Sunday, September 16, 2012

More on "Sumner Day": A little less frantic on my part

I want to do two things: first acknowledge the wisdom of Sumner's reaction to all this, and second link to someone that actually seems to agree with me!


Most of what I've been linking to with respect to claims that Thursday was "Scott Sumner Day" because of the Fed move wasn't Scott Sumner. But he has had some interesting things to say. For example, he links to this discussion by the Washington Post with Woodford, saying he was thrilled the Post even mentioned him:

"DM: One big advocate of an NGDP target, on his blog and elsewhere, has been Scott Sumner at Bentley University. Did he influence your thinking on this?

MW: I don’t think it affected me. This theme is one that I had been pushing extensively even before the current crisis, both for reasons that relate to my general views on monetary policy, and the fact that I had been giving talks on responding to the zero lower bound in this general situation. So I already had a well worked out view of that kind. I don’t think it changed my mind about the importance of the particular themes."

Apparently some Sumner groupies thought this would upset him, which is nuts. This is the sort of distorted picture that the blogosphere gives sometimes. Sumner is a great thinker and public intellectual, but the idea that Michael Woodford would be getting his monetary theory from a blog post-crisis is laughable. Sumner knows this of course. So does anyone else who's actually studied economics and realizes that Woodford is one of the most respected monetary economists in the world. And as I was pointing out to Ryan the other day, Woodford had been saying since before the financial crisis, simply as a statement of theory, that in a liquidity trap you loosen monetary policy to act on demand and inflation expectations. Sumner also had this to say:

"I knew I shouldn’t try to list names in the previous several posts.  I forgot David Eagle, who has worked for many years on NGDP targeting.  And people like Doug Irwin, Niklas Blanchard, Kantoos, and many others.  And of course there’s Paul Krugman, who’s 1998 paper started the ball rolling on the expectations approach to the zero rate trap."

This is a reference to an earlier post where he listed names and they were all market monetarists from what I could tell. That was annoying when it was posted because it continued this theme that somehow only market monetarists have been saying these things. The fact that he mentions Krugman here is huge, and it deserves to be recognized.

Remember the disinformation that has been on Money Illusion for years now: that Krugman doesn't think monetary policy can work and those Keynesians think that at the zero lower bound you can only do fiscal policy. Well now here's two posts in a row that Sumner essentially acknowledges none of those claims are true (he didn't challenge the Woodford characterization, so I'm assuming that's an acknowledgement of sorts).

Better late than never I guess.

And remember, Krugman in 1998 was just applying standard New Keynesian thinking to a new scenario that had emerged in Japan. New Keynesians had been talking about the expectations channel formally for long before that, and Old Keynesians had been talking about expectations in an informal sense even before the New Keynesians. When the liquidity trap came up as a problem after decades in hiding, Krugman simply said "you know the way the New Keynesians always talk about monetary policy acting through expectations: that has relevance here and that's something non-forward-looking Old Keynesian models missed". So this approach to monetary policy didn't even start with Krugman in 1998... that's just when the modern liquidity trap literature really began.

Now I have to be a little snarky after acknowledging all of these good acknowledgements by Sumner:

Where was this for the last five years? If Sumner had blogged like this for the last five years rather than trying to convince everyone that a huge swath of the profession thought he was crazy, we might have had better monetary policy - and sooner.

And the fact that this is not ideal policy - just somewhat better - is important to keep in mind. There's plenty of cautionary posts out there by Sumner, Krugman, Selgin, etc.. Read them carefully and know that this is not a silver bullet.


Bob Murphy agrees with me! The idea that this is Scott Sumner Day is truly, truly crazy. I'm glad to hear someone else say it. Bob has a lot of pointed questions about exactly what Scott calls for, some of which are answered by Bill Woolsey in the comment section.


  1. I said it in my comment section, but I'll repeat it here too: I agree with you Daniel that although we think it's crazy to call this "Scott Sumner Day," the fault is with his fans, not Scott. He has handled this very humbly. So I (and I think you) am not saying, "Scott is improperly grabbing credit for himself!"

    1. I agree - however, Scott cultivated that sort of fan.

      These are the sort of followers you get when you promote a voice crying out alone in the wilderness image.

    2. I think that might be an implication of where his priorities were at.


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