"Professors at Bentley University who've never published a famous book don't normally shift the public debate," Slate's Matthew Yglesias wrote after the Federal Reserve announced in September a new round of "quantitative easing," stimulating economic growth by buying assets from private banks. But Scott Sumner's dogged blogging on his website, TheMoneyIllusion, has won rare bipartisan plaudits across the economics world, ranging from Goldman Sachs to Paul Krugman (No. 34) -- and Sumner just might have permanently shifted U.S. monetary policy.
His big idea is nominal GDP targeting, the notion that the Fed's policies should be focused on economic growth rather than inflation rates. As Sumner explains, "it's about setting specific goals and promising to do whatever one can to meet those goals." This means the Fed should keep up aggressive easing and inject money into the financial system until growth returns -- inflation be damned.
The most important convert to Sumner's ideas was Fed Chairman Ben Bernanke himself. As recently as November 2011, he dismissed the notion that the Fed should reorient its policies from inflation to growth targets. Over time, however, Bernanke reportedly came to realize that the U.S. jobs crisis was more severe than he realized and needed some unorthodox thinking. And he managed to bring his hawkish board around: On Sept. 13, the Fed announced that it would buy $40 billion a month of mortgage-backed securities and continue doing so until the U.S. job market improved, and never mind about inflation. "This is a 'Main Street' policy," Bernanke said. "What we're about here is trying to get jobs going."
Influential economist and blogger Tyler Cowen, one of Sumner's earliest champions, proclaimed it "Scott Sumner day."
SUMNER Reading list: The Great Recession, by Robert L. Hetzel; 1Q84, by Haruki Murakami; The Places in Between, by Rory Stewart. Best idea: Develop self-driving cars. Worst idea: For the eurozone to double down with a fiscal union. American decline or American renewal? Decline in the short run. More Europe or less? More money, less Europe. To tweet or not to tweet? Not.