Tony Yates calls out market monetarists to get quantitative:
I’m sure these mix-ups would get ironed out if [market monetarists] stopped blogging and chucking words about, and got down to building and simulating quantitative models.
Scott Sumner decides instead to set Western civilization back a thousand years:
In my view economists should forget about “building and simulating quantitative models” of the macroeconomy, which are then used for policy determination. Instead we need to encourage the government to create and subsidize trading in NGDP futures markets (more precisely prediction markets) and then use 12-month forward NGDP futures prices as the indicator of the stance of policy, and even better the intermediate target of policy.
Sumner apparently doesn't even want to simulate an economy with an NGDP futures market before using one to guide the economy. And it's not like you can't just set one up and say it's not going to influence policy decisions. If you set up a liquid NGDP market, but said it was only an experimental measure with regard to policy, markets could still crash on news of a crash in the NGDP market.
"We think this NGDP market represents the wisdom of crowds, but please ignore it if it does anything weird."
Note that Sumner is trying to set up an NGDP prediction market. The thing is that inasmuch as people don't believe the prediction market actually works is it not dangerous to the economy. If people believed it was working (was liquid enough, had enough volume, enough diversity of participants, or whatever), then its movements could strongly affect economic sentiment and spark a panic. This is where market monetarism's reliance on expectations comes back to haunt it.
Now let's crowd-source a launch vehicle and send people to Mars without testing it!
Note that project Vanguard actually did test the components of that rocket before that happened. Because reason.
"Now let's crowd-source a launch vehicle and send people to Mars without testing it!"ReplyDelete