Scott Sumner

Scott B. Sumner (born 1955) is an American economist. He is the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University, a Research Fellow at the Independent Institute, and professor who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".[1] In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.[2]

After Ben Bernanke's announcement on September 13, 2012, of a new round of quantitative easing, which open-endedly committed the FOMC to purchase $40 billion agency mortgage-backed securities per month until the "labor market improves substantially", some media outlets began hailing him as the "blogger who saved the economy", for popularizing the concept of nominal income targeting.[3]

Scott Sumner
Born1955 (age 63–64)
NationalityUnited States
FieldMonetary economics
School or
tradition
Market monetarism
Alma materUniversity of Chicago (Ph.D.) University of Wisconsin (B.A.)
InfluencesMilton Friedman
Information at IDEAS / RePEc

Academic career

Sumner received a PhD in economics from the University of Chicago in 1985. His published research focuses on prediction markets and monetary policy.[4]

In the wake of the 2008 financial crisis, Sumner began authoring a blog where he vocally criticized the view that the United States economy was stuck in a liquidity trap.[5] Sumner advocates that central banks such as the Federal Reserve create a futures market for the level of nominal gross domestic product (NGDP, also known as nominal income), and adjust monetary policy to achieve a nominal income target on the basis of information from the market. Monetary authorities generally choose to target other metrics, such as inflation, unemployment, the money supply or hybrids of these and rely on information from the financial markets, indices of unemployment or inflation, etc. to make monetary policy.[6]

In 2015, Sumner published The Midas Paradox: A New Look at the Great Depression and Economic Instability. The book argued that the Depression was greatly extended by repeated gold market shocks and New Deal wage policies.

Market monetarism

A school of economics known as market monetarism has coalesced around Sumner's views; The Daily Telegraph international business editor Ambrose Evans-Pritchard has referred to Sumner as the "eminence grise" of market monetarism.[7] In 2012, the Chronicle of Higher Education referred to Sumner as "among the most influential" economist bloggers, along with Greg Mankiw of Harvard University and Paul Krugman of Princeton.[8] In 2012, Foreign Policy ranked Sumner jointly with Federal Reserve chair Ben Bernanke 15th on its list of 100 top global thinkers.[9]

Nominal GDP targeting

Sumner contends that inflation is "measured inaccurately and does not discriminate between demand versus supply shocks" and that "Inflation often changes with a lag...but nominal GDP growth falls very, very quickly, so it'll give you a more timely signal stimulus is needed".[10] He argued that monetary policy can offset fiscal austerity policies such as those pursued by the British government in the wake of the 2007 economic crisis.[10]

In April 2011, the Reserve Bank of New Zealand responded to Sumner's critique of inflation targeting, arguing that a nominal GDP target would be too technically complicated, and make monetary policy difficult to communicate.[11] By November 2011, however, economists from Goldman Sachs were advocating that the Federal Reserve adopt a nominal income target. Nathan Sheets, a former top official at the Federal Reserve and the head of international economics at Citigroup, proposed that the Federal Reserve adopt a nominal consumption target instead.[12]

Sumner has argued that one cannot account for the impact of fiscal policy without first considering how monetary policy may affect the outcome; fiscal stimulus may not succeed if monetary policy is tightened in response. Economic journalists have referred to this as the Sumner Critique, akin to the Lucas critique.[13] Summarizing this thinking, The Economist suggested:

...the economy will almost certainly not grow at a 5.3% rate no matter what Congress does. Arguments to the contrary are subject to what econ bloggers have come to call the Sumner Critique, after economist and blogger Scott Sumner. It is reasonable to assume, by this critique, that the Federal Reserve has a general path for unemployment and inflation in mind and it will react to correct any meaningful deviation from that path. A 5.3% growth rate is well outside the range of current Fed projections. Growth that rapid would almost certainly bring down unemployment quite quickly, triggering Fed nervousness over future inflation and prompting steps to tighten monetary policy.[14]

Personal life

Well known in Bentley's economics department as a "technophobe", Sumner, who purchased his first cell phone in 2011, apparently "triggered expressions of surprise and amusement when he informed his colleagues that he was starting a blog".[1]

Sumner is married and lives in Newton, Massachusetts.

