Brad DeLong’s new guru!

Brad DeLong has a special self-smackdown edition:

For a decade now, I have been a follower of Greenspanism[1]–the doctrine that I name after former Fed Chair Alan Greenspan that the constraint on expansionary monetary policy is inflation and inflation alone. The idea is that the first priority of the central bank is to maintain low consumer price inflation, and that the second priority is–given low current and forecast consumer price inflation–to maintain maximum employment and purchasing power–and the third priority of the central bank is that there is no other third priority.

Opposing Greenspanism is what I call Mussaism[2]. Mussaism–the doctrine I name after former IMF Chief Economist Michael Mussa–holds that there are two constraints on central bank activity. The central bank must insure:

  1. No large asset bubbles.
  2. Consumer price stability.

Only after it has successfully achieved these two higher priorities can it then even begin to worry about:

(3) Maximum employment and purchasing power.

The Greenspanist retort to the Mussaites–a retort I would have said I believed 100% a year and a half ago, 90% a year ago, and 60% last March–is that creating unemployment and idle factories because you are scared of what might happen when irrational exuberance dies away and asset prices collapse is a crime; that modern central banks are powerful; that they can successfully manage whatever crisis is provoked when it happens; and that it is easier to sweep after the elephants have gone through than to try to stop them–especially when stopping them requires the destruction of millions of jobs.

I don’t see how I can maintain my belief in Greenspanism today[3].

Therefore I abjure, I recant, and I do penance. I transfer my allegiance and fealty to Michael Mussa, who is my new guru.

By the way, that I read blogposts like this is what makes me take offence when I see sentences like this (especially from a blogger for whom I have plenty of respect):

Could this be circumstantial evidence that economics, while dismal, is not a science? Otherwise, an economist would just assume that oversight would be part of the deal, right?


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