19 Sep 2015

Scott Sumner, the Dr. Who of Economics Blogging

Scott Sumner 22 Comments

On EconLog he recently had a post entitled, “Recessions often begin before the thing that caused them occurs.”

Now that is a deliberately provocative title, but I understand what he means and in principle I could agree with him (though not in the particulars of his post).

However, today at his blog Scott writes: “I thought yesterday’s policy announcement would offer a nice natural experiment, but instead it served up perhaps the most muddled stock market response I’ve ever seen.”

Sounds fine at first, but think about what he’s saying. Do you see the problem with it? If not, try this.

22 Responses to “Scott Sumner, the Dr. Who of Economics Blogging”

  1. Z says:

    Check your western white male privilege, Bob. You and your linear conception of time are causing micro-aggression against mine and Scott’s fluid and dynamic view of time. Who are you to tell him the experiment is held before the results come in?

    • E. Harding says:

      I didn’t expect a rate hike in September due to really weak NGDP and inflation. But both Bob and Scott are Western White males, so I don’t see how that’s relevant.

  2. Chris says:

    I also thought it was funny that he says the Fed’s decision means “easier than expected money.” Doesn’t he always say interest rates are a bad indicator of the stance of policy and that low rates are often associated with tight money? Why should we expect a movement in either direction from the stock market based on the Fed’s decision? Isn’t this textbook reasoning from a price (lack of) change?

    • E. Harding says:

      Chris, if the Fed raised the Federal Funds rate, then it would have been associated with tight money due to really weak growth in NGDP and the price level. No, it’s not reasoning from a price change if the price is controlled.

  3. Transformer says:

    If he’d just said

    “I thought yesterday’s policy announcement offered a nice natural experiment and it served up perhaps the most muddled stock market response I’ve ever seen”.

    Then the rest of his article could have remained exactly the same and all the points he made in it would not have been affected in any way. So I think this is just poorly chosen wording rather than any attempt to say “its only an experiment if it proves my theory correct” which is what I assume Bob is trying to read into it.

    • Transformer says:

      Sumner just confirmed that he meant “it’s a natural experiment who’s outcome is hard to read.”

  4. David R. Henderson says:

    I understand your point–and see my comment on Scott’s blog this a.m. But I don’t get the reference to Dr. Who. I don’t know the character well but I have a sense of who Dr. Who is. I googled and that helped. But what’s the connection?

    • Bob Murphy says:

      It’s possible David that my cultural reference is totally off. I don’t watch the show either. But I thought he was a time traveler.

      • David R. Henderson says:

        Ah, OK. I thought it had something to do with the experiment point, but now I get it.

      • Yosef says:

        Bob, more than just being a time traveler (Dr. Who is technically a member of an alien species known as the Time Lords), Dr. Who specifically once explains that “People assume that time is a strict progression of cause to effect, but actually — from a non-linear, non-subjective viewpoint — it’s more like a big ball of wibbly-wobbly… timey-wimey… stuff.”

        Something you would know if you just read a little bit more Krugman: http://krugman.blogs.nytimes.com/2012/08/30/wibbly-wobbly/

  5. Tel says:

    Sumner’s definition of “tight” vs “loose” money is based on the outcome, not based on the action itself.

    Once you build around that definition, I think causality problems are inevitable.

    To borrow from Sumner’s bus driver analogy (everyone wants to drive the bus), a normal person would define “steering the bus left” as meaning “turning the steering wheel more towards the left”. That’s defining in terms of the action.

    However, Sumner’s equivalent definition of “steering the bus left” is something like “whatever results in the bus moving to the left”. The difference is subtle but important: if your bus is fishtailing the driver might need to turn the wheel towards the right, even though the bus is swinging to the left (steering into the fishtail rather than out of it)… Sumner would define this as “steering the bus left”. What’s more if the driver hits a rut in the road which causes the bus to jolt over to the left, Sumner would also define this as “steering the bus left”. If the bus blew out a tyre and started pulling hard to the left, yet again Sumner would define this as “steering the bus left”.

    Weird, but that’s what happens when you define the nature of the action, in terms of the outcome.

    Sumner’s methodology means you can make a lot of statements that are correct by definition, but also completely useless for anyone who wants to learn to be a better bus driver.

  6. Tel says:

    Unrelated to Sumner, but this is probably the only place we can discuss Fed interest rate policy… wasn’t Peter Schiff smug all of a sudden in his episode 110. I found that one hilarious when he started talking about the rates staying zero forever.

    My personal prediction on events… the US dollar is surely going to weaken, followed by increase in the “Producer Price Index for All Commodities” (PPI). After the PPI gets above 200 (but before 210), then Yellen will raise rates, and she won’t give any notice, she will just do it and catch everyone by surprise. Afterwards she will say, “Gosh I gave you guys plenty of warning. You must have known it was coming.”

    As ever, how quickly this happens is the big challenge. The US is certainly sliding into recession now, but events are not dramatic. There’s a bunch more tech industry layoffs to come… 25000 jobs will be cut from HP, that’s worldwide I think, but quite a few companies seem to be quietly reducing their staff. I think we could see a dip within another year.

    • E. Harding says:

      Don’t see the US sliding into recession. Less than 1/5 of the signs visible in late 2006 are visible now.

  7. Major.Freedom says:


    Murphy, for a future Sunday post, could you delve into this:

    Suppose tomorrow God changed the universe in such a way that a new reality began whereby to follow God’s commands will result not in heaven but going to hell, and to disobey God’s commands will result not in hell but going to heaven. Suppose you believed this.

    Would you still follow God’s commands, knowing you’ll eventually go to hell, or would you start disobeying his laws, knowing you’ll eventually go to heaven? And whatever you choose, why would you choose it?

  8. Major.Freedom says:

    Murphy, Sumner did not address your point.

  9. Andrew_FL says:

    Point of order, the character in question is “The Doctor” (“The definite article, you might say”) not “Dr. Who” That’s just a long running kind of Abbott and Costello type thing which was a plot point in a recent series.

    • Harold says:

      Whilst the character is indeed “The Doctor”, it might not be clear who was being talked about if this was the phrased used.

      • Grane Peer says:

        Scott Sumner, The Doctor of economics blogging.

  10. Rick Hull says:

    Scott’s post looked to me like a whole lot of reasoning from price changes. Prohibited for thee, but not for me?

    • Major.Freedom says:

      Can’t forget “Socialism (centralized counterfeiting) for thee, and capitalism for me.”

    • Rick Hull says:

      Note: I am referring to Scott’s MoneyIllusion post, linked at the bottom of Bob’s post here — http://www.themoneyillusion.com/?p=30645

    • E. Harding says:

      That’s not reasoning from a price change, it’s reasoning from a money demand/money base change.

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