What the Economics Profession Looks Like to Yglesias

It took three weeks for Matt Yglesias to figure out that I was having fun at his expense. As my mother would have said, better late than never.

Yglesias tries to get my goat by arguing that people who talk about economic science are full of it. But here is something interesting:

Here's what I think about ambition. I think that if I were an ambitious monetary economist who believed in good faith that the current course being pursued by the FOMC will be ineffective in boosting employment and is likely to produce a troubling level of inflation, I'd be shouting that from the rooftops.
Why? Because when we're mired in inflation, all the whores and politicians will look up and shout "save us!" and they'll be shouting at the people who called it right. When Milton Friedman warned that the naive Phillips Curve economics being pursued by the Federal Reserve in the late-60s and 70s would lead to ruinous inflation, nobody listened to him. Until suddenly they did listen to him and low and behold Milton Friedman was super-famous. Developing a correct analysis of the situation and then explain it is obviously no guarantee of success in your career. But all else being equal, it tends to help. That said, sometimes things aren't equal. But I wonder what it is Williamson thinks isn't equal here? What job is Kocherlakota angling for? And how will pretending to believe something he knows is wrong help him get it?

This, I think, is a strange view of the economics profession, but possibly not so far away from how the average non-economist thinks. If you're an economist, you might be anticipating that Uncle Billy is going to ask you for a forecast tomorrow over Thanksgiving dinner, and you probably won't know what to tell him. Probably his forecast is as good as yours. Some economists are indeed forecasters, but most of us hardly think about the forecasting problem.

Yglesias has a story in his head about how Milton Friedman became "super-famous." Actually, Friedman was super-famous long before he made his 1968 address as President of the American Economic Association, and long long before the importance of that address was widely understood. Further, in terms of research impact, Friedman's influence today has more to do with the Friedman rule, the permanent income hypothesis, and the Monetary History.

Yglesias thinks that the way to get ahead in the economics profession is to make an outlier forecast, make a big noise about it, and hope that you're right. There's certainly a cynical view out there that says this works - Nouriel Roubini comes to mind. I guess Yglesias and I are very different. He puts himself in the shoes of an "ambitious monetary economist" and asks what he'd do. Maybe I'm not ambitious, or too old for it, but I think of everything I do as learning and teaching. I want to learn, and I enjoy passing the knowledge on to other people. Fame is for Yglesias and Lady Gaga.

On the particular questions at hand: First, it is indeed accurate that I think what the Fed has done recently (QE, Twist, forward guidance) matters little for US labor markets. Second, it is not accurate to say that I think a "troubling level of inflation" is "likely." Given current and planned monetary policy actions, and how I think the Fed will behave in the future, I can see an equilibrium path on which the inflation rate is higher than it should be. I can't say anything sensible about "likely." Actually, my hope is not that this comes to pass and people think I am remarkably prescient, but that I have some influence and it doesn't happen. That would be better for everyone, don't you think?

Second, there are plenty of economists for whom Narayana Kocherlakota is a puzzle. He may yet redeem himself, but my current thinking is the following. Nerds are valuable members of society. I think we should give them resources and room to work. But we should think twice about letting a nerd run anything.