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Scott Sumner

Scott Sumner
Sumner in a 2016 video by the Mercatus Center
Born1955 (age 68–69)
Academic career
FieldMonetary economics
Institutions
School or
tradition		Market monetarism
Alma materUniversity of Wisconsin (B.A.)
University of Chicago (Ph.D.)
InfluencesMilton Friedman
Information at IDEAS / RePEc

Scott B. Sumner (born 1955) is an American economist. He was previously the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University, a Research Fellow at the Independent Institute, and a professor at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion,[1] popularized the idea of nominal GDP targeting, which says that the Federal Reserve and other central banks should target nominal GDP, real GDP growth plus the rate of inflation, to better "induce the correct level of business investment".[2]

In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.[3]

After Ben Bernanke's announcement of a new round of quantitative easing on September 13, 2012, which open-endedly committed the FOMC to purchase $40 billion agency mortgage-backed securities per month until the "labor market improves substantially", some media outlets began hailing him as the "blogger who saved the economy", for popularizing the concept of nominal income targeting.[4]

Academic career

Sumner received a PhD in economics from the University of Chicago in 1985. His published research focuses on prediction markets and monetary policy.[5]

During the 2007–2008 financial crisis, Sumner began authoring a blog where he vocally criticized the view that the United States economy was stuck in a liquidity trap.[6] Sumner advocates that central banks such as the Federal Reserve create a futures market for the level of nominal gross domestic product (NGDP, also known as nominal income), and adjust monetary policy to achieve a nominal income target on the basis of information from the market. Monetary authorities generally choose to target other metrics, such as inflation, unemployment, the money supply or hybrids of these and rely on information from the financial markets, indices of unemployment or inflation, etc. to make monetary policy.[7]

In 2015, Sumner published The Midas Paradox: A New Look at the Great Depression and Economic Instability. The book argued that the Depression was greatly extended by repeated gold market shocks and New Deal wage policies.

Market monetarism

Main article: Market monetarism

A school of economics known as market monetarism has coalesced around Sumner's views; The Daily Telegraph international business editor Ambrose Evans-Pritchard has referred to Sumner as the "eminence grise" of market monetarism.[8] In 2012, the Chronicle of Higher Education referred to Sumner as "among the most influential" economist bloggers, along with Greg Mankiw of Harvard University and Paul Krugman of Princeton.[9] In 2012, Foreign Policy ranked Sumner jointly with Federal Reserve chair Ben Bernanke 15th on its list of 100 top global thinkers.[10]

Nominal GDP targeting

Main article: Nominal income target

Sumner contends that inflation is "measured inaccurately and does not discriminate between demand versus supply shocks" and that "Inflation often changes with a lag...but nominal GDP growth falls very, very quickly, so it'll give you a more timely signal stimulus is needed".[11] He argued that monetary policy can offset austerity policies such as those pursued by the British government during the Great Recession.[11]

In April 2011, the Reserve Bank of New Zealand responded to Sumner's critique of inflation targeting, arguing that a nominal GDP target would be too technically complicated, and make monetary policy difficult to communicate.[12] By November 2011, however, economists from Goldman Sachs were advocating that the Federal Reserve adopt a nominal income target. Nathan Sheets, a former top official at the Federal Reserve and the head of international economics at Citigroup, proposed that the Federal Reserve adopt a nominal consumption target instead.[13]

Sumner has argued that one cannot account for the impact of fiscal policy without first considering how monetary policy may affect the outcome; fiscal stimulus may not succeed if monetary policy is tightened in response. Economic journalists have referred to this as the Sumner Critique, akin to the Lucas critique.[14] Summarizing this thinking, The Economist suggested that a growth rate of 5.3% would result in concerns over (future) inflation and tightening of monetary policy, largely because 5.3% is beyond both projections and goals of the Federal Reserve.[15]

Other views

Sumner has been described as a libertarian or classical liberal.[16][17][18] Sumner has criticized populists like Jair Bolsonaro, Donald Trump, and Hungarian prime minister Viktor Orban, referring to them as the "new axis of evil".[19][20]

Sumner is a vocal critic of Donald Trump, calling him "Putin's puppy",[21] and opining that he has a "contempt for democracy".[22] Sumner described Trump as having a "longstanding infatuation" with Putin, citing a comment Trump made in which he called Putin "a leader far more than our president", referring to Barack Obama.[22][23]

Personal life

Well known in Bentley's economics department as a "technophobe," Sumner, who purchased his first cell phone in 2011, apparently "triggered expressions of surprise and amusement when he informed his colleagues that he was starting a blog."[2]