Bibliography

See also

References

  1. ^ a b Greeley, Brendan (1 November 2012). "The Blog That Got Bernanke to Go Big". Bloomberg Businessweek.
  2. ^ O'Brien, Matthew (2 May 2012). "A Rebellion at the Federal Reserve?". The Atlantic.
  3. ^ Thompson, Derek (14 September 2012). "The Blogger Who Saved the Economy". The Atlantic.
  4. ^ "Scott B. Sumner". Bentley University. Retrieved 2011-01-18.
  5. ^ Krugman, Paul (2 March 2009). "A Quick Response to Scott Sumner". New York Times. Retrieved 2011-01-18.
  6. ^ Sumner, Scott (14 December 2010). "Money Rules". The National Review. Retrieved 2011-01-18.
  7. ^ Evans-Pritchard, Ambrose (27 November 2011). "Should the Fed save Europe from disaster?". The Telegraph. Retrieved 2011-12-01.
  8. ^ Berrett, Dan (8 January 2012). "'Dim Sum for the Mind': Economics Blogs Engage Policy Wonks and Students". Chronicle of Higher Education.
  9. ^ Wittmeyer, Alicia P. Q. (November 26, 2012). "The FP Top 100 Global Thinkers". Foreign Policy. The Slate Group. Retrieved 2012-11-26.
  10. ^ a b Hamilton, Scott (2011-04-10). "Bank of England Should Replace Inflation Targeting, Sumner Says". Bloomberg. Retrieved 2011-04-13.
  11. ^ "Reserve Bank rejects report on system flaws". NZPA. 13 April 2011. Retrieved 2011-04-15.
  12. ^ Sumner, Scott. "Monetary regimes in your review mirror may be closer than they appear". Retrieved 2011-12-01.
  13. ^ Yglesias, Matthew (18 May 2012). "Don't Believe The "Taxmageddon" Hype". Slate. Retrieved 2012-05-29.
  14. ^ "Fiscal cliffs, multipliers, and the myth of central bank independence". The Economist. 23 May 2012. Retrieved 2012-05-29.

External links

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Christina Romer

Christina Duckworth Romer (née Duckworth; born December 25, 1958) is the Class of 1957 Garff B. Wilson Professor of Economics at the University of California, Berkeley and a former chair of the Council of Economic Advisers in the Obama administration. She resigned from her role on the Council of Economic Advisers on September 3, 2010.After her nomination and before the Obama administration took office, Romer worked with economist Jared Bernstein to co-author the administration's plan for recovery from the 2008 recession. In a January 2009 video presentation, she discussed details of the job creation program that the Obama administration submitted to Congress.

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Liquidity trap

A liquidity trap is a situation, described in Keynesian economics, in which, "after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers [holding] cash [rather than] holding a debt which yields so low a rate of interest."A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. According to mainstream theory, among the characteristics of a liquidity trap are interest rates that are close to zero and changes in the money supply that fail to translate into changes in the price level.

List of richest Americans in history

For the contemporary lists, see List of Americans by net worth and Forbes 400.Most sources agree on John D. Rockefeller being the richest American in history, although some define richest as an individual'sr example, economic blogger Scott Sumner noted in 2018 that Rockefeller was worth $1.4 billion when he died in 1937, which was about $24 billion in dollars adjusted to 2018. Meanwhile, Bill Gates in 1999 was worth nearly $150 billion in dollars adjusted to 2018.Second richest in terms of wealth over contemporary GDP is disputed, with various sources listing Andrew Carnegie, Cornelius Vanderbilt, John Jacob Astor IV, Bill Gates, or Henry Ford, or John Pitcairn. Most sources agree on Carnegie. Further places are a matter of even bigger debate.

Given the economic rise of the United States of America since its origins, with America becoming the foremost economic power in the world by the late 19th century, the wealthiest men in America were often also the wealthiest men in the world.

List of utilitarians

This is an incomplete list of advocates of utilitarianism and/or consequentialism.

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Lost Decade (Japan)

The Lost Decade or the Lost 10 Years (失われた十年, Ushinawareta Jūnen) is a period of economic stagnation in Japan following the Japanese asset price bubble's collapse in late 1991 and early 1992. The term originally referred to the years from 1991 to 2000, but recently the decade from 2001 to 2010 is often included so that the whole period is referred to as the Lost Score or the Lost 20 Years (失われた二十年, Ushinawareta Nijūnen). Broadly impacting the entire Japanese economy, over the period of 1995 to 2007, GDP fell from $5.33 trillion to $4.36 trillion in nominal terms, real wages fell around 5%, while the country experienced a stagnant price level. While there is some debate on the extent and measurement of Japan's setbacks, the economic effect of the Lost Decade is well established and Japanese policymakers continue to grapple with its consequences.

Market monetarism

Market monetarism is a school of macroeconomic thought that advocates that central banks target the level of nominal income instead of inflation, unemployment, or other measures of economic activity, including in times of shocks such as the bursting of the real estate bubble in 2006, and in the financial crisis that followed. In contrast to traditional monetarists, market monetarists do not believe monetary aggregates or commodity prices such as gold are the optimal guide to intervention. Market monetarists also reject the New Keynesian focus on interest rates as the primary instrument of monetary policy. Market monetarists prefer a nominal income target due to their twin beliefs that rational expectations are crucial to policy, and that markets react instantly to changes in their expectations about future policy, without the "long and variable lags" postulated by Milton Friedman.

Mercatus Center

The Mercatus Center at George Mason University is an American non-profit free-market-oriented research, education, and outreach think tank directed by Tyler Cowen. It works with policy experts, lobbyists, and government officials to connect academic learning and real-world practice. Taking its name from the Latin word for "market", the center advocates free-market approaches to public policy. During the George W. Bush administration's campaign to reduce government regulation, the Wall Street Journal reported, "14 of the 23 rules the White House chose for its "hit list" to eliminate or modify were Mercatus entries".According to the 2017 Global Go To Think Tank Index Report (Think Tanks and Civil Societies Program, University of Pennsylvania), Mercatus is number 39 in the "Top Think Tanks in the United States" and number 18 of the "Best University Affiliated Think Tanks". The Koch family has supported the organization, and Charles Koch serves on the group's board of directors.

