The New Synthesis? Market Monetarists Meet New (and Post?) Keynesians on Helicopter Drops
A a year or so back I highlighted David Beckworth’s great post on Helicopter Drops. And the world’s best econoblogger, Steve Randy Waldman, did as well. (A “fantastic post,” he said.)
I’ve been pinging ever since to see a response to that post from Market Monetarist opinion-leader Scott Sumner. (AS SRW said, what we’d gotten from him was largely “quibbles.”)
I won’t rehash it all here but rather point you to Nick Rowe’s wonderfully successful effort to bring it all to conclusion, synthesizing Market Monetarist and New Keynesian thinking into support for a policy proposal that I think Post-Keynesians and MMTers would also jump on with gusto. (Also read the comments to Nick’s post, including one from Scott Sumner.)
I feel quite sure that Democrats/Liberals would embrace the policy wholeheartedly. Republicans/Conservatives, unfortunately, would consider it to be heresy and apostasy (often-sensible but utterly toothless Reformocons nothwithstanding).
Which pretty much clarifies where the problem lies…
Cross-posted at Asymptosis.
Beckwith’s starting premise is this: “Fiscal policy geared toward large government spending programs is likely to be rife with corruption, inefficient government planning, future distortionary taxes, and a ratcheting up of government intervention in the economy. So I will pass on this type of fiscal policy.”
This claim could be lodged against any government spending whatsoever and feeds into a utopian libertarian perspective that is inherently nonsensical. Government must spend on certain things. Private toll roads? Private fire departments? Been there, done that. There are always useful projects on hold, and once upon a time Republicans agreed with Democrats that direct hiring from spending for worthwhile infrastructure projects was a good response to high unemployment. How, too, can there be objection to cushioning the states from bearing the employment brunt for economic forces that were national in scope and over which they have no control? That seems like a perfect application of using Federal power to spread the risk and keep hundreds of thousands of people from being fired..
This is not really to criticize the methodology, which is beyond my capability. But starting with the premise that there is a fundamental problem with Federal spending to counteract a drop in private demand seems wrong. Anyone can shout “corruption” and recall some incident — an anecdote — that makes us nod out heads without thinking very much.