This is Paul Krugman:
Actually, before I get there, a word about self-styled conservative “market monetarists”: guys, have you noticed who your real policy enemies are? People like me, Brad DeLong, etc. are skeptical about the Fed’s ability to offset the effects of fiscal austerity, but we do want it to try. The furious academic opposition to quantitative easing is instead coming from moderate conservative macroeconomists, notably Taylor and Feldstein. So your problem isn’t just that the GOP’s effective leader on economic issues gets his macro from Francisco D’Anconia; it’s that even the not-so-silly wing of the party is dead set against what you consider reform.
When I read Krugman’s comment I came to think about what Robert Solow once said about Milton Friedman:
“Everything reminds Milton Friedman of the money supply. Everything reminds me of sex, but I try to keep it out of my papers.”
Paul Krugman undoubtedly is an extremely clever economist and when he actually writes about economics – rather than about obsessing about the US Republican party – he can be very interesting to read.
Unfortunately he is no better than the people on the right in US politics he so hates. It seems like every issue he writes about has to involve the Republican Party. Frankly speaking I find that extremely boring and massively counterproductive.
Personally I refuse to participate in the tribalism advocated by Paul Krugman. I do not judge economists and their views on whether they are affiliated with the Republican party or the Democrat party in the US. I find these affiliations utterly irrelevant.
It is of course correct that Market Monetarists tend to agree with Keynesians like Krugman and Brad DeLong that the main economic problem in the US, Japan and the euro zone right now is weak aggregate demand (we would say weak NGDP growth). None of ever denied that. However, we equally agree with John Taylor that monetary policy should be rule based and we agree with Allan Meltzer (at least the ‘old’ Meltzer) that monetary policy is highly potent. That is as least as important – or maybe even more important – when it comes to policy advocacy.
Furthermore, as particularly Scott Sumner often has argued that Paul Krugman has been extremely inconsistent on his view of monetary policy – sometimes he seems to that there is no role for monetary policy (he seems as obsessed with the imaginary liquidity trap as he is with the GOP) and sometimes he thinks monetary easing is great and will work. Or said in another way – we tend to agree the New Keynesian Krugman, but have no time for the paleo-Keynesian Krugman.
Finally would you all stop calling Market Monetarists “conservative”. As far as I know most of the Market Monetarist bloggers are either apolitical or think of themselves as libertarian or classical liberal. I am certainly no conservative – neither was Hayek nor was Friedman.
PS Josh Barro might be to “blame” to this discussion. It is probably this comment that triggered Krugman’s response:
“But while market monetarism is the shining success of the conservative reform movement, it also points to trouble for the reformists. We have had zero success in convincing Republican elected officials that easy money is ever a good idea. The Republican party has gotten, if anything, more rabidly afraid of inflation and more flirtatious with the idea of returning to a gold standard. The 2012 Republican National Convention adopted a platform calling for a “commission to investigate possible ways to set a fixed value for the dollar.”
PPS I feel that this blog post might have been a complete waste of time writing so I hope that I at least have not wasted your time as well.
PPPS Scott also comments on Krugman as do Dilbert:
Jonathan Cast
/ June 8, 2013Tangentially related comment on the Barro quote: isn’t NGDPLT the best way to “set a fixed value for the dollar”, since the value of the dollar is either 1/NGDP (the fraction of national income it can purchase) or the productive capacity of society/NGDP (the volume of actual output it can purchase) or such?
Lars Christensen
/ June 8, 2013Jonathan, you are completely right.
robengland
/ June 8, 2013From a position of monetary equilibrium it makes sense to see “a fixed value for the dollar” as being the fraction of national income it can purchase, but most people would see it as stable purchasing power.
dajeeps
/ June 8, 2013It will be a sign of improvement if the “conservative movement” in the US tries to adopt us. That will mean that the largest part of the battle is behind us considering most of the resistance to a monetary solution is coming from that direction.
James in London
/ June 8, 2013Dajeeps. Sadly, the way the left/right thing often works is that if the GOP were to adopt MM, the Dems would start opposing it. And neither side would remember it had ever been different. We just have to hope that whoever is actually in power, in any particular country, adopts MM.
It’s probably, therefore, more important in the US that the Dems get it, and therefore Krugman too. If the Dems were out of power Krugman would be less important to target, and less responsible.
And in the UK, the Conservative and LibDems are important to target. On monetary policy I believe they follow the consensus of “City” economists, so that needs to be targeted. In the EuroZone, there is no political control, which makes it harder to change their disastrous policy. In Japan, it has worked out well that a party adopted a form of MM and has partly implemented it. Is the current government left or right? Hard to tell, but the good thing is that it doesn’t matter.
Petar Sisko
/ June 8, 2013Krugman read Ayn Rand?
Blue Aurora
/ June 8, 2013I mean no disrespect, but I think your attempt to adapt Robert Solow’s half-joking remark on Milton Friedman to Paul Krugman and the GOP doesn’t quite work out…it’s simply not as funny.
Alexander
/ June 8, 2013Nothing to reply, Lars, you did it right!!. I enjoyed it.
Tommy Dorsett
/ June 8, 2013The demand side fiscalists have been as upended as the Austrian inflation nutters by an average pace of payroll gains in the USA that is running slightly ahead of the 2012 average. Where’s the sequester in the data? And if it’s not visible, then the ZLB liquidity trap is simply an imaginary constraint. Everything else in PK’s post was a diversion.
reflectionephemeral
/ June 8, 2013The fundamental problem with American politics is that tribalism is the sum total of what the Republican Party has to offer. This distorts our policies– instead of policies to boost demand, we have to ransom the “hostage” (Sen. McConnell’s term) of the economy from the GOP with the counterproductive sequester.
Krugman’s comments are reasonable. Calling out destructive tribalism is not itself tribalism.
Benjamin Cole
/ June 9, 2013But…Krugman is right.
Krugman doesn’t seem to care about MM, and says give it a try.
But Taylor, Feldstein and the auriferous genuflectors galore are deadset against MM, and want to put a monetary noose around the neck of the economy.
The Euro solution (tight money then recession and then inescapable deficits, also known as the Japan solution) is a proven failure.
I don’t know why the right-wing is stick in the 1970s, but they ought to read Pethokoukis of AEI. He is actually coming out in favor of MM. There is hope. I think. Well, maybe. Sort of.
robert
/ July 14, 2013What would cause a weak aggregate demand, and how would you go about fixing it?