So I watched the Bloomberg feed on my Apple TV yesterday morning while working at home, on what seemed to start out as an ordinary morning but turned out to be an extraordinary one. I overheard a discussion about the minimum wage that included Art Laffer arguing for wage subsidies instead of a minimum wage hike. Which is awesome not because I agree wholeheartedly with wage subsidies, though I agree it is less damaging to the low skilled labor market than a minimum wage, but because it’s Art Laffer arguing for it. This is certainly something I never expected to see in 100,000 years.
To some this event may seem small. Laffer has made somewhat of a joke of himself over the last handful of years with seemingly wild and unfulfilled predictions; and on its own it is small. But thanks to Becky Hargrove, who pointed out the Cato economic growth conference in December, the Laffer interview on Bloomberg falls into perspective to cap a complete day of surprises that included Brad DeLong advocating for a policy of NGDP makeup and stabilized growth thereafter. Marcus Nunes also points out some great Brad DeLong points about the folly of the inflation targeting/interest rate peg regime while figuratively shooting at Tony Yates in a barrel, points that also provide clarity for Scott Sumner’s argument that the ZLB is a self-inflicted ideological problem that is not a problem at all.
My, has the world changed. Not too long ago I cringed on every page of Brad DeLong’s blog who reminded me of a more ideological Paul Krugman. Art Laffer was warning of 1970’s style inflation, seemingly joined at the hip with the “47%” crowd. And of course, a still-defiant Tony Yates was writing nasty-grams to Bernanke over QE.
One other positive, but loosely attached, development is that David Beckworth says good-bye to secular stagnation with analysis of risk-premium-adjusted real interest rate trends. Along with those, he presents a blast from the past, an article written in the 1930’s by Alvin Hansen, the supposed father of the secular stagnation thesis (which I can immediately understand. I will have to consider the data in the post before commenting), that looks like a carbon copy of the demographic excuses for poor economic conditions that have been floating around recently. It is certainly encouraging to witness the last few nails going into the secular stagnation argument’s coffin simply because it’s nothing more than a distraction.
It has taken a lot of outside influence to convince me that MM is now a force to be reckoned with; and I feel much better about the prospects for the future with enough high-profile economists standing by to object to hair-raisingly bad monetary policy. I do not know if the present roster is enough to prevent another monetary crisis. But the main point toward the positive is that it might be enough to ensure bad policy doesn’t persist unchecked as it did in 2008-12 while nearly everyone was pointing at different possible causes of economic turmoil. In short, I can’t say “never again,” but I think we’re getting much closer than ever.
Though, I will be completely satisfied only when the ivory towers are shattered and it no longer politically matters what Yellen or any of her colleagues say, and those staff economists at the Fed who Bernanke didn’t fire, but should have, feel the bite of a limited shelf-life. Because, after all, what goes around should come around. Old dogs learning new tricks simply will not suffice.