Brad DeLong is exercised, and rightly so, over the fact that some good economists have joined the crazies in signing the Republican anti-QE letter. How is this possible? he asks. After all, we’re not even talking about Keynesianism here, we’re talking about monetarism — at least in terms of the spirit of the thing. For Friedman’s whole case against the Fed was not, fundamentally, about monetary aggregates; they were just intermediate targets. It was that the Fed was supposed to do whatever it took to avoid an economic plunge, and didn’t. So calling on the Fed not to act now is a betrayal of Friedmanism as well as Keynesianism.
But it’s not really a mystery what’s going on here. In part, the GOP letter-signers are against doing anything that might help Obama, of course. But more fundamentally — and this is a point I think conservatives who believe they can remain reasonable about macro fail to grasp — this is about philosophy of government. If your bedrock faith is that government is always the problem, never the solution, then you’re not, ultimately, going to be willing to draw a line around the central bank and say that it’s OK for that semi-autonomous part of the government to engage in active problem-solving.
And what Taylor, Holtz-Eakin and others are saying, in effect, is that at this point their loyalty to that political cause trumps their professional economics; they may write textbooks and analytical papers in which active monetary policy makes sense, but when push comes to shove they will lend their credibility to the extreme anti-government-no-matter-what camp.
The interesting group, in a way, is that of conservative economists who didn’t sign that letter. I wonder if they’ll break their silence, one way or the other.
