As I repeatedly say, I think Scott Sumner is a very sharp guy who understands technical economics models. (For some of the technical papers I’m working on here at Texas Tech, Sumner may be one of the few people I personally know who can give me feedback on the drafts.) But his latest EconLog post really underscored something that has been concerning me over the years, and so I left this comment (which I hope he sees and answers, if he has time):
I would like to request that when you get a chance, you devote an EconLog post to avoiding potential confusion among its readers. Here’s my concern:
==> From a 30,000-ft view, I think a lot of free market economists in 2005 would have endorsed the following: “The Keynesian economists thought the proper policy in a recession was to print money and generate (price) inflation, in order to bring down unemployment. But Friedman and others pointed out that this was quite shortsighted. Once unions and other workers adjusted to the new policy, the so-called Phillips Curve would simply shift. Then we’d have the worst of both worlds, of high unemployment and inflation. That’s why the central bank shouldn’t try to solve a recession by the printing press, but should instead focus on monetary policy rules that provide a stable framework that, in the long run, maximizes real GDP growth and minimizes volatility.”
==> So I know you know all of this stuff, and can get much more nuanced, but I’m concerned the average EconLog reader will take away the lesson from your typical posts here that: “For the last 8 years we have had tight money and that’s why the economy has been bad. The way to fix this recession is to inflate. The way to fix the next recession is to inflate. If unemployment is too high, you need more inflation to fix it.”
Again, I realize that’s not literally what you are saying, but at times it sounds like that’s the take-away message. So if you could at some talk about this, I think that would be helpful.