Sumner tells us the future. Is it worth fighting for?
"I’m so convinced that stabilizing expected NGDP (via level targeting) would also roughly stabilize actual NGDP that I have in the past made grand claims about “the end of macro.” (Of course I actually meant the end of certain types of macro, just as Francis Fukuyama actually meant the end of certain types of history.)"
"Macroeconomics is the study of policy failure. Once an issue goes away the field loses interest. Liquidity traps were dropped from the curriculum in the 1970s, when 13% inflation and 15% interest rates made the “problem” of being stuck in deflation and zero rates seem absurd."
Well I guess that's true. Modern Macro only is supposed to have been born with Keynes in the 30s.
"In 1984-2007 we came close to solving the key macro problem, NGDP stabilization. We were thrown off course by a number of factors, including an inability to use the interest rate instrument at the zero rate bound. If we can get a better policy instrument (NGDP futures targeting anybody?) then we will go right back to the macro problem being solved. When that happens, it will no longer be necessary to divide textbooks into micro and macro splits. The remaining macro areas (such as long run growth) will be special topics, analogous to international trade."
Hey look I have no problem with the end of bad recessions and the business cycle. But just feel we've heard all this before. Friedman's money supply growth rule sounded like a panacea to many in the late 70s as well.
Not to be a downer but I don't necessarily remember 1984-2007 to be quite the utopia many in Macro thought it was either. Again, not saying NGDP can't do all that it's promised to do and hope it can but can't claim to have no skepticism.