Yes, market monetarism is not exactly the same as old-style monetarism, which is why it needs a new label. But I do believe that it is closer to monetarism than to other competing schools of thought.
He is responding to a review by George Selgin of Sumner’s recent book.
To me, the most important difference between Sumner and the monetarists that were prominent when I was studying economics concerns the issue of rules vs. discretion. Milton Friedman was adamant that the monetary authority should follow a rule. I would characterize Sumner’s guidance to the monetary authorities as “Do something expansionary when the market indicators suggest that future nominal GDP will fall below target, and do something contractionary when the indicators suggest the opposite.” But which market indicators, using what formula? And what is the exact dose of expansion or contraction indicated for a given discrepancy between the market forecast and the target? Sumner’s guidance is nowhere near as precise as the guidance that the rule-oriented monetarists would have provided. His market monetarism seems to allow a great deal of room for discretion, and the old-fashioned monetarists equated discretion with mischief.
Read Selgin’s review of the book prior to seeing your post and agree with you.
The Selgin review hardly inspired me to want to read it.
This complaint seems quite misguided. Sumner wants to subsidize an NGDP futures market, and have the Fed act precisely so as to keep that market at 4.5% growth (or whatever the Fed’s announced rate is; the rate should be held fixed [admittedly, there is some arbitrariness about just where it should be fixed]).
That’s an unfair use of ‘discretion’. Subordinate military commands have some ‘discretion’ on the details of how to execute their mission, but they have zero discretion to change the mission itself, and *that’s* the kind of mischief monetarists worry about.
To use one of Sumner’s metaphors, if the captain of a ship leaves leaves Lisbon with instructions to arrive in New York at a particular day, then as he gets hit with unpredictable winds and currents, he steers the rudder and adjusts the sails to whatever extent necessary to stay on course and on time. Which is to say, he keeps turning the wheel until the best forecast of where he expects to end up is consistent with his charge.
That is just as much a ‘rule’ as “Always keep the rudder at 10 degrees.” And if one actually is trying to get to New York at a particular time, it’s a better rule.
Scott Sumner could learn a thing or two from our humble host. Every time I muster up the fortitude to read some of his stuff, he always throws in partisan politics in such an uncharitable way that it makes me never want to read his blog again. I usually visit every few months or so, and every time I have the same reaction. Joke’s on me.
Stay awesome, Arnold. Don’t let the partisan hacks drag you down.