I don’t think you’re engaging your opponents strongest arguments here. Yes most proponents (even economists or scott sumner) of active monetary policy can’t articulate why it might be a good idea that is solidly grounded, but other people can (myself, nick rowe, other market monetarists or the austrian monetary desequilibriumists), and you should engage the arguments they make.
Hold on—Sumner is the one everyone refers back to when advocating monetary policies he likes, he’s blogged about it for years, at tremendous length, starting from the crisis, he’s become (supposedly) influential in policy circles, and you’re saying I’m attacking a weak point? Sumner is exactly who I should be engaging, which is why it’s all the more saddening that his arguments fail simple checks:
Doesn’t this mean the Fed should be loaning to any ol’ person who can put up the collateral at 0%, not just large banks?
Why is it bad to “hoard” money for a year, but not five days? Why 5% NGDP growth and not some other number?
Why is it a “crisis” when interbank short-term loan rates “spike” from 4% to 6%? That just means their borrowing cost went up in the parts per million. (His entire response to this was something like “yes, ‘for want of a nail’ and all that”.)
If more exchanges are good, why aren’t hyperinflation scenarios (in which people treat money as a hot potato) a social optimum? (Or lesser scenarios that make people trade more than they otherwise would, like bans on home cooking.)
I know you know of a way to tabulate the benefits because we’ve had extensive discussions about it. The benefits are the marginal utility of holding money (convenience etc.), the costs/benefits are the changes in money holdings you impose on other people when you trade or don’t trade with them.
No, those weren’t the main benefits of holding money, and your citing of them means I somehow didn’t communicate the benefits to you. On your specific illustrative examples of convenience in our past discussion, I found them to completely assume away the important social benefits of hoarding.
In short, every example you gave was a case in which people knew in advance what they were going to spend the money on (e.g. having money for the bus). But these are emphatically opposite of the cases where money is most important and uniquely valuable—i.e., when you don’t yet know what you wish to redeem the money for and prefer to keep its option value.
The main benefit of holding money is that it signals the higher social demand for option value, which in turn is indicative of “discoordination”, or the lack of confidence that people can find stable comparative advantages. Money is only the extreme end of a scale that includes goods of increasingly multiple use—but in such scenarios, anything if valued if and to the extend that it will be useful in a broader array of situations.
You can suppress that signal, but only by worsening the economic allocation problem, just as you can suppress spiking oil prices, but only by shifting around the inefficiencies.
So I don’t think anyone, including you, has really engaged with the benefits of hoarding and so don’t have a satisfactory framework for evaluating whether there’s “too much”.
I phrased that badly. You’re not engaging a weak point so much as not steelmanning, which is what you should be doing. Fix your opponents arguments.
Yes, everyone refers to Sumner. He is the popularizer of market monetarism. Yes, Sumner doesn’t produce a defense of his views that is solidly grounded in economics. He is none the less vastly better than most people talking about this.
You should say things like ‘The best arguments for Sumners views are made by Nick Rowe and others (link to work or something) and are sometimes called ‘monetary disequilibrium theory’, however I think that this theory misses the important effect of Discoordination which works like this …’.
Basically no one discussing monetary economics (including the Austrians and others against active monetary policy) manages to ground their arguments in solid theory except Nick Rowe, a couple other market monetarists and the monetary disequilibriumist Austrians. The quality of debate is bad, but that doesn’t mean its OK for you not to engage the strongest arguments.
I found them to completely assume away the important social benefits of hoarding.
And that’s fair enough. I didn’t get that you were referring to that.
However,It is highly misleading to say
I don’t think anyone, including you, has really engaged with the benefits of hoarding and so don’t have a satisfactory framework for evaluating whether there’s “too much”.”
Because monetary disequilibrium is an internally consistent theory which does talk about the benefits of holding money and which can assess whether people hold ‘too much’ or not within the theory. You do not appear to deny this.
