Notes on Taking Hummel's Monetary Theory and Policy Course
By David Henderson
I wrote the final exam in Jeff Hummel’s Masters course in Monetary Theory and Policy last month and got the results about 10 or 12 days ago. I got an A+. (Yay!) Now you might say that I should have gotten an A+, given that I have a Ph.D. in economics and given that one of the readings on the syllabus was by me. (By the way, embarrassingly, the only short-answer question out of 46 questions that I got wrong was on an article that Jeff and I had co-authored. Division of labor explains that. Jeff came up with the data, which was what the question was on, and wrote the first draft, and I rewrote.)
But I had to do the work. Don Boudreaux asked me after the midterm, on which I got close to a perfect score, what percent I would have got if I hadn’t taken the course or done any of the readings. I estimated that it would have been between 50 and 60%, which, in a Masters class, is essentially a failing grade. I asked myself that question for the final. The answer is 40 to 50% because the material in the last half of the course was less familiar to me than the material in the first half.
I learned a ton: the resource cost of a gold standard, the weird and implausible Diamond-Dybvig model, the Bailey curve on seigniorage, bond illusion, the fiscal theory of the price level, the Taylor rule (I knew that but I couldn’t have told you the actual numbers–now I can), Hayek’s prediction of the kind of money that would evolve if there were no government intervention (and why I think, with Larry White, that Hayek was wrong), the Currency School, the Free Banking School, the real bills doctrine, Murray Rothbard’s pretty weak case for 100% reserve requirements in banking, the exact definition of fiat money (HINT: it does not mean money that has no intrinsic value), the interesting history (in a reading by Hummel) showing that bank panics, widespread bank failures, and recessions must be distinguished between, the formula for the money multiplier, and how Jeff’s favorite President, Martin van Buren, avoided having the federal government have a bank account, to name a few.
Along with that, he gave an outstanding lecture on the Great Depression. I already knew most of what he talked about here, but most means about 70%. I learned the other 30%, including the fact that the feds put a 2-cent tax on checks at exactly the wrong time because the tax encouraged people to convert checking accounts to currency, reducing the money multiplier and shrinking the money supply.
Also his explanation of capital theory using Tom Hanks’s character in Castaway is really good. Just cuts to the chase and avoids a lot of extraneous stuff.
If Jeff teaches the class again next January by Zoom, and I’m encouraging him to do so, I recommend that you get in touch with him if you have a fairly strong economics background and are willing to stay up until 9:15 p.m. Pacific time, on a Tuesday evening.