Pages

Loading...

Tuesday, July 31, 2012

Again: Has Scott Sumner Jumped the Shark?

      It has seemed to me at times recently that Sumner is beginning to lose it-he seems more and more hypersensitive to any criticism and more and more makes no attempt to even try to answer questions he doesn't like in any way other than snark.

      While it's tough to argue with him in not answering Major Freedom, it seems that he is more and more unwilling to answer any questions that are in any way critical and no more than cheerleading from the Market Monetarist Choir.

      This comment by Ron T. seriously riled Sumner yesterday:

       "Neither you nor Krugman know how can we get the demand-side inflation without the demand coming first. It is like saying “if we had ham we could have ham and eggs. If we had eggs”. Typical for economists: assume we have a can opener. How to close an output gap? I have an idea! Let’s start with closing the output gap! Brilliant."

      "Before you deal with the private debt overhang the demand is not coming. And neither is inflation."

       http://www.themoneyillusion.com/?p=15602&cpage=2#comment-173625

       Whoa! Sumner all but blew a gasket in the face of this comment:

       "The biggest output gap in history was 1933, and the devaluation got high inflation right away. Go study that event and come back here when you grow up and are no longer a sarcastic jerk."

       Sumner made more allusions to this to loyal choir member dwb-who I do like. He's a choir member but still a very nice guy:

       "dwb, Those people really are morons. They don’t even know the Great Inflation happened all over the world. They know nothing about hyperinflation in Latin America, or superneutrality of money, or any of the basics of monetary economics. They latch on to a few anecdotes and think they have a general theory. Pathetic."

      Well no. It's not true that "they" don't know the Great Inflation happened though it is true that they may question Sumner's conventional narrative. As to the superneutrality of money, there are many who question this theory, including, interestingly enough, Sumner's friend and fellow MMer, David Glasner. Glasner goes as far as suggest that money might have long term effects.

     Sumner still wasn't done:

     "You get MMTers coming over here claiming textbooks assume the money multiplier is constant, which just means they’ve never read a textbook. And a commenter above says he was taught the SRAS curve was flat."

       What MMTers actually do is deny the money multiplier altogether as they demand that banks lend deposits. The whole notion of the money multiplier hinges on the idea that banks do lend reserves. If this isn't true the money multiplier is more than simply not 100% constant-it's a chimera.

       As to Sumner's often repeated claim that the U.S. devaluation in 1933 led to immediate high inflation, this is not true. Here I will quote my own comment I just left at Sumner. We'll see if he goes off half cocked with me as well-wouldn't be surprising if he does. You will see though that unlike Ron T. I didn't give him any room-to justly-claim I was being a jerk:

       "However, isn’t it a fact that inflation can only come after all the slack is out of the economy?

        As for this comment:

        “The biggest output gap in history was 1933, and the devaluation got high inflation right away.”
Inlfation didn’t get high, though deflation did come to an end.
\
         "According to Inflationdata.com, in 1933 we had delfation-a negative inlfaton rate of 5.09%-in 1934 it came back to 3.51% in 1935 it was 2.56%. The 1934 rate of 3.51% was the highest it got during any year in the 1930s."

        http://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx

        "So we ended deflation but never got high inflation. It would seem to me that this is not unexpected as high inflation only comes when we don’t have slack in the economy."

        In another comment Sumner declared that he doesn't have time to debate those blankety blank Post Keynesians anymore.

        Again, I ask this sincerely-with no unpleasant intent-is Sumner becoming burnt out? Nick Rowe, if you're out there maybe you can shed some light as I know you're a close friend of his. I really am curious. He used to be willing to at least debate other ideas-even the MMTers-in a fact based way, rather than just calllign out insults.

2 comments:

  1. Sad but true. Good points/data on the 1930's inflation. A point Sumner seems to miss is that devaluation of a fixed currency is an action which can bring about inflation...the direction of causation matters. However, that fact does little for the US today in a floating FX regime.

    One slight tweak I might offer to your comment about high inflation only coming without slack...leave out only. One could imagine renewed oil shocks, droughts, etc that causes high inflation for a time with slack (however you define it).

    ReplyDelete
  2. "One slight tweak I might offer to your comment about high inflation only coming without slack...leave out only. One could imagine renewed oil shocks, droughts, etc that causes high inflation for a time with slack (however you define it)."

    That's supply side inflation however. What Sumner-and Krugman-is after is demand side inflaton.

    You make a very important point that we don't have a fixed currency regime today as we did then.

    I don't know if you have read Mike Kimel at
    Angry Bear but he once ticked Sumner off by arguing that the devlautaion of 1933 was not behing the strong recovery in prices and GDP.

    I'm not entirely sure if I even got Kimel's argument entirely but do you agree with Sumner that the devaluation had the strong impact he believes?

    For the Kimel-Sumner tiff from late last year see

    http://www.themoneyillusion.com/?p=11919

    ReplyDelete