Speaker

Scott Sumner

Scott Sumner

Monetary economist; Ralph G. Hawtrey Chair of Monetary Policy at the Mercatus Center, taught economics at Bentley University for 27 years, and originator of Market Monetarism and its central policy prescription, NGDP-level targeting. Best known for his blog The Money Illusion, which built the case for targeting nominal GDP rather than inflation in the years after the 2008 financial crisis, and for the phrase ‘never reason from a price change’.

Sumner earned his economics PhD at the University of Chicago under Robert Lucas, with a dissertation on currency hoarding, and spent decades studying the Great Depression through contemporaneous sources, including a systematic read of New York Times coverage from the 1920s and 1930s. He also blogs at Econlib, and is the author of several books on monetary theory and history, including The Midas Paradox: A New Look at the Great Depression and Federal Reserve Policy during the 1930s and The Money Illusion: Market Monetarism, the Great Recession, and the Future of Monetary Policy. He describes his own career as unusually late-blooming: denied tenure at Bentley for insufficient publications, he did the great majority of his research afterward and found his largest audience only in his 50s and 60s, through blogging. Outside economics, he writes extensively on film.

Core positions

  • Nominal GDP, not the price level or the money supply, is the variable monetary policy should target. Sumner argues that stabilising the path of nominal GDP resolves most of what drives the business cycle, because the overwhelming majority of financial contracts are fixed in nominal terms — a sharp fall in nominal income makes debts across the economy harder to service simultaneously.
  • Financial crises are usually a symptom of nominal GDP shocks, not an autonomous cause of recessions. Sumner reads 1929, Argentina’s early-2000s crisis, and 2008 as cases where a monetary-policy mistake caused nominal GDP to fall first, with financial distress following and then amplifying the downturn — a view Tyler Cowen challenges as risking near-tautology.
  • Monetary policy should be judged as more or less rule-like, not as a binary choice between a strict rule and unconstrained discretion. Steadier, more predictable Fed behaviour over the last three decades, in his account, is real progress even though a perfectly automatic rule remains unattainable given the influence of politics.
  • ‘Never reason from a price change.’ No price movement — an interest rate, an exchange rate, an inflation reading — carries fixed economic meaning on its own; the same movement implies opposite conditions depending on whether it is driven by demand or supply, a heuristic he traces to his own 1989 research on real-wage cyclicality, well before he coined the phrase.

In the wiki