Poor Scott has been worried that I’m forgetting him with my running series on David Beckworth. But I couldn’t do that to the most prolific Market Monetarist blogger! So two quick observations on his recent posts. (And barring a marathon Euchre tournament, I’ll do Step #3 in my Beckworth series tonight.)
==> In his most recent EconLog post, Scott complains of his fellow economists who “lack an imagination.” In particular Scott writes: “I often find it hard to even have a conversation with my fellow economists. Sometimes their views on “scientific” methodology are so narrow that any claim that doesn’t fit some arbitrary mathematical model is ruled out of order.”
I agree! Now Scott was talking about behavioral economists, but there are money/macro guys guilty of this sin, too. For example, I know a guy who says that if your analysis of an economy dealing with 330 million people can’t be reduced to two lines intersecting on the x-y plane, then it’s bunk. How would you feel about a heart surgeon or car mechanic with this approach?
==> You think I’m kidding, but I’m being serious: I also totally agree with Scott’s second-last post at EconLog, titled, “The Fed doesn’t have a magic wand.” Scott wrote:
Here are the monetary base and interest rates on August 1, 2007:
MB = $855.960 billion, fed funds rate = 5.25%
And here is the same data on April 9, 2008:
MB = $855.411 billion, fed funds rate = 2.25%
Why did interest rates fall sharply? Perhaps one is entitled to say the Fed caused rates to fall, in the very limited sense that some counterfactual policy would have produced a different path for interest rates. But one is not entitled to also call that an expansionary monetary policy, even though expansionary monetary policies do in fact sometimes cause interest rates to fall. [Formatting in original.–RPM]
Again, I love it. But not just for its own sake, but because with some minor tweaks I can apply the above-quoted stance from Scott to help out with my dispute with a certain Market Monetarist. Watch how I can make totally plausible tweaks to spit out an analogous view:
Here are the monetary base and NGDP levels on August 1, 2007:
MB = $855.960 billion, NGDP = $14.6 trillion
And here is the same data on August 1, 2009:
MB = $1,677.1 billion, NGDP = $14.4 trillion
Why did NGDP growth fall sharply relative to the previous trend? Perhaps one is entitled to say the Fed caused NGDP growth to fall, in the very limited sense that some counterfactual policy would have produced a different path for NGDP. But one is not entitled to also call that a contractionary monetary policy, even though contractionary monetary policies do in fact sometimes cause NGDP growth rates to fall.
It’s the same thing as Sumner’s view, right?