…but we’ll be back!
Recently David R. Henderson had a very gallant post in which he admitted that he thought he was going to catch somebody in a bout of hypocrisy, but had been wrong. So let me do the same thing here.
This morning, I read Scott Sumner really letting people have it for arguing that a currency depreciation could help a country’s real GDP by boosting its (net) exports. “Oh boy, here we go,” I thought. “Another example of Scott wagging his finger at people for making ceteris paribus assumptions and taking a shortcut, when he himself has done the same thing a dozen times on his blog while touting the virtues of looser money.”
Well, I spent ten minutes looking and couldn’t find an example of Sumner making the same “mistake,” and what’s worse I found several examples of him making the same (correct, in terms of the framework he’s using) point in the EconLog post. Namely, Scott was pointing out that if currency depreciation occurs because of looser monetary policy in a situation where that promotes growth, for all we know net exports might FALL (even as real GDP rises), because the richer population now buys more imports.
So, I am happy to report that Scott has been pretty consistent on this point. However, I still will die on the hill for my claim that Scott “reasons from a price change” when it comes to interest rates all the time.