07 Aug 2017

I Throw Scott Sumner Under the Bus

Market Monetarism 16 Comments

In a recent EconLog post, Scott writes:

You are about to take a bus from Zurich to Milan, right over the Alps. You have three buses to choose from:

1. Bus A is a self-driving machine, fitted with a rear-mounted camera and the latest automatic steering mechanism, designed by noted Swiss engineer Johan Taylor. When the camera sees that the bus has deviated too far to the right of the road, it automatically steers the bus to the left, and vice versa.

2. Bus B is driven by Johanna Yellen, widely regarded as one of Switzerland’s best bus drivers.

3. Bus C is a complicated human/machine hybrid. It has forward looking cameras, that feed road images into a large building, in real time. About 10,000 bus drivers sit at the controls of a simulator, and steer the bus as they think is appropriate. The average of all of their steering decisions is fed back to the bus in real time, in order to adjust the steering mechanism. To motivate good steering decisions, the 10,000 bus drivers are rewarded according to whether their individual steering decisions would have led, ex post, to a smoother and safer drive than that produced by the consensus.

Which bus would you take?

Put aside your views on monetary policy for a second. The answer to this is CLEARLY (2). We know this is the case, because people routinely take buses all the time. These buses are not self-driven or driven by 10,000 people, but instead by a driver. If people knew, “This particular driver has been rated one of the best in the country,” then they would be even more comfortable with it.

And yet, Scott obviously thinks the right answer here is (3), which corresponds to his monetary proposals. My comment:

I’m being dead serious: Anyone who answered “C” to Scott’s question is having his or her hand forced by prior commitment to NGDP targeting. There’s no way in the world you would get on that kind of bus if it were driving through the Alps. You would first want several years of tests on flat county roads.

And I’m not just quibbling with the analogy. For the exact same reason, you should be very wary of NGDPLT proposals.

For what it’s worth, Scott responded to me: “Bob, i’ve written papers on how the proposal can be tested, and gradually implement to reduce risk of error.”

16 Responses to “I Throw Scott Sumner Under the Bus”

  1. denis says:

    u got me… i agree with you even though i agreed with him

  2. Andrew_FL says:

    I agree with this except that the answer isn’t clearly 2, it’s clearly 1.

  3. Transformer says:

    This is a great example of an analogy that totally backfires. If would have been way easier to understand if he had just said

    ‘You need to choose optimal monetary policy:You have three options to choose from:

    1. The Taylor rule
    2. The current fed run by Yellen
    3. An NGDP futures market’

    The analogy seems to serve no useful purpose.

    (He should probably have added a fourth ‘Austrian bus option: The passengers each lean in the direction that maximizes their utility and the bus just steers itself’

    • Andrew_FL says:

      Amazing talent for constructing analogies that make freedom sound stupid.

      • Major-Freedom says:

        A former KGB agent disclosed that the Soviet Communists liked the useful idiots….but only for a time.

  4. Steven Landsburg says:

    I think you win this one.

  5. Tel says:

    Thank you for choosing bus #2. We hope you enjoy your very smooth ride to Milan in the capable hands of world renowned bus driver Johanna Yellen.

    And now for the news. Appointment of next Federal Reserve Governor has been revealed today to be the well known Economist Nicolás Maduro; as confirmed by President Bernie Sanders.

    In a brief introductory speech, Maduro said, “I’m keeping this on the rails!”

  6. Darien says:

    It’s a true fact: due probably to being very tired, I honestly didn’t see where Sumner was going with this, and just thought he was being weird about buses. And to be sure: the answer is very clearly 2. In fact, while I was reading answer 3 behind my wonderful veil of ignorance, I figured he was setting up some madcap analogy in which he was going to make fun of people for choosing something equivalent to 3.

  7. Harold says:

    My choice was 3. This assumes they all cost the same and the technology actually works.

    Bus 1 only has left and right correction – what if a goat jumps in the road?

    Bus 2 would be perfectly acceptable, and most people are happy with this.

    Bus 3 has all the advantages if bus 2, multiplied many fold. The only downside is whether the technology works, but I assume it does and has already been tested. If you told me it was experimental it would be different.

    Thus bus 3 has the potential of producing the best output of the three.

    • Yancey Ward says:

      This is called begging the question, however. This goes right to the point made above by Transformer- the analogy backfires because it serves no constructive purpose other than to try to sneak in that assumption.

    • Stephen Dedalus says:

      “Bus 1 only has left and right correction – what if a goat jumps in the road?”

      SMH: obviously this was meant to imply ‘Any adjustments necessary.” People were supposed to read charitably enough the Sumner thought he would not have to list every possible adjustment individually.

      • Harold says:

        ” ‘Any adjustments necessary.”
        Yes, possibly. Given that I have assumed the technology works, should I travel by automatic bus or one driven by 10000 people? Maybe I will switch my choice to 1.

        However, the “left right correction” seems to imply a somewhat simpler system.

      • Craw says:

        Ugh. I will hate myself in the morning but .. I think Harold was right. He’s not the one reading uncharitably, Sumner is writing uncharitably. That is why the bus in 1 has only a *rear* view camera — to mock those using the Taylor rule.

  8. Harold says:

    “We know this is the case, because people routinely take buses all the time. These buses are not self-driven or driven by 10,000 people, but instead by a driver.”

    We don’t have the option of a bus driven by 10,000 drivers. The fact that people routinely take buses driven by a driver tells us nothing about the preferences for the other options because they are not available.

    For example, if there was an option 4: instead of a bus you could instantly teleport with guaranteed absolute safety and comfort.

    I would think most people would take option 4.

  9. Andrew_FL says:

    Twitch Plays Bus Driver

  10. Major-Freedom says:

    Murphy, Sumner’s analogy presumes anarcho-capitalist monetary policy, since he set up an “atomistic” scenario. One bus that is going to be controlled in a specific way. Not all buses, just this one. Every other bus is on account of their absence from the analogy, assumed to run independently from this particular bus. This scenario is just Sumner asking people to believe he has a good driving plan for this particular bus.

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