I’m currently at a blogging conference in Berkeley, and something I’ve encountered there has got me thinking about how to organize my blog. One way to do that is to list the unconventional claims I’ve made in various posts over the past 15 years.
1. The Great Recession is usually associated with a financial crisis, but it was actually caused by tight monetary policies.
2. Monetary policy is usually linked to interest rates, but interest rates have little or no relationship to monetary policy, which is better explained in terms of nominal GDP.
3. Economists are often thought of as people who forecast business cycles. In reality, economists cannot, and should not try to, forecast recessions or major movements in inflation.
4. Asset price bubbles are widely believed to exist in various markets, but in reality bubbles do not exist.
Now, none of these claims are exactly true. useful Approximation of reality – True in the sense that Newtonian mechanics is approximately true (but not as accurate as Newtonian mechanics).
Many more objections could be added to this list (fiscal multipliers are near zero, price gouging is good for consumers, etc.), but I will focus on these four. Should this “market monetarist” model be considered similar to heretical models that reject textbook economics like MMT? I don’t think so.
In an essay discussing the Clinton administration’s fight against protectionists, Paul Krugman He gave me the following advice:
(ii) Posturing as a rebel: There is nothing worse in our culture than to appear to be a staunch defender of old ideas, no matter how true they may be. Fortunately, at the moment, academic economist orthodoxy is a minority position among intellectuals at large. By reciting the contents of standard textbooks, you can appear to be a brave heretic, someone who boldly challenges authority. This has worked for me.
That really resonated with me. All my highly controversial ideas are 100% built on standard textbook economics building blocks. My blog posts (and The illusion of money In this book, I often cite popular textbooks as well as mainstream macroeconomists who do not support my unorthodox views. They may not agree with me, but I show that my arguments are a natural extension of much of what they have written and said over the years. In that sense, Market Monetarism is quite different from MMT, and is quite unorthodox, but only in its conclusions, not in its underlying model.
Another way to think about my blog is in terms of the even more fundamental “tools” that have enabled me to arrive at these various controversial claims.
1. Don’t blame price changes
2. Financial offsets
3. Efficient Market Hypothesis
You could say my blog is about applying these tools to a variety of problems. For example, all three tools helped me come to the conclusion that the 2008 recession was caused by the Fed. Not reasoning from price movements allowed me to see the situation without being fooled by low or falling interest rates. I saw that the EMH was signaling that nearly all asset markets were short of money, and that central banks could and should have used monetary policy. offset Adverse effects on the economy (specifically NGDP) caused by other factors such as a decline in the real estate market.
I am sometimes associated with the advocate of NGDP targeting. However, many economists support NGDP targeting (many more than when I started the blog). What sets my blog apart is its controversial claims.
