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Political Economy
Scott Sumner has repeatedly attacked Bernanke for his failure to base his monetary policy on his monetary economics. But yesterday he argued that leaders in non-totalitarian countries don’t make much difference. Unlike Mao, current Chinese dictator Hu Jintao couldn’t start his own Cultural Revolution. And like Bush, Gore would have invaded Iraq.
I’m puzzled by the apparent contradiction between Scott’s two positions. I wonder if he’d be willing to clear matters up.
Update: See Scott’s reply in the comments. As far as I can tell, he’s saying that Bernanke is a Hu Jintao with respect to the Zeitgeist of a few hundred elite macroeconomists. Is that a fair summary?
READER COMMENTS
Daniel
Aug 27 2009 at 12:52pm
Obviously the Fed is a totalitarian organization.
valter
Aug 27 2009 at 12:59pm
“And like Bush, Gore would have invaded Iraq.”
Could you tell us on what evidence you base this assertion?
david
Aug 27 2009 at 1:33pm
@valter
It’s not Bryan’s assertion, it’s Scott’s. Although I would be interested to know if Bryan agrees… đ
Blackadder
Aug 27 2009 at 1:42pm
Here is Sumner’s reasoning for the Gore invades Iraq thing:
E. Barandiaran
Aug 27 2009 at 2:16pm
Bryan,
Hu Jintao or Obama can do as much harm (good according to BB’s fans) as Bernanke. They may cry “the martians are coming” and throw thousands of bombs and missiles and then declare victory. Indeed any history of their government and their country will later tell the story of this great victory. Do you think this action has anything to do with the point Sumner was trying to make when he mentioned the differences between Mao and Hu Jintao?
John
Aug 27 2009 at 7:46pm
I think Scott Sumner would say that his blog is not an attempt to convince one person–say, Bernanke–to adjust his policies, but is rather an attempt to change the “zeitgeist” of the economics profession. He wants to push conventional wisdom to the point where it would no longer seem radical for Bernanke to dramatically increase the money supply.
Whether hoping to single-handedly change the zeitgeist is more or less idealistic than hoping a wise leader will dramatically alter policy is another question entirely.
Scott Sumner
Aug 27 2009 at 9:07pm
I’d be glad to respond to this question. I have also argued a number of times that the Fed tends to reflect the consensus views of the macroeconomics elite–say the top several hundred macroeconomists. Indeed in one post I argued that economists as a group almost never blamed the Fed for recessions, at the time and place, because the Fed was reflecting the consensus views of those same macroeconomists. (Exceptions are 1921 and 1982, when recessions were viewed as acceptable costs for containing inflation.) Thus with each recession we hear the refrain “Recessions are normally due to inadequate AD, caused by insufficiently expansionary money policy. But this time it’s different.” There is always some factor (financial instability, supply shocks, tech bubble) that exonerates the Fed. And how could it be otherwise? People don’t want to blame themselves.
Only with the perspective of time or distance (Japan 1990s, US 1930s), do we blame the central bank.
I have consistently been highly critical of the macroeconomics elite, and indeed blame them, not reckless bankers, for the severe crash of late 2008. However reckless bankers were to blame for the small crash of late 2007.
This is why I don’t have strong views on reappointing Bernanke. Unless he was replaced with his Princeton colleague Lars Svensson, what would be the point?
BTW, I think this consensus-based institutional structure is good. If central banks started basing policy on minor cranks like me, what are the odds that they would find the occasional crank who happens to be a genius? I’m trying to change the consensus.
Scott Sumner
Aug 29 2009 at 10:26am
If I understand your reply, the answer is yes. In my view there are two factors that limit Bernanke’s power.
1. He is just one of 12 votes on the FOMC.
2. Institutions like the Fed tend to follow the consensus of elite opinion–I think there’s a fancy German word for it.
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