University of Chicago (Ph.D.)University of Wisconsin (B.A.)
|Information at IDEAS / RePEc|
Scott B. Sumner is the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University, a Research Fellow at the Independent Institute, and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". 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.
After Ben Bernanke's announcement on September 13, 2012, of a new round of quantitative easing, 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.
In the wake of the 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. 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.
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.
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. 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. In 2012, Foreign Policy ranked Sumner jointly with Federal Reserve chair Ben Bernanke 15th on its list of 100 top global thinkers.
Nominal GDP targeting
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". He argued that monetary policy can offset fiscal austerity policies such as those pursued by the British government in the wake of the 2007 economic crisis.
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. 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.
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. Summarizing this thinking, The Economist suggested:
...the economy will almost certainly not grow at a 5.3% rate no matter what Congress does. Arguments to the contrary are subject to what econ bloggers have come to call the Sumner Critique, after economist and blogger Scott Sumner. It is reasonable to assume, by this critique, that the Federal Reserve has a general path for unemployment and inflation in mind and it will react to correct any meaningful deviation from that path. A 5.3% growth rate is well outside the range of current Fed projections. Growth that rapid would almost certainly bring down unemployment quite quickly, triggering Fed nervousness over future inflation and prompting steps to tighten monetary policy.
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".
Sumner is married and lives in Newton, Massachusetts.
- 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.
- Greeley, Brendan (1 November 2012). "The Blog That Got Bernanke to Go Big". Bloomberg Businessweek.
- O'Brien, Matthew (2 May 2012). "A Rebellion at the Federal Reserve?". The Atlantic.
- Thompson, Derek (14 September 2012). "The Blogger Who Saved the Economy". The Atlantic.
- "Scott B. Sumner". Bentley University. Retrieved 2011-01-18.
- Krugman, Paul (2 March 2009). "A Quick Response to Scott Sumner". New York Times. Retrieved 2011-01-18.
- Sumner, Scott (14 December 2010). "Money Rules". The National Review. Retrieved 2011-01-18.
- Evans-Pritchard, Ambrose (27 November 2011). "Should the Fed save Europe from disaster?". The Telegraph. Retrieved 2011-12-01.
- Berrett, Dan (8 January 2012). "'Dim Sum for the Mind': Economics Blogs Engage Policy Wonks and Students". Chronicle of Higher Education.
- "The FP Top 100 Global Thinkers". Foreign Policy. December 2012. Retrieved 2012-11-26.
- Hamilton, Scott (2011-04-10). "Bank of England Should Replace Inflation Targeting, Sumner Says". Bloomberg. Retrieved 2011-04-13.
- "Reserve Bank rejects report on system flaws". NZPA. 13 April 2011. Retrieved 2011-04-15.
- Sumner, Scott. "Monetary regimes in your review mirror may be closer than they appear.". Retrieved 2011-12-01.
- Yglesias, Matthew (18 May 2012). "Don't Believe The "Taxmageddon" Hype". Slate. Retrieved 2012-05-29.
- "Fiscal cliffs, multipliers, and the myth of central bank independence". The Economist. 23 May 2012. Retrieved 2012-05-29.