03 Jan 2011

Scott Sumner: Fool or Genius?

Financial Economics 9 Comments

In a recent post, “Does Finance Deserve Its Earnings?” Scott Sumner writes:

Many economists (even some relatively free market economists) have begun to question the high returns flowing to the financial industry in recent years. It’s not that people don’t understand that finance is important, or that it plays a critical role in our economy, but rather the claim is that finance is much more generously rewarded than in the past, and that those extra earnings are at least partly unmerited.

Today I’d like to defend finance….[E]ven in the absence of policies such as Too Big To Fail, you would expect the share of income going to finance to be rising sharply, as compared to earlier decades.

Now I’ll be honest: I thought I was going to be able to pounce on Sumner for this one. I mean, Scott has refused to admit–even though I’ve asked him point-blank twice (I believe)–that accountants serve a purpose in a market economy. I know, I know, you think I am exaggerating, but please go re-read my exchanges with Scott when he says that the very concept of “income” is useless.

As I say, I was getting ready to level a back-breaking blow; how the heck can Scott say financiers are useful, if he thinks accountants don’t really do anything? But then I saw his elegant escape hatch: Scott is talking in this post about “earnings” and “share of income.” Two meaningless concepts, if we are to believe his earlier posts.

Hence, Scott Sumner has performed the macroeconomic equivalent of Jesus’ famous, “Render unto Caesar what is Caesar’s.” The man is a force of nature. Look what he did to the last guy who tilted at the Sumnerian Worldview a bit too recklessly.

9 Responses to “Scott Sumner: Fool or Genius?”

  1. Scott Sumner says:

    And you can expect that same ridicule if you continue exposing errors in my logic–we’re both libertarians aren’t we? You should be on my side!!

  2. Desolation Jones says:

    When are we going to see a scalding critique of Sumner’s proposal to level target NGDP on mises? Forget Krugman. Sumner is your #1 enemy right now. In the end, Sumnerism will probably beat out Krugmanism in Fed policy so get cracking. Plus Sumner has claws to fight back with while you’ll never hear back from Krugman.

  3. David L. Kendall says:

    Scott Sumner is no fool, that’s for sure. Robert Murphy is also certainly no fool, equally certain. Paul Krugman is also no fool, but he can be rather annoying, just the same.

    I, too, want to understand Scott Sumner’s ideas. I have only begun to consider his ideas, and I think best in the presence of other minds. So let the arguments begin. I will be watching both Free Advice and The Money Illusion regularly. Give us your best.

    By the way, I also am a libertarian to the bone. So, if either Dr. Sumner or Dr. Murphy come up with something that requires one set of people to compel another, you can expect serious skepticism coming via comment. In fact, that’s one of the big problems I’m already having so far with my explorations of Scott Sumner’s ideas. The very existence of the Fed requires one set of people to compel another set of people. That runs a red flag all the way to the top of the pole for me.

    • Silas Barta says:

      You can look at the “junior” version of Murphy vs. Sumner in my blog discussions with John Salvatier. (Latest discussion linked, which links back to the earlier ones.)

    • bobmurphy says:

      DLK, Sumner hasn’t gone a day without advising one type of coercion or another. (I am exaggerating–he sometimes takes the day off.) Really, look at his blog.

      • David L. Kendall says:

        You are right.

      • David says:

        Indeed, though I’m a bit puzzled how he can claim to be a libertarian still. Artificially engineering a supposedly optimal economy through coercion would still be morally wrong even if it produced “better” economic outcomes than a free market system.

  4. Bob Roddis says:

    Is this the same Scott Sumner writing in National Review? Is he some kind of Buckleyite neo-con?

    “To control inflation, the Fed should target nominal income” by Scott Sumner: