Thursday, August 8, 2013

Sumner on Summers

Scott Sumner criticized Larry Summers as potential Fed chair in the Financial Times.    I agree with Sumner's major point.    As the Romer's pointed out, the Fed's three greatest failures (what I call the three strikes against the Fed,) were all caused by the Fed leadership's view  that matters were beyond their control.   What are the three strikes?   The Great Depression, the Great Inflation, and most recently, the Great Recession.   It is true, of course, that stabilizing nominal spending on output  cannot control employment, production, or real standards of living.    The problem is when the leadership of the central bank denies that it can control nominal spending and the price level.

On the other hand, I am not willing to choose between Summers and Yellen.   Yellen seems to be more of what we have now.    Maybe Miles Kimball?   Evan KoenigRobert Hetzel?   Realistically, such people need to be put on the Board of Governors or promoted to Federal Reserve bank President.    At least Koenig is a Vice President at the Dallas Fed.   If we are really stuck with new Keynesians, then I suppose Woodford is best.   Then what about Evans, if the "Evan's Rule," is the best we can get for now?   And, of course, why not Christina Romer?


  1. “I am not willing to choose between Summers and Yellen.” Well, there must be *something* you would do if it were up to you which of the two was to become Fed Chair: if there were a button such that if you pushed it Summers would become Chair, otherwise Yellen would, you would have either to push it or not (by the Law of Excluded Middle).

    I suppose you won’t be happy if either of the two becomes Chair; but then Market Monetarists are notorious soreheads!

  2. Would Alan Blinder not go well in your book, Mr. Woolsey?

    Also...I understand that you are a busy man with a lot of commitments to deal with, but would you have the time and the interest to reading a book recommendation from a commentator on your blog?

    Have you heard of the economist Ulrich Bindseil? In 2005, he published a book called Monetary Policy Implementation: Theory, Past, and Present. As indicated by the title, it deals with your main area of interest: monetary economics. I recently learned of his book in an online discussion.

    I recommended it to Scott Sumner, but he's too busy to read much any more. I also pointed it out to David Glasner, but he hasn't gotten back to me on it yet.

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