Scott B. Sumner (born 1955) is an American economist. He 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 professor 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.
|Born||1955 (age 63–64)|
|Alma mater||University of Chicago (Ph.D.) University of Wisconsin (B.A.)|
|Information at IDEAS / RePEc|
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 targetingEdit
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, Scott (April 25, 2019). "Understanding the Federal Reserve". Mercatus Center.
- Sumner, Scott; Horan, Patrick (March 11, 2019). "How Reliable Is Modern Monetary Theory as a Guide to Policy?". Mercatus Center.
- Sumner, Scott (November 15, 2018). "How to Improve Fed Accountability and Transparency". Mercatus Center.
- Sumner, Scott (October 8, 2018). "How Prediction Markets Can Improve Monetary Policy: A Case Study". Mercatus Center.
- Sumner, Scott (July 2, 2018). "Explaining Quantitative Easing". Mercatus Center.
- Sumner, Scott; Roberts, Ethan (March 19, 2018). "The Promise of Nominal GDP Targeting". Mercatus Center.
- Sumner, Scott (2016). "Nudging the Fed Toward a Rules-Based Policy Regime" (PDF). Cato Journal. Cato Institute. 36 (2): 315–335.
- 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 (March 2015). "What Would Milton Friedman Have Thought of the Great Recession?". The American Journal of Economics and Sociology. Wiley-Blackwell. 74 (2): 209–235. doi:10.1111/ajes.12097.
- 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. (2014). "Nominal GDP Targeting: A Simple Rule to Improve Fed Performance" (PDF). Cato Journal. Cato Institute. 34 (2): 315–337.
- Sumner, Scott (December 2, 2013). "Central Banks Can and Do Hit Inflation Targets". Cato Institute.
- Sumner, Scott (November 25, 2013). "Asset Prices, Inflation, and Interest Rates". Cato Institute.
- Sumner, Scott (November 22, 2013). "The Fed Was a Mistake. But Now That We Have It…". Cato Institute.
- Sumner, Scott (November 8, 2013). "In Defense of a Flexible Monetary Policy". Cato Institute.
- Sumner, Scott (September 11, 2013). "Why the Fiscal Multiplier is Roughly Zero". Mercatus Center.
- Sumner, Scott (July 24, 2013). "A Market-Driven Nominal GDP Targeting Regime". Mercatus Center.
- 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.
- Sumner, Scott (October 23, 2012). "The Case for Nominal GDP Targeting". Mercatus Center.
- Sumner, Scott (Fall 2011). "Re-Targeting the Fed". National Affairs (37). National Affairs, Inc.
- Sumner, Scott (October 1, 2009). "Final Thoughts and Thanks". Cato Unbound.
- Sumner, Scott (September 30, 2009). "We Can't Agree on Everything, George…". Cato Unbound.
- Sumner, Scott (September 29, 2009). "Defining the Stance of Monetary Policy Is Harder than It Looks". Cato Unbound.
- Sumner, Scott (September 29, 2009). "Clearing up Some Miscommunication". Cato Unbound.
- Sumner, Scott (September 28, 2009). "Score-Keeping with Selgin". Cato Unbound.
- Sumner, Scott (September 25, 2009). "From Discretion to Futures Targeting, One Step at a Time". Cato Unbound.
- Sumner, Scott (September 23, 2009). "Almost on the Money: Replies to Hamilton, Selgin, and Hummel". Cato Unbound.
- Sumner, Scott (September 14, 2009). "The Real Problem was Nominal". Cato Unbound.
- Sumner, Scott; Jackson, Aaron L. (October 2006). "Velocity Futures Markets: Does the Fed Need A Structural Model?". Economic Inquiry. Wiley-Blackwell. 44 (4): 716–728. doi:10.1093/ei/cbj044.
- Sumner, Scott (2002). "Some Observations on the Return of the Liquidity Trap" (PDF). Cato Journal. Cato Institute. 21 (3): 481–490.
- Sumner, Scott (2000). "Is Nonprice Competition in Currency Inefficient?". Journal of Money, Credit and Banking. Ohio State University Press. 32 (1): 146–149. doi:10.2307/2601097. JSTOR 2601097.
- Sumner, Scott; Gulley, O. David; Newman, Ross (1998). "Money demand and nominal debt: An equilibrium model of the liquidity effect". Journal of Macroeconomics. Elsevier. 20 (2): 267–293. doi:10.1016/S0164-0704(98)00057-3.
- Sumner, Scott (November 1997). "Reply to Garrison and White". Journal of Money, Credit and Banking. Ohio State University Press. 29 (4): 542–545. doi:10.2307/2953713. JSTOR 2953713.
- Sumner, Scott (February 1995). "The Impact of Futures Price Targeting on the Precision and Credibility of Monetary Policy". Journal of Money, Credit and Banking. Wiley-Blackwell. 27 (1): 89–106. doi:10.2307/2077852. JSTOR 2077852.
- Sumner, Scott; Silver, Stephen (January 1995). "Nominal and Real Wage Cyclicality during the Interwar Period". Southern Economic Journal. Southern Economic Association. 61 (3): 109–118. JSTOR 1060983.
- Sumner, Scott (October 1994). "A Note on the Viability of an 'Indirectly Convertible' Gold Standard". Southern Economic Journal. Southern Economic Association. 61 (2): 530–533. doi:10.2307/1059998. JSTOR 1059998.
- Sumner, Scott (March 1993). "Colonial Currency and the Quantity Theory of Money: A Critique of Smith's Interpretation". The Journal of Economic History. Cambridge University Press. 53 (1): 139–145. doi:10.1017/S0022050700012420. JSTOR 2123179.
- Sumner, Scott (February 1993). "Privatizing the Mint". Journal of Money, Credit and Banking. Ohio State University Press. 25 (1): 13–29. doi:10.2307/2077817. JSTOR 2077817.
- Sumner, Scott (1992). "The Gold Standard, Monetary Policy, and the Banking School - Currency School Debate". Eastern Economic Journal. Palgrave Macmillan. 18 (3): 345–358. JSTOR 40325457.
- Sumner, Scott (February 1990). "The Forerunners of 'New Monetary Economics' Proposals to Stabilize the Unit of Account: Note". Journal of Money, Credit and Banking. Ohio State University Press. 22 (1): 109–118. doi:10.2307/1992131. JSTOR 1992131.
- Sumner, Scott; Grubaugh, Stephen (August 1989). "Commodity Prices, Money Surprises, and Fed Credibility: Comment". Journal of Money, Credit and Banking. Ohio State University Press. 21 (3): 407–408. doi:10.2307/1992424. JSTOR 1992424.
- Sumner, Scott; Silver, Stephen (June 1989). "Real Wages, Employment, and the Phillips Curve". Journal of Political Economy. University of Chicago Press. 97 (3): 706–720. doi:10.1086/261623. JSTOR 1830462.
- 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.
- Wittmeyer, Alicia P. Q. (November 26, 2012). "The FP Top 100 Global Thinkers". Foreign Policy. The Slate Group. 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.