quasi-monetarists are trying too hard to find a deep essence when what’s really needed is just a model. Let’s tell a story about what economic players do, and see what it says about policy options. That’s all it takes”.
I think that´s exactly what QM´s have been doing: Tell stories and indicate the policy options!
Lars Christensen has given the “story” some “backbone”:
http://thefaintofheart.wordpress.com/2011/09/13/market-monetarism-%E2%80%93-the-second-monetarist-counter-revolution-a-guest-post-by-lars-christensen/
(And don´t miss the link to his WP)
13. September 2011 at 07:52
Jason Odegaard,
I read Krugman as saying that NGDP it not something easily targeted by the Fed therefor making NGDP a poor choice for a target.
13. September 2011 at 08:03
“in principle you can get traction by making money a less attractive store of value. In particular, if you can credibly promise future inflation, that will make the real return on money negative. But getting that kind of credibility is tricky, especially given the normal prejudices of central bankers. … Nor does focusing on nominal GDP instead of M2 or whatever really bridge the gap.” – Krugman
How does focusing on NGDP not bridge the gap of inflation expectation credibility? I feel like I’m missing something that Krugman trying to illustrate. Does he think that the Fed is incapable of targeting NGDP?
13. September 2011 at 08:52
@Mark- re: #5. Are you sure its not just the beet salad you ate last night?
13. September 2011 at 09:13
I vote for Nominalism. It’s unfamiliar so the name doesn’t trigger biases or preconceptions. It doesn’t immediately identify a school of academic economists, who most politicians and voters think of as squabbling ivory tower fetishists. Nominalism, in short, gives you a chance to make your own first impression.
It’ll never work, but I prefer “Pharcydist” because this blog always make me think of their jazzy little ditty, especially the second stanza:
13. September 2011 at 09:38
Ugh, stuck with quasi-monetarist. Forever not a “real” monetarist, just quasi.
Scott – BEFORE you respond to Krugman, consider:
that piece was the nicest thing Krugman has said about you (albeit indirectly)… pretty much ever. It is, at least, a rational response that takes the argument seriously and ends with an olive branch (“what’s really needed is just a model. Let’s tell a story about what economic players do, and see what it says about policy options. That’s all it takes.”)
OK, the model has been built already, but maybe not in Krugman’s language.
13. September 2011 at 09:42
In the Krugman post on QM there´s this comment I found Hilarious! Apparently the MMTers “never lose”. A few months ago I heard the same “victory cry” when I made the mistake of making a comment on a post by one of their cabal:
The Quasi Monetarists (Nick Rowe, Scott Sumner and David Beckworth) have vague idea how the Fed and the banking system actually works. They lost all debates with MMT on this. Sumner is famous for asking that banks be assumed out of existence in his argument and for stating that MMT focuses too much on “reality”.
http://neweconomicperspectives.blogspot.com/2011/07/scott-sumner-agree-t…
13. September 2011 at 09:43
But when you click on the link “the page does not exist”!
13. September 2011 at 09:54
Marcus Nunes,
Clearly, it’s not part of reality.
13. September 2011 at 09:58
Eric, ROFL.
If people without money want to get some money (work) they will matter.
But MONEY does not exist to make sure people get work. You just heard 8 Presidential candidates say the Fed should have no dual mandate.
8 Presidential candidates from party the has the real power, and also is favored by the Fed.
So Eric…
Even under a level target NGDP regime, there are STILL going to be 8-9% unemployed people, until the system gets rid of ALL the structural issues.
Why?
Because we’re going to have a low enough target at 4% or less, STARTING TODAY that raises rates WHENEVER the economy starts to grow.
AS I keep saying assume a very conservative 3% NGDP level target, under such a regime:
The VERY BEST THING we can do is drive down the price of labor and wages and reduce regulatory burden.
Why?
Because those effects are deflationary, they cause productivity gains. SO, when prices are falling, the Fed will ease up to keep us at 3%.
It means we want RGDP to fall 2% without ANY reduced output (same amount of consumption, everything cheaper), so the Fed can deliver 5% inflation to keep us at 3% NDGP.
