The Journal of Austrian Economics reviewed Nunes and Cole’s book, Market Monetarism: Roadmap to Prosperity, as pointed out on Marcus’ blog Historinas today. Nunes includes this snippet from the review that he says he likes:
Nunes and Cole deserve credit for making monetary policy and history accessible to a larger audience. Popularizing NGDP targeting as a policy rule by presenting it intelligibly and using it as a framework to re-examine accepted macroeconomic orthodoxy is a valuable endeavor. Especially welcome are their arguments against the “Great Recession as market failure” paradigm which is, unfortunately, one of the most prominent explanations (if not the most prominent) among the public and non-economist intellectuals. However, a stronger link between their claims and the logic of individual action could have made their arguments more persuasive, and further distanced their position from the “macro-as-engineering” approach they disdain. Readers of this journal who read Nunes and Cole will come away with a further appreciation of Market Monetarism, but will recognize the political economy issues associated with institutionalizing a sound monetary environment are far more complicated than the authors suggest.
It’s very kind of them to emphasize points where we can agree. After all, I think the largest disagreement between many who identify with Market Monetarism and Austrians is the gold standard as a means of limiting governmental interventionism. I consider them as sort of philosophical brothers from another mother. And I suppose it can be said that there are no fiercer of feuds than those between blood, so to speak.
That said, I do like that bit in the review, but the end of it takes away from the agreeable things they have gone to the trouble to say, as a sort of pie in the face. So I hope they don’t mind a return of the sweet little favor, as it seems to be overlooked that under a NGDPLT monetary regime, interest rates would float with the market. It seems odd that adoption of a nominal target that eliminates interest rates as policy lever isn’t a compromise worth consideration. We get nominal stability and they can have their market signaling. But because we don’t agree with every point, political economic issues are far more complicated than Market Monetarists can admit. I beg to differ. We understand them far better than we are given credit.
Over the last five years, we’ve witnessed political unrest here at home that is far more animated than at least I have ever seen, with but a taste of the tight money that accompanied the Great Depression; and their answer is to make it even tighter with a commodity peg. It appears misguided to assume that the economic causes of the unrest can be alleviated with even tighter money while maintaining the expectation to achieve a libertarian utopia with our political cohesiveness intact.
It wouldn’t survive; people simply are not wired to take that kind of pain with no relief in sight, especially ones who have not bought into the entire message. I hate to have to remind them that even including MMer’s, we are, by far, a political minority. Political economy as we have known it would cease to exist in a spectacular societal convulsion under those conditions.
I want peace, opportunity and to look toward the future in anticipation of happy times. I don’t want to spend my life fighting and leave a legacy of ruin for my kids; but if I have to do it, it will be over something worth dying for, not the failures of a gold standard that simply trades one form of big government for another – complete with capital controls, management of the balance of payments, and bubble-fearing paternalism. It’s done and gone for good reason, namely that it necessitates the structures by which our government robs us of economic freedom, structures that are increased in magnitude when the limits are reached. We are still living with many relics of the New Deal – and tight money has simply gotten us more – Dodd-Frank and power grabs that are masqueraded as macroprudential policy among other recent Federal acts.
We do have problems and disagreements of all kinds, but in my judgment, Market Monetarists in general have the market for understanding reality and the limits of human endurance completely cornered.