I wanted a rumble and we've gotten some though we need more like this I think. My hyperbolic title is based largely on the comments war after Sumner's answer to Kervick.
Actually Sumner did have a comment for me on his blog too when I posted a link to my first post about this smackdown. I had opined that:
"As a proponent of more MM-MMT smackdowns, glad to see Scott picked this up. I haven’t made up my mind who won this one."
Sumner is having none of that he thinks there was some slam dunk somewhere by Nick Rowe in particular.
"You haven’t decided who won? How about when Nick Rowe demolished the MMT argument, are you still undecided about that one too? And let me know when you figure out how Gaddafi’s troops are doing in the Libyan war."
No I saw Rowe's recent posts about Krugman-Keen but saw no demolition of MMT as far as I can tell. But the comments were driven by some over the top people like Mark Sadowski who was outraged that Kervick failed to answer some one sentence question of his-in over a hundred comments.
Watch as Sadowski's comments get increasingly apocalyptic:
"Dan Kervick, You’re still autistically avoiding direct conversation with me. Lift your eyes, look me in the eyes. I promise debate with me shall not hurt, and shall only yield the truth."
"Dan Kervick, I’ve never seen a man (I’m assuming you’re a man, not that gender matters that much) more weak-kneed in the face of honest debate than you. I really wanted to prove you wrong and you will not give me even that simple satisfaction. You really disappoint me. I’ll see you at the hanging."
Wow! Who said it's not personal? Mark goes on: "Dan, What do you think I’m talking about? Answer the question I simply asked in a single sentence almost two days ago."
"Central Police Station Scott, There’s a Dan Kervick on the loose (my fault as I let him get away).
Look for a wild Modern Monetary Monetarist with dreams of fiscal stimulus driven macroeconmic equilibrium in his eyes. He’s highly dangerous and armed with infrastructure and welfare enhancing spending. Be on the lookout."
Finally Dan responds with this:
"I’m afraid we are wildly talking past each other, Mark. My point was about what happens to specific kinds of people in the context of a general rise in the price level. It was not a point about aggregates, and it doesn’t matter whether the inflation in question is demand pull or supply push.
Paul Krugman had argued that if there is inflation, that helps people with debt repayment. I claimed that that is only true of those people whose nominal wages happen to rise along with prices. I used a really simple illustration to make clear the impact on some people of what I thought should be a totally obvious fact: that in the context of a general rise in prices, not everyone gets a nominal raise! Some employers, eager to reduce their labor costs and employees’ real wages, but unable or unwilling to give them a nominal pay cut, simply hold back on the pay increases as so that they can pay their employees lower real wages."
"This is something that happens all the time, every day. I can tell you that I know many people who have not received significant raises in three years, and whose wages have not kept up with price increases. They are now poorer than they used to be. They have not received any substantial debt relief at all, because the debt relief only comes when you get a nominal pay increase so that the ratio of your nominal wages to your debts (which are mostly fixed in nominal terms) increases. So the general price increase just makes them poorer, and future price increases engineered by economic policy makers – via whatever policy tool they might employ to do the engineering – will only make them poorer still.
It’s also my view that the people upon who this sad fate is most likely to fall are those with the least bargaining power in our economy and who have already endured the heaviest costs of the economic catastrophe enabled by malpracticing economists who are too busy dicking around with their moronic curves and textbook models to understand how anything in the real world actually works."
"Are you guys really denying this phenomenon of nominal wages for the least powerful lagging behind price level increases? Do you really think there is some magical macroeconomic glue that keeps prices and wages all yoked together like beads along a single curve?"
"Apparently, Scott needs to have this translated into textbook curve talk before he will deign to cease pretending that he can’t understand it. Or maybe he thinks my example is about the “representative wage-earner”, so that it was meant to illustrate what happens to real and nominal wages in general But I think it is a completely intuitive point that is absolutely obvious to anybody who actually pays attention to the real business world and knows how it works. Scott replied to my reply to his question by saying this:
Dan, The effect of inflation on real incomes completely depends on whether it’s demand or supply side inflation. “Never reason from a price change.” If it’s higher aggregate demand, then any rise in prices occurs precisely because AD shifted right, which means real incomes also rise (Unless SRASSRAS is vertical?
"So again, apparently there is a built-in difficultly in the MM mind in understanding the difference between gross aggregate phenomena at the smooth, birds-eye, curve-level view of the economy and the very uneven, bumpy, unfair and ugly carnage that lies beneath when you zero in on classes of real people making up the components of the aggregates."
"If prices rise by 3%, the gods of macroeconomics do not come along to make sure everyone’s nominal wages rise by 3% too. There are big winners and big losers in all these policy choices. And the inflationists – oh excuse me, the “NGDP level targeters” – are getting ready to stick it to the most vulnerable workers yet again. I can understand why this is a popular approach among the conservatives and Social Darwinists and in the MM camp, but I’m a little miffed that nice liberal boys like Paul Krugman are lending their weight to the unending war of wealth and ownership against labor and the vulnerable."
"Oddly, some people on this thread who disagree with my policy preferences nevertheless have no trouble at all understanding what I’m talking about, and have argued that the ability of employers to take advantage of inflation to reduce real wages is a feature not a bug. I respect their honesty.
You want to translate this into a question about curves floating around in macroeconomic space? Do it yourself. Because I can’t believe that you honestly don’t understand what I’m talking about."
Sadowski answers with a flourish. His last paragraph of a long missive:
"Who made you the moral arbitrar? You who knows nothing about macroeconomics? You who have spent zero years suffering for the field or for its implications? Who gave you the right in your enormous ignorance to pass judgement on the whole macroeconomics profession and @!$$ all over it?"
Holy wow! He almost sounds like Stephen Williamson. Macroeconomists take it real personal when you tell them their models are no good. Ironically, though Kervick initially went after Krugman here, it was Krugman himself who had offended the establishment back in 2009 for saying that Macro had blown it and had to explain it's failure.