Which means under a politically realistic Sumnerian model: ANYONE screaming for wage hikes is DIRECTLY screaming for higher rates, slower growth.
Think of it this way: under Sumner there can never be any fat times when labor suddenly feels justified in getting more money.
13. September 2011 at 10:15
Better to go with Nominalism than Nominal Economics (which is way too easy to mock as being the opposite of Real Economics).
13. September 2011 at 10:51
I’m partial to the “market monetarist” label via Lars Christensen’s guest post on Marcus Nunes blog:
http://thefaintofheart.wordpress.com/2011/09/13/market-monetarism-%E2%80%93-the-second-monetarist-counter-revolution-a-guest-post-by-lars-christensen/
13. September 2011 at 11:09
Maybe you guys can call your brand of economics practical monetarism or enlightened monetarism.
13. September 2011 at 11:34
I like Market Monetarism.
13. September 2011 at 11:53
I wish Krugman would make up his mind what he believes, or doesn’t. I thought he’d already conceded that monetary policy can have traction even at the lower interest bound.
13. September 2011 at 16:28
Everyone, I have a new naming post.
FEH, I like Barney’s idea.
Mark, Glad that things are looking up.
Martin, What Koo doesn’t realize is that the BOJ actions were a smashing success. Each time they tightened monetary policy (2000, 2006) they were able to keep prices from rising. His entire argument is based on a misconception that prices rose less than the BOJ wanted, but that’s obviously not true, or they wouldn’t have tightened monetary policy.
Statsguy, et al, Nominalist just seems too vague to me. Keynesians claim to control NGDP too, via fiscal stimulus.
W. Peden, I don’t know where I am. I believe in ratex and sticky wages/prices. Where does that put me on the cube?
Statsguy;
“Scott – BEFORE you respond to Krugman, consider:”
Too late, I already blew my chance. I should have read you first.
Jason, You said;
“Scott, in this current economic climate, would NGDP targeting (if credible) convince people that money shouldn’t be held as a store of value? Is that the “transmission mechanism”?
And is getting that credibility the challenge that Krugman argues can’t be overcome?”
Yes and yes.
bababooey, I’m surprised so many like nominalism. I’ll have to put it on the list.
13. September 2011 at 20:05
Morgan wrote:
“Mark, I’ll give you $10 if you write a post demanding all thinking people vote Rick Perry, and laughing at Obama for never having a real job… and find a way to rhyme, “Michele Obama is a hypocrite.”
500 words. Signed in your name. $10.
Professional blogging is in your grasp. Answer the the door.”
I really could use the $10 (but no). Is that all that professional blogging really pays? (Not a big surprise.)
I’ll stick to being an adjunct professor. I’ve got my honest opinions and if I can’t make real money sharing them then I’ll be content forcing students to listen to my opinions so that they may gain credit towards a degree.
13. September 2011 at 23:24
Morgan,
More on Perry.
Not only is he a demonstrable idiot (only on Texas would that not be an impediment for being Governor) but his stance on vaccinating against HPV
1) probably encourages sexual promiscuity
2) has led to policies on government intervention on the issue of vaccines that is basically fascistic.
3) means that the pharmaceutical company that makes the vaccine has donated to Perry’s re-election campaign (oops).
Perry has about as much chance of becoming the Republican nominee as Sarah Palin, and either would be a terrific outcome for the Democrats.
14. September 2011 at 13:00
Scott Sumner,
Macroeconomic disequilbrium + monetary recommended + fiscal recommended would = point R. I assume you think that disequilibrium is unusual and monetary policy is long-run neutral, which is point Q- neoclassicalism. QR = monetarism: neoclassical most of the time, disequilibrialist in situations where NGDP is out of whack.
14. September 2011 at 13:00
* fiscal NOT recommended.
14. September 2011 at 13:01
** And disequilibrium.
14. September 2011 at 17:16
W. Peden, I don’t know what “disequilibrium” means. It could mean many things. I believe in sticky prices and ratex, you can decide where that puts me. I believe in monetary stimulus but not fiscal stimulus.