Milton Friedman

Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy. With George Stigler and others, Friedman was among the intellectual leaders of the second generation of Chicago price theory, a methodological movement at the University of Chicago's Department of Economics, Law School and Graduate School of Business from the 1940s onward. Several students and young professors who were recruited or mentored by Friedman at Chicago went on to become leading economists, including Gary Becker, Robert Fogel, Thomas Sowell and Robert Lucas Jr.Friedman's challenges to what he later called "naive Keynesian" theory began with his 1950s reinterpretation of the consumption function. In the 1960s, he became the main advocate opposing Keynesian government policies and described his approach (along with mainstream economics) as using "Keynesian language and apparatus" yet rejecting its "initial" conclusions. He theorized that there existed a "natural" rate of unemployment and argued that unemployment below this rate would cause inflation to accelerate. He argued that the Phillips curve was in the long run vertical at the "natural rate" and predicted what would come to be known as stagflation. Friedman promoted an alternative macroeconomic viewpoint known as "monetarism" and argued that a steady, small expansion of the money supply was the preferred policy. His ideas concerning monetary policy, taxation, privatization and deregulation influenced government policies, especially during the 1980s. His monetary theory influenced the Federal Reserve's response to the global financial crisis of 2007–2008.Friedman was an advisor to Republican President Ronald Reagan and Conservative British Prime Minister Margaret Thatcher. His political philosophy extolled the virtues of a free market economic system with minimal intervention. He once stated that his role in eliminating conscription in the United States was his proudest accomplishment. In his 1962 book Capitalism and Freedom, Friedman advocated policies such as a volunteer military, freely floating exchange rates, abolition of medical licenses, a negative income tax and school vouchers and opposed the war on drugs. His support for school choice led him to found the Friedman Foundation for Educational Choice, later renamed EdChoice.Friedman's works include monographs, books, scholarly articles, papers, magazine columns, television programs and lectures and cover a broad range of economic topics and public policy issues. His books and essays have had global influence, including in former communist states. A survey of economists ranked Friedman as the second-most popular economist of the 20th century following only John Maynard Keynes and The Economist described him as "the most influential economist of the second half of the 20th century ... possibly of all of it".

Minimum wage

A minimum wage is the lowest remuneration that employers can legally pay their workers—the price floor below which workers may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century.Supply and demand models suggest that there may be welfare and employment losses from minimum wages. However, if the labor market is in a state of monopsony (with only one employer available who is hiring), minimum wages can increase the efficiency of the market. There is debate about the effect of minimum wages.The movement for minimum wages was first motivated as a way to stop the exploitation of workers in sweatshops, by employers who were thought to have unfair bargaining power over them. Over time, minimum wages came to be seen as a way to help lower-income families.

Although minimum wage laws are in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage. Supporters of the minimum wage say it increases the standard of living of workers, reduces poverty, reduces inequality, and boosts morale. In contrast, opponents of the minimum wage say it increases poverty, increases unemployment (particularly among unskilled or inexperienced workers) and is damaging to businesses, because excessively high minimum wages require businesses to raise the prices of their product or service to accommodate the extra expense of paying a higher wage and some low-wage workers "will be unable to find work...[and] will be pushed into the ranks of the unemployed."Modern national laws enforcing compulsory union membership which prescribed minimum wages for their members were first passed in New Zealand and Australia in the 1890s.

Monetary policy

Monetary policy is the process by which the monetary authority of a country, typically the central bank or currency board, controls either the cost of very short-term borrowing or the money supply, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.Further goals of a monetary policy are usually to contribute to the stability of gross domestic product, to achieve and maintain low unemployment, and to maintain predictable exchange rates with other currencies.

Monetary economics provides insight into how to craft an optimal monetary policy. In developed countries, monetary policy has generally been formed separately from fiscal policy, which refers to taxation, government spending, and associated borrowing.Monetary policy is referred to as being either expansionary or contractionary. Expansionary policy occurs when a monetary authority uses its tools to stimulate the economy. An expansionary policy maintains short-term interest rates at a lower than usual rate or increases the total supply of money in the economy more rapidly than usual. It is traditionally used to try to combat unemployment in a recession by lowering interest rates in the hope that less expensive credit will entice businesses into expanding. This increases aggregate demand (the overall demand for all goods and services in an economy), which boosts short-term growth as measured by gross domestic product (GDP) growth. Expansionary monetary policy usually diminishes the value of the currency relative to other currencies (the exchange rate).The opposite of expansionary monetary policy is contractionary monetary policy, which maintains short-term interest rates higher than usual or which slows the rate of growth in the money supply or even shrinks it. This slows short-term economic growth and lessens inflation. Contractionary monetary policy can lead to increased unemployment and depressed borrowing and spending by consumers and businesses, which can eventually result in an economic recession if implemented too vigorously.

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