01
Sep
2014
Scott Sumner Warns Against Heterodox Views, Except His
This post at Mises CA actually turned out better than I had first anticipated. As I thought of more pieces of evidence, the case against Sumner became quite powerful–using the very framework he recommended to his readers. (Incidentally, that’s my point here; I’m not attacking heterodoxy. I recognize that Austrian anarcho-capitalist evengelical Christians are not exactly swarming the streets.)
One of the best, if not the best, intellectual arts I have learned in life, is the art of self-referential analysis/critique.
It is what most clearly exposes the flaws of statism and empiricism, for example.
Has Sumner ever responded to Austrian critiques that he ignores economic calculation and Cantillon Effects and that his policies are trying to cure problems that don’t actually exist but for the fiat money system?
I strongly suspect Sumner is confusing correlation with causation in his post. I’ll discuss this later.
Yes.
He rejects Cantillon Effects as inconsequential, if not non-existent. But he contradicts himself on this point, sometimes saying those who sell bonds to the Fed are absolutely and always harmed (then why do they do continue to do it?), and other times saying otherwise. He thinks of inflation in terms of “seigniorage”, which he admits takes place, but he always makes sure to include the “but taxation is far worse” addendum.
I can tell you he does not understand economic calculation. His approach is general equilibrium modelling, which blinds the researcher to the market process, since equilibrium models can only deal with final states of rest.
Regarding fiat versus free market money, he believes in the general Friedmanist interpretation of the Great Depression. He dodges the 1920s inflation like a landmine, going so far as hand waving it all away by claiming that because the Fed wasn’t tracking M2 back then, there could not have been too much inflation of the money supply. Not kidding.
There really wasn’t a whole lot of monetary inflation (either of the base or of the money supply) during the late 1920s, but the Fed clearly was propping up the stock market via purchases of acceptances. Easing at the time was qualitative, not quantitative.
http://research.stlouisfed.org/fred2/series/SBASENS
http://research.stlouisfed.org/fred2/series/M1444AUSM027SNBR
There wasn’t much need for a lot of quantitative Fed monetary inflation because stocks were in a bubble.
Very funny – and the links you provide show a great attention to detail.
Sumner says; “A note to commenters. Before you mention some study that has the support of 5% of climate scientists, ask yourself how you’d feel if some massive liberal big government intervention was being proposed on the basis studies that 5% of scientists supported, and 95% thought were nuts. Wouldn’t you ridicule the heterodox view?”
I am a fan of Sumner and should point out that he doesn’t see the kind of polices needed to implement NGDP-targeting as “some massive liberal big government intervention” but rather as the anecdote to such an intervention. By using asset purchases to stabilize NGDP the economy can be optimized without the need for “big government intervention”. This theory will probably need the support of more than 5% of economists before it is accepted – but I think it is important that it be seen as against, and not in favor of “big government”:
Why does Sumner use the word “if” in this context?