Bibliography

Books

  • Sumner, Scott B. (2021). The Money Illusion: Market Monetarism, the Great Recession, and the Future of Monetary Policy. Chicago: University of Chicago Press. ISBN 978-0226773681.
  • Sumner, Scott B. (2015). The Midas Paradox: A New Look at the Great Depression and Economic Instability. Independent Institute. ISBN 978-1-59813-150-5.
  • Sumner, Scott B. (2015). "What Would Milton Friedman Have Thought of Market Monetarism?". In Cord, Robert A.; Hammond, J. Daniel (eds.). Milton Friedman: Contributions to Economics and Public Policy. Oxford University Press. pp. 246–264. ISBN 9780198704324.
  • Sumner, Scott B. (2012). "5. How Nominal GDP Targeting Could Have Prevented the Crash of 2008". In Beckworth, David (ed.). Boom and Bust Banking: The Causes and Cures of the Great Recession. Independent Institute. pp. 129–165. ISBN 978-1-59813-076-8.

Articles

The Hill

U.S. News & World Report

  • Sumner, Scott (December 26, 2017). "Low Inflation Nation". U.S. News & World Report. Retrieved April 18, 2021.
  • Sumner, Scott (July 10, 2017). "Demystify the Fed". U.S. News & World Report. Retrieved April 18, 2021.
  • Sumner, Scott; Horan, Patrick (May 30, 2017). "Fed Up With Congress". U.S. News & World Report. Retrieved April 18, 2021.

Mercatus Center

Cato Institute

Others

See also

References

  1. ^ "It's all demand side".
  2. ^ a b Greeley, Brendan (November 1, 2012). "The Blog That Got Bernanke to Go Big". Bloomberg Businessweek. Archived from the original on November 5, 2012.
  3. ^ O'Brien, Matthew (May 2, 2012). "A Rebellion at the Federal Reserve?". The Atlantic.
  4. ^ Thompson, Derek (September 14, 2012). "The Blogger Who Saved the Economy". The Atlantic.
  5. ^ "Scott B. Sumner". Bentley University. Retrieved January 18, 2011.
  6. ^ Krugman, Paul (March 2, 2009). "A Quick Response to Scott Sumner". New York Times. Retrieved January 18, 2011.
  7. ^ Sumner, Scott (December 14, 2010). "Money Rules". The National Review. Retrieved January 18, 2011.
  8. ^ Evans-Pritchard, Ambrose (November 27, 2011). "Should the Fed save Europe from disaster?". The Telegraph. Retrieved December 1, 2011.
  9. ^ Berrett, Dan (January 8, 2012). "'Dim Sum for the Mind': Economics Blogs Engage Policy Wonks and Students". Chronicle of Higher Education.
  10. ^ Wittmeyer, Alicia P. Q. (November 26, 2012). "The FP Top 100 Global Thinkers". Foreign Policy. The Slate Group. Retrieved November 26, 2012.
  11. ^ a b Hamilton, Scott (April 10, 2011). "Bank of England Should Replace Inflation Targeting, Sumner Says". Bloomberg. Retrieved April 13, 2011.
  12. ^ "Reserve Bank rejects report on system flaws". NZPA. April 13, 2011. Retrieved April 15, 2011.
  13. ^ Sumner, Scott. "Monetary regimes in your review mirror may be closer than they appear". Retrieved December 1, 2011.
  14. ^ Yglesias, Matthew (May 18, 2012). "Don't Believe The "Taxmageddon" Hype". Slate. Retrieved May 29, 2012.
  15. ^ "Fiscal cliffs, multipliers, and the myth of central bank independence". The Economist. May 23, 2012. Retrieved May 29, 2012.
  16. ^ Yglesias, Matt (October 8, 2015). "The most important paragraph in Ben Bernanke's new book". Vox. Retrieved April 25, 2022.
  17. ^ Chait, Jonathan (February 28, 2011). "Should Liberals Be More Grateful To Grover Norquist?". The New Republic. Retrieved April 25, 2022.
  18. ^ Worstall, Tim (February 26, 2016). "Robert Shiller's Answer To Scott Sumner: Bubbles Exist Because Markets Aren't Necessarily Complete". Forbes. Retrieved April 25, 2022.
  19. ^ "Macho men and scaredy-cats". TheMoneyIllusion. Retrieved April 27, 2024.
  20. ^ "The new axis of evil". TheMoneyIllusion. Retrieved April 27, 2024.
  21. ^ "cHiNa iS tHe reAL thReAt". TheMoneyIllusion. Retrieved February 25, 2022.
  22. ^ a b "Trump loves Putin". TheMoneyIllusion. Retrieved February 25, 2022.
  23. ^ "Trump says Putin 'a leader far more than our president'". BBC News. September 8, 2016. Retrieved February 25, 2022.
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