Wednesday, June 20, 2012

Ryan Murphy on me and the whole Hayek/Sumner thing

Ryan has a good post up, and I agree with more of it than I suspect he thinks I would.

So I've said from the beginning that Hayek (and Greg Ransom) support NGDP stabilization, which - because we're talking about NGDP and we're talking about a particular level of NGDP you can call "NGDP targeting" if you so desire.

So I already recognize exactly what Ryan points out - that there are tons of Austrians out there that are somewhere along the NGDP targeting spectrum and thus who are not categorically different from Scott Sumner. I know not everyone is a Rothbardian (least of all people who are quickest to cite Hayek!), and I don't think I claimed that.

Part of how we got to this point, I think, is Greg Ransom's framing. He sees Bob's post which to me seemed to make a fairly obvious point and counters that Hayek didn't want to see deflation.


Nobody said he did (here, at least).

In other words, Greg broadened the debate considerably farther than the initial parameters that Bob was interested in, which was simply pointing out that Sumner would not sit well with Hayek. You want to point out that there is no categorical difference between Sumner and Hayek? I agree with that. But I still think Bob is right that there's a pretty big gulf between them. Hayek's concern was a stable price level. At around 2% inflation right now, I don't think he'd be embracing Sumner's demand to

Do you? Really?

And that's the point.

In the middle of a seminar, you may not see much of a difference between 0% MV growth and 5% MV growth. In the middle of a depression, I do. And that's ultimately what these things boil down to. We've got people between whom there is no categorical theoretical difference and a huge categorical practical difference.

If you just want to point out that there are lots of things you could call an "NGDP target" that people with a similar basic framework for thinking could converge on, I've never disagreed with that. If you want to point out that the Austrian school is not monolithic, I've never disagreed with that. But on the theoretical side you've got big gaps between the Rothbardians and Sumner and on the practical side you've got big gaps between Hayek and the Rothbardians and Sumner.

So that's Hayek. What about "Hayekians"? Well who's a "Hayekian". I first read Hayek almost ten years ago now and he's had a big impact on me, and I'm happy to volunteer that. I still see a big practical difference between Sumner and Hayek and if you're closer to Sumner on that practical difference I think that's a good thing.


  1. Commenter rob, from the other post, gets it. He writes :

    "The logic of the 5% v 0% is to prevent prices having to fall as productivity rises plus to have a bit of inflation to allow relative prices to adjust without any actual prices falls being necessary.

    By the time of "denationalization of money" Hayek seems to have accepted the first part of this argument as he favors Prices Level Stability, which would involve increasing the money supply to match productivity growth.

    I think the second part, increasing the money supply in order to have planned inflation , is more controversial. Using inflation to allow relative prices to adjust is very un-Austrian and I'm surprised that Selgin and Horowitz etc don't take a stronger stance on that point."

    I couldn't agree more. This is absolutely not about categorical differences or Rothbardians vs. non-Rothbardians. And if the shoe don't fit, then don't mistake me for telling you to wear it.

    I am surprised by the same thing rob is. I am also surprised that Sumner is being so buddy-buddy with Hayek.

    1. Oh to clarify... I'm not sure if rob is saying this or not, but I'm saying it... 5% trend level targeting is not a productivity norm target (that would be nice though, wouldn't it?).

  2. My understanding of the productivity norm is that it would be 0% NGDP growth with price deflation to match productivity growth. NGDP may be allowed to increase to match workforce growth.

    1. Thanks - I'm no expert on these proposals. I was under the impression that it was NGDP growth to match productivity change (I was a little curious what is done with workforce growth) and maintain price stability.

      You're probably right. However it's conceived, this clearly is not what the market monetarists are proposing.

    2. I'd support NGDP stabilisation under particular conditions. Whether NGDP should grow at 0% or 5% is just quibbling on the margin. Are wages sticky? How sticky? Can we do something about it? What effect to expectations have? Should we strive to preserve preexisting trends or establish new ones? What about population growth or maybe total factor productivity growth (Selgin)? What effect will there be on the capital structure? Etc. Etc.

      So far as I am aware, Hayek never really addresses all these marginal issues. It's hard to get a clear reading on where he would stand on the practical issues of today's monetary policy. However, fundamentally, he understands the need for some kind of stabilisation of the 'money stream' in the much the same way Sumner does for NGDP.


All anonymous comments will be deleted. Consistent pseudonyms are fine.