As far as I can tell, you additionally claim that this theory does not describe the important effects of Discoordination which provide additional social benefits to holding money. This is well and good! You should acknowledge what monetary disequilibrium theory does do well, and then attempt to improve upon its deficiencies. I’m actually very interested in hearing those arguments!
Your previous posts do not make this at all clear that this is what you were arguing, even to me. Since I probably know more about your views than anyone else other than you, this means they were probably also unclear to everyone else.
Hold on—Sumner is the one everyone refers back to when advocating monetary policies he likes, he’s blogged about it for years, at tremendous length, starting from the crisis, he’s become (supposedly) influential in policy circles, and you’re saying I’m attacking a weak point? Sumner is exactly who I should be engaging, which is why it’s all the more saddening that his arguments fail simple checks:
Doesn’t this mean the Fed should be loaning to any ol’ person who can put up the collateral at 0%, not just large banks?
Why is it bad to “hoard” money for a year, but not five days? Why 5% NGDP growth and not some other number?
Why is it a “crisis” when interbank short-term loan rates “spike” from 4% to 6%? That just means their borrowing cost went up in the parts per million. (His entire response to this was something like “yes, ‘for want of a nail’ and all that”.)
If more exchanges are good, why aren’t hyperinflation scenarios (in which people treat money as a hot potato) a social optimum? (Or lesser scenarios that make people trade more than they otherwise would, like bans on home cooking.)
No, those weren’t the main benefits of holding money, and your citing of them means I somehow didn’t communicate the benefits to you. On your specific illustrative examples of convenience in our past discussion, I found them to completely assume away the important social benefits of hoarding.
In short, every example you gave was a case in which people knew in advance what they were going to spend the money on (e.g. having money for the bus). But these are emphatically opposite of the cases where money is most important and uniquely valuable—i.e., when you don’t yet know what you wish to redeem the money for and prefer to keep its option value.
The main benefit of holding money is that it signals the higher social demand for option value, which in turn is indicative of “discoordination”, or the lack of confidence that people can find stable comparative advantages. Money is only the extreme end of a scale that includes goods of increasingly multiple use—but in such scenarios, anything if valued if and to the extend that it will be useful in a broader array of situations.
You can suppress that signal, but only by worsening the economic allocation problem, just as you can suppress spiking oil prices, but only by shifting around the inefficiencies.
So I don’t think anyone, including you, has really engaged with the benefits of hoarding and so don’t have a satisfactory framework for evaluating whether there’s “too much”.
I phrased that badly. You’re not engaging a weak point so much as not steelmanning, which is what you should be doing. Fix your opponents arguments.
Yes, everyone refers to Sumner. He is the popularizer of market monetarism. Yes, Sumner doesn’t produce a defense of his views that is solidly grounded in economics. He is none the less vastly better than most people talking about this.
You should say things like ‘The best arguments for Sumners views are made by Nick Rowe and others (link to work or something) and are sometimes called ‘monetary disequilibrium theory’, however I think that this theory misses the important effect of Discoordination which works like this …’.
Basically no one discussing monetary economics (including the Austrians and others against active monetary policy) manages to ground their arguments in solid theory except Nick Rowe, a couple other market monetarists and the monetary disequilibriumist Austrians. The quality of debate is bad, but that doesn’t mean its OK for you not to engage the strongest arguments.
And that’s fair enough. I didn’t get that you were referring to that.
However,It is highly misleading to say
Because monetary disequilibrium is an internally consistent theory which does talk about the benefits of holding money and which can assess whether people hold ‘too much’ or not within the theory. You do not appear to deny this.
As far as I can tell, you additionally claim that this theory does not describe the important effects of Discoordination which provide additional social benefits to holding money. This is well and good! You should acknowledge what monetary disequilibrium theory does do well, and then attempt to improve upon its deficiencies. I’m actually very interested in hearing those arguments!
Your previous posts do not make this at all clear that this is what you were arguing, even to me. Since I probably know more about your views than anyone else other than you, this means they were probably also unclear to everyone else.