Professor Sumner is probably best known for his advocacy of “market monetarism,” a contrarian critique of the Federal Reserve, that says a) mismanaged monetary policy — not the housing bust or Wall Street greed — caused the Great Recession, and b) its continued tight money policy is a big reason why the economic recovery is so weak and unemployment is so high. Think of it as an update on Milton Friedman’s approach to monetary policy.
Time magazine recently described Sumner as “most vocal supporter of NGDP targeting .. a strategy whereby the Federal Reserve, instead of trying to keep inflation stable and unemployment low, would announce its intention of taking any action necessary to maintain a long run nominal GDP growth rate target. This would mean that instead of buying up a certain amount of bonds like the Fed has done with QEs 1 and 2, it would set a target for the effect of those bond purchases and then, in theory, buy up as many securities as necessary to make it happen.”
That’s right, Sumner wants a more active Fed to boost the economy — and thinks other free-market conservatives should, too.