Mercatus Center's New Program on Monetary Policy
The Mercatus Center at George Mason University has just launched the Program on Monetary Policy under the direction of Scott Sumner, Professor of Economics at Bentley University and editor of the influential blog The Money Illusion. Sumner is a leading proponent of the old Friedmanite "rules-based approach to monetary policy," wherein typically a central bank is legislatively mandated to target a particular macroeconomic or price variable, e.g., the growth rate of the money supply, the inflation rate, the price of gold or foreign exchange, etc. Sumner himself favors targeting nominal GDP, that is, total spending on final goods and services produced within a national economy. That Sumner's macroeconomic and Fed-centric approach hardly represents a radical departure from the current U.S. monetary regime is indicated by the subtitle of his blog, “A Slightly Off-Center Perspective on Monetary Problems.” Given Sumner's views, the Program on Monetary Policy is very unlikely to formulate proposals favorable to the restoration of a genuine gold or other commodity money standard whose value and quantity is governed exclusively by market forces of supply and demand. Nonetheless, Sumner's voice is a welcome addition to the continuing debate over monetary reform, and the Mercatus Center is to be congratulated for providing him with a more prominent position from which to express his maverick views.
There are a couple of other reasons for viewing the Mercatus Center’s initiative as a positive development. First, Sumner is not a member of the economics profession's elite. He does not publish in highly ranked journals or teach at a prestigious university. And yet he has managed to attain a great deal of publicity and influence for his views not only in the blogosphere but among academic economists and even policymakers. He has accomplished this almost exclusively through his diligent and single-minded blogging. He is thus an inspiration to all monetary reformers and sound money advocates who aspire to promote their programs in the face of the torrent of scorn and derision meted out to them by the academic and policy-making elites. Second, judging from its press release--and greatly to its credit--Mercatus Center’s Program does not disguise its openly pro-Fed stance in promoting a nominal GDP target. It will thus present a stiff dose of competition to the Cato Institute’s Center for Monetary and Financial Alternatives (CMFA), forcing the latter to clarify its rather muddled and diffuse message. In the Cato Institute's press release announcing CMFA's founding, its mission was framed as challenging the very existence of the Fed, although now its website also expresses support for “strict monetary rules” to bind the Fed. Indeed its director, George Selgin, endorses Fed nominal GDP targeting as an approximation to a freely competitive banking system based on gold or other market-supplied commodity money.
I wish the best to both D.C.-based think tanks and eagerly look forward to the bracing competition between them. When it comes to fighting the increasingly destructive and predatory policies of the Fed, my motto is: "Let a hundred flowers blossom, let a hundred schools of thought contend.“