Friday, February 3, 2012

Heterodox Economics

In a late December article, The Economist discussed the ways in which three non-mainstream schools of macroeconomic thought suggest handling economic crises.  The three schools were the Austrian school of economics, which counsels inhibition, seeing the short-term suffering as "an inevitable consequence of past excesses"; the neo-chartalist school, which advocates ever-increasing levels of stimulus financed by bonds, paying the bonds off by printing more paper money if necessary; and the "market monetarist" school, which suggests the central bank focus on making sure that the nominal Gross Domestic Product - as opposed to the "real" GDP, which accounts for inflation - grows at a constant rate, thereby keeping the bank's currencies and policies credible and predictable.

This last school of macroeconomics is particularly interesting in that it came about more or less by accident.  The idea was first espoused by Scott Sumner of Bentley University, in Waltham, Massachusetts, in his blog "The Money Illusion", started on the second of February, 2009.  One wouldn't expect a blog post by an unknown economist to induce relatively widespread change and discussion, but although Sumner was self-admittedly not a "natural blogger" his post gathered thoughtful comments and within a month was linked to and discussed by two well-known and respected blogs, from Tyler Cowen of George Mason University and Mr Paul Krugman.  From there, the theories presented by Sumner's blogpost attracted a number of other economists who had similar ideas, many of whom hadn't realized there were others who shared their thoughts.  The name of the movement, "Market Monetarism", was, itself, born from the blogosphere.

It's an interesting example of the power of networks in action; the school of thought would have taken far longer to come about through traditional methods of exchanging ideas if it ever did at all.  It's a fascinating demonstration of both the blogosphere's power to allow even relative unknowns to have their voices heard and given honest, serious thought, and the dramatic effects incoming links from highly central nodes have upon previously isolated pages.

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