Friday, May 15, 2009


Scott Sumner on Krugman

I will be at the North Dakota Free Market Forum for the next few days, so blogging will be at a minimum. In the meantime, remember a while back when I said Scott Sumner was my new favorite blogger, and some of you pooh-poohed me because of his position on business cycles? You have to look beyond the theoretical errors and grasp the essence of the blogger. Check this out:
Over the last few months I have had a chance to closely examine many of Krugman’s recent and past writings on fiscal and monetary policy. One thing that I notice is that Krugman is very skilled at making an argument. He can use the same basic model to make either monetary or fiscal policy seem like the only reasonable option. All that is required is that one tweak the assumptions in such a way that the less favored policy seems either undesirable or infeasible. So my message is this—don’t let anyone (including me) bully you into thinking that your policy instincts are wrong, until you have closely examined the assumptions that underlie each side of the debate. All this drivel in the blogoshere about velocity, multipliers, liquidity traps, Ricardian equivilence, budget constraints, etc, etc, are merely verbal tools that can be wielded to achieve any desired outcome. It’s an insiders game. The real battle is elsewhere.

Ah, I can spot talent. I knew this guy was worth watching.

And don't worry, kids: Sumner seems intellectually honest enough that when nominal GDP rises at more than 7% per year in 2010,* while CPI rises by more than 10%, he will concede that he needs to go back to the drawing board. Not saying he will get a tatoo of Rothbard on his left arm, but he will realize he has some 'splaining to do.

* Not an official prediction.

When your CPI skyrocket takes off, I predict a new youth cult of tattooed Austrians, call 'em "Roths".

I have been following Sumner since you have highlghted him, and I thnk you are right about him. He is intellectually honest (and fun to read).


Your former favorite blogger.
Thanks Bob, It will be fun to watch how things turn out. I won't necessarily get the tattoo, but I will definitely talk about your predictions, and how you beat me. I usually admit my mistakes (Iraq war, housing bubble, etc.) BTW, I do have one problem with the earlier post on the TIPS. Those consecutive monthly errors looked very bad, but because each is a five year forecast, they were all affected by the huge energy price rise in 2007-08. I'd rather think of that as one big error, rather than 20 or 30 consecutive small errors. But I agree it is at least a small point in your favor.
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