Tuesday, March 25, 2014

Sumner, Morgan Warstler and Patrick Sullivan on the Benefits of Market Monetarism

     I see that Sumner has finally embraced Morgan and I say it's about time. I've always said that there is no daylight between the two and Sumner now confirms it-as opposed to dippy liberals and centrists who insisted as seeing Morgan as wild eyed and and extremist with Sumner as moderate and reasonable.

    "The title of this post was left in a recent comment by Morgan Warstler.  What he means is that NGDPLT takes nominal spending off the table, all that’s left is for the government to try to influence the split between P and Y.  And that means demand policies don’t work, all fiscal policy must be supply-side, aimed at more growth and hence less inflation."

    "If conservatives understood this then market monetarism would go from being a fringe movement eyed suspiciously by those on the right, to a position where we’d be headline speakers at CPAC. While we’re at it, Morgan’s wage subsidy scheme makes the minimum wage and welfare obsolete."

     This exactly what I've always said-NGDPLT is for Republicans to get the kind of cuts to government they can't get through the front door. Then Patrick Sullivan really underscores the point even more-turns out a government that controlled inflation with fiscal policy has existed before-guess which country did it?

     "Something like the fiscal side controlling inflation happened in Chile after the 1973 coup. As Pinochet privatized hundreds of businesses that Allende had nationalized (and others that had been informally seized by las turbas) the increase in productivity increased the supply side and moderated the 1,000% inflation rate the junta inherited."

     "Of course, it took Chicago Boys to really bring inflation down to reasonable levels over many years."

    Yes, we need a dictator to achieve this utopia as Benjamin Cole understands:

     "Kudos to Morgan. ..but someday look at federal agency spending (that is, not spending financed by FICA). Once you take DoD, VA, DHS, Intelligence and rural subsidies…hardly much else left.
And I would shoot for 5 percent NGDP growth…jn a democratic nation, structural reforms are impossible…think ethanol and zinc pennies…"

     This is a big part of why Sumner prefers monetary to fiscal policy here-it's not by directly elected officials but by a Fed with 'independence.' 

     Morgan insists there is something for the Dems in all this-which I have a hard time buying. His argument is that we have hit a kind of Great Stagnation-a la Tyler Cowen-and the only hope is lots of austerity. 

     "There’s no reason government can’t deliver 3-4% productivity gains YOY for a solid 10-20 years.
Eventually, this is the Dem’s best play."

      It's the best play for the Dems to become Republicans this is what conservatives always want us to believe. In any case, Sumner now admits to having the agenda I've always said he has-while others are incredulous at the thought. We'll see how they misconstrue him next. 

       I get Morgan's theory as I wrote about-that the Internet revolution means we have to cut government-so it was supportable before to have minimum wage. However, Greg offered a good counterexample-Australia has a very high MW as is doing pretty well. 


  1. Mike, Sumner has featured Morgan before:

    ... also, you might like this: Sadowski mildly scolds Scott:

    "Scott, I’ve pointed out to you more than once in the past that the CBO has two potential GDP series: NGDP and RGDP. For some reason you still refuse to believe it."

    1. Scott fires back (to Mark):

      "Oh I believe they have such a series, I just don’t believe there such a thing as potential NGDP. But governments do many strange things, and estimating potential NGDP is just one of them."

      Oh well, not much of a smack down fight there ..... :D

    2. Sumner's not going to get rude with the resident Market Monetarist wonk. That'd really be stupid

  2. O/T: I don't know if you looked at the link to Noah Smith's tweet I left for you yesterday (on your previous post), but I'll go ahead and just print it out for you in case you missed it:

    ""MMT" and "Post-Keynesian" = giant hoaxes. If you fell for one of these hoaxes, just remember that people fall for Scientology too." -- Noah Smith

  3. Yes, Tom I remember this previous Morgan post. Still this was different in that he really explicitly embraces Morgan's intellectual point as he never quite did before.

  4. I think Noah's comment shows what he is, at bottom just a defender of the mainstream status quo in economics.

  5. Why shoudn't he be-he's well fed by this status quo.

    1. Sometimes I think Noah just likes to make an outrageous statement for the fun of it. It wasn't more than a week or two ago that he was recommending MMT as a good "halfway house" for people recovering from mainstream econ. :D

    2. Noah has certainly ruffled Scott's feathers too on occasion... to the point where Scott couldn't quite figure out what he was up to.

    3. Tom Brown,
      "It wasn't more than a week or two ago that he was recommending MMT as a good "halfway house" for people recovering from mainstream econ."

      Actually he said MMT (or Stephen Williamson, arrgh) is a good halfway house for recovery from the "Financial Macro Canon- the basic framework through which a big chunk of Wall Street sees the macroeconomy" otherwise known as "the hive mind". FMC is pop econ for Wall street types, and is definitely *not* the same thing as "mainstream economics".

    4. Mark, you are correct. Thanks.

  6. Mike, I'm not the only one. Check out Frances Coppola:

    "MM and MR are brothers under the skin."


    1. BTW, NOT that I'm trying to prove they are "brothers" ... just that I suspect there's a bit more overlap than first meets the eye (once you brush away some of the inflammatory language coming from both sides).

  7. I got you Tom. I like to joke around that you're Switzerland or the Sumner Whisperer always looking for the positive. However, I can see that you're approach does bear real fruit as whisper this great thread you had with them there and now over here. Appreciate you Sir!

    You and I got our approaches but both bear fruit of its own

    1. No problem... there are worse nicknames that "Switzerland." :D
      (I was a little surprised by Frances' comment though in that she sometimes gets into it w/ those guys... but I guess I wasn't entirely surprised this go around... in that comment of Sadowski's where he mildly scolds Sumner, he mentions that it looked to him like Sumner and Frances were close on the essential bits (or something like that)).

  8. I meant 'as witness this great thread'