Wednesday, February 26, 2014

Let A Thousand Blogs Bloom (or Sumner's Hydra)

I was both pleased and flattered to see my post on Rick Mishkin draw a response from Scott Sumner. For a relatively new blogger, this was the equivalent of having Michael Jordan comment on a sign I was waving in the crowd. Personal satisfaction aside, however, it was an opportunity to reflect on the history of market monetarism as an idea. The essence of my post on Mishkin was to show that his textbook (literally) ideas on monetary policy could have mitigated some of the effects of the Great Recession. Of course, Mishkin was hardly the only proponent of such ideas. Early on, Sumner joked that his gravestone should read: "Devoted his life to blogging on Hetzelian ideas". But here's the funny thing: I've read quite a bit of Hetzel, and while I understand his ideas, they didn't make as much on an impact as the work of Sumner and others. I commented tonight that I enjoyed Marcus Nunes and Benjamin Cole's book on market monetarism more than I enjoyed Hetzel's book on the 2008 recession. To some, that's probably an act of intellectual heresy (or inferiority). I can just hear it now: "Seriously, dude? You liked the Lord of the Rings movies more than the book? Wow." I think what this really shows is that any idea needs different expositors. Like the movies, blogs have a certain immediacy, and are an excellent introduction to a more complex medium. Some people respond to the written word. Some people respond to the spoken word (listen to Sumner's early expositions on market monetarism, and compare them to later, more refined versions where he deftly anticipates many of the criticisms). Some people respond to pictures (one of the undoubted strengths of Nunes and Beckworth's blogs). Some of us needed The Money Illusion to understand why Cassel and Hawtrey were worth reading.

It's interesting to trace the genealogy of the movement. Sumner encouraged Marcus Nunes to start his own blog. Nunes allowed Lars Christensen to do a guest post on "market monetarism", thereby giving a name to an idea that only seemed inchoate because it had not yet been appropriately named. The efforts of all these bloggers (and others like David Beckworth, David Glasner and Nick Rowe - sorry, I'm not sure how or if they fit in this family tree) eventually pushed me to write to explore things I didn't (and still don't) understand fully. I'm fairly sure that young, talented bloggers like Evan Soltas and Yichuan Wang got their starts from being mentioned by Sumner. Again, this dispelled the idea that market monetarism was an arcane idea that belonged to the select few. Besides the generational span, there is a diversity of nationalities (Brazilians, Danes & Singaporeans, to name a few!) and areas of focus (academic economists to market practitioners) represented. The last is important because these ideas can be tested every day in markets. People don't talk about reflexivity because Soros is a great philosopher. They talk about it because he's a billionaire, and because he thinks it works. What the blogosphere needs to continue to do is convince people that this is a worthwhile idea because it works.

The analogy that stands out to me is how the value investing credo has spread. Benjamin Graham basically created the concept. His Graham-Newman partnership spawned Buffett, Ruane and Schloss. You'd have to be completely ignorant not to know the influence that generation has had on today's fund management industry. Or, to take a modern day version, Julian Robertson's Tiger Management gave birth to Tiger Cubs, grand-cubs, and hangers-on who are happy to claim any lineage at all.

I say that last bit with complete self-awareness. I don't for a second imagine that the quality of posts or originality of ideas here merit the influence that Sumner has had (nor do I intend to focus primarily on monetary policy). Equally, I'm sure Buffett would be horrified at the simplistic version of value investing you sometimes see espoused on Internet fora. But value investing as a discipline has proceeded beyond Graham's relatively simple quantitative measures of value. That's why it's fascinating to see the Hydra in action. Monetary policy is still seen as something that only the high priests of the FOMC and ECB can call on. It would be dangerous if monetary policy became subject to populism, but it equally should not be something that ordinary citizens shrug their shoulders at, particularly at a time when major central banks consistently fail their institutional mandates, or when money mischief is being wrought on the people of Venezuela & Argentina. 

But don't get me wrong - I'm optimistic. It's a slow process, but the battle of ideas is being won, one retweet at a time. So, as Sumner himself might say, let a thousand blogs bloom.


  1. Ravi, I´m very pleased to see a great expositor in our midst. I would like to introduce you to two great ladies, Bonnie Carr (Dajeeps) and Becky Hargrove that exhale the caring and poignancy that we men lack.
    You can find them here: and here:

    1. Thank you for the compliment, and for the suggestion! I knew they were commenters on the blogs but didn't realize they blogged too. Will definitely check them out.