Economists as “peddlers” of views/theories

I just realized I´ve been using the “peddler” description a lot, like in:

  • John Taylor “peddles” the “Taylor Rule”
  • Paul Krugman “peddles” the “Liquidity Trap”
  • Delong/Summers “peddle” “Self-Financing Deficits”
  • Edmund Phelps “peddles” “Structural Slumps”

But the tragic moment came about when Ben Bernanke, with the power to act on it, “peddled” his “non-monetary effects of the financial crisis in the transmission of the Great Depression”.

His reasoning was written down almost 30 years ago:

The last part is not quite right. It wasn´t the “New Deal” that rehabilitated the financial system, but FDR´s March 1933 decision to de-link from gold and inflate, stating a price level target. The result was that the last bout of banking failures in the spring of 1933 did not affect the economy like the previous ones.

Maybe Bernanke´s “bias” is the reason David Beckworth upped Christy Romer´s clamor for Bernanke to have a “Volcker moment” and suggested Obama have a “FDR moment”:

Maybe it is time for us to admit that Bernanke will never have his Volcker moment.  He has had many opportunities and whether because of groupthink at the Fed, political power of savers, or a failure by him to read Scott Sumner’s blog, Bernanke cannot seem to find his Volcker moment.  It is not clear he ever will.  So instead of hoping Bernanke has a Volker moment, maybe we should be hoping for President Obama to have a FDR moment.

The FDR moment occurred in 1933 when FDR took the reins of monetary policy from an ineffective Fed and sparked a robust recovery in aggregate demand.   The Fed had allowed aggregate demand to collapse for three years when FDR responded.  He signaled that he wanted the price level to return to its pre-crisis level (i.e. increased expectations of higher nominal spending) and acted upon it by having the Treasury Department devalue the gold content of the dollar.  This dramatically increased the monetary base and spurred a sharp increase in aggregate demand.

Let´s keep wishing and hoping…

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3 thoughts on “Economists as “peddlers” of views/theories

  1. Excellent blogging.

    Note to Keynesians: Even if you are right, the fact is the GOP will stomp on deficit spending.

    Okay, enough stimulus by deficits is out of the picture (even if it would work without monetary stimulus, which it won’t).

    What is PLan B? Market Monetarism. You gotta have a Plan B.

  2. The term ‘peddling’ seems to demean what are publicly espoused and, yes, advocated opinions by these respected economists. When one usually writes an essay to espouse an opinion, and if its worth writing and publishing, the author probably feels pretty sure about it. Why would a leading economist not try to advocate an opinion that he feels sure about? You advocate and perhaps peddle NGDP targeting, why should we demean you for having an opinion? I guess I’m saying we can attack ideas, but I’m hesitant to attack well meaning and intellectually honest individuals (which I consider Bernanke, Taylor, Phelps, etc. to be) or their sincerity of beliefs.

    • Joseph – I wasn´t “attacking” individuals, although I have doubts about them being always “well meaning” and even “intellectually honest” Peddle is in quotation marks – could have written “insists on” or “never misses a chance to remind everyone of his namesake rule” (in the case of Taylor, for example). In that sense no problem with you saying I “peddle” NGDP Trageting.

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