Judy Shelton Confuses Me (Part 2,432,671)

Fed Nominee-to-be Judy Shelton responds to her issues with government statistics (Long, Davies, WaPo):

In a series of e-mails, Shelton defended her views, saying that she remains “skeptical about the accurancy and consistency” of economic statistics because they do not always capture technological innovation accurately. She added that “we need to be sure that data used for policy-making decision is accurate and appropriate.”

However from the context of her 2015 talk (see tape, at 1:07:07) it’s pretty clear from how she responded to the question, she thought the government statistics were understating inflation. Yet her supposedly exculpatory statement regarding technological innovations is consistent with an enormous literature that addresses concerns that government price statistics overstate inflation (review, Boskin Commission; more recently in digital context, see here). In other words, I still get the impression that Dr. Shelton disbelieves the government statistics because, well, they’re government statistics, and not because of any deeply held convictions regarding hedonic adjustments for quality, etc. in the CPI or other price indices. (A Google Scholar search fails to detect any Shelton writing on quality/measurement issues and deflators and/or productivity statistics).

An interesting paper on the subject of incorporating digital products into the national accounts, by Brynjolfsson et al. (2019).

20 thoughts on “Judy Shelton Confuses Me (Part 2,432,671)

  1. pgl

    “Yet her supposedly exculpatory statement regarding technological innovations is consistent with an enormous literature that addresses concerns that government price statistics overstate inflation”.

    Shelton claims government statistics understate inflation and then appeals to some argument that would say just the opposite? My is she the dumber person EVER? Well maybe not as just today CoRev went off again on Menzie’s documenting the fall in soybean prices with one of CoRev’s complaints is that Menzie is not paying enough attention to the factor he refers to as “bad weather”. But this factor would shift inwards the supply curve which should have RAISED soybean prices.

    So the results are in as for the dumbest person ever. Shelton wins the Silver medal as CoRev takes the Gold!

  2. pgl

    “The CPI Commission: Findings and Recommendations by Michael J. Boskin, Ellen R. Dulberger, Robert J. Gordon, Zvi Griliches and Dale W. Jorgenson
    The American Economic Review, Vol. 87, No. 2, Papers and Proceedings of the Hundred and Fourth Annual Meeting of the American Economic Association (May, 1997), pp. 78-83”.

    An AER paper from 22 years ago. Anyone commenting on this issue should have read it by now. But I bet the ranch that Judy Shelton has never bothered to read this classic.

  3. Moses Herzog

    I respect people’s academic achievements. Even people whom I strongly dislike (One might be able to think of a particular one wandering around the comments section of this blog). If they went to an accredited four-year university and/or a school with a respected graduate program my hat is off to them.

    However there are rare rare exceptions to this personal code/rule of mine. Calling Judy Shelton a “Doctor” in major “X” is offensive to me. She is a walking/breathing embarrassment to any institution of higher learning she attended, and arguably her grade school teachers as well.

    1. pgl

      She got a degree in business not economics. I guess if one had a Ph.D. in basket weaving but praised Trump, one becomes the most qualified monetary economist ever!

      1. Menzie Chinn Post author

        pgl: To be fair, her PhD dissertation seems finance-oriented, so distantly related to monetary economics. On the other hand, she seems to have jettisoned all of her quantitative chops for ideology in the ’90’s.

        1. pgl

          I’ve had to work with a few MBAs in my life time. The marketing and management types were a total waste of time but the ones that focused on finance were a joy to work with as long as they put good research over being shills for corrupt clients.

        2. Barkley Rosser

          I have noted here previously that she seems to have been more reasonable and even occasionally insightful early in her career back in the 80s, although the seeds of her more recent nonsense were there then as well. I remind folks in particular that she was one of the few to call the collapse of the USSR ahead of time, although some of her reasons for this were idiosyncratic. That was probably her intellectual high point. But I agree that somewhere in the 90s, or maybe a bit later, she basically sold out being seriously intellectual for being an opportunistic ideologue, with this seeming to get worse over time since then.

          1. Moses Herzog

            @ Barkley Junior
            Your profound ability to regurgitate people’s bio online is utterly breathtaking……

            [ Watch, if Barkley Junior misses this bracketing, he’ll take me completely seriously and do the infamous Barkley Junior “humble brag”, worth at least 3 chuckles. It’s best imagined with a William F. Buckley Jr. fake aristocratic accent and something about his mother always telling him that he was really special that way. ]

  4. Not Trampis

    Menzie or Chinny as we shall call you downunder,
    Perhaps the headline should read Shelton is confused

  5. Ed Hanson

    If Robert Mundell thinks well of her, it is good enough for me, and should be good enough for anyone. This does not mean you must agree with him or her, just that there are serious, accomplished economists who do respect her. Sorry socialists who are bent on personal destruction of anyone perceived to be in their way to utopia.


    1. Menzie Chinn Post author

      Ed Hanson: I’m not taking my cue from others, I’m applying my own standards of what I would expect a trained economist to understand if they were to work in the areas of macroeconomics and monetary policy. Would you like to have a doctor who doesn’t understand how antibiotics work, even if that doctor knew how to speak Latin?

    2. pgl

      Odd that you could not be bothered to provide a link to what Mundell allegedly said. Did he say she was “hot”? I seriously doubt she understands the Mundell-Flemming model. Then again – I doubt you have no clue what I’m talking abut here.

    3. pgl

      Huh! Judy Shelton on the twitter hugging an elderly Robert Mundell:


      “Thrilled to be with the brilliant economist Robert Mundell (Nobel, 1999) at his annual international monetary conference near Siena, Italy. Bob won for his understanding of exchange-rate regimes, including gold standard. A primary intellectual force behind supply-side economics.”

      It looks like she had nice things to say about Mundell who after all did write a lot of interesting papers. It is too bad Shelton’s writings lacked any real understanding or clarity.

      This is not even close to some seminar 35 years ago where I was ripping a really stupid paper on “currency substitution” only to watch the great Milton Friedman nodding approval at what I had to say. Friedman at the end decided to say what he thought about the paper which echoed my comments but with a level of brilliance that went way beyond what I had to say.

      I would love it if the late great Milton Friedman could come back to life and give his views on Shelton’s writings. It would likely be brutal but beyond brilliant.

    4. pgl

      An interesting discussion of Mundell’s contributions:


      “Mundell also considered the case of floating exchange rates. At the time this was regarded as a theoretical curiosum because, as mentioned, all major trading countries had fixed their exchange rates with each other. But Mundell’s native Canada had floated its dollar from 1950 to 1962. Possibly for that reason, and possibly because Mundell had a sense of the future, he thought it worthwhile to consider the floating exchange rate case. (Major countries’ exchange rates have floated since the early 1970s.) Mundell showed that if the country has a floating exchange rate, then the government has much more ability to use monetary policy. On the other hand, fiscal policy now becomes impotent. If the government wants to increase aggregate demand by increasing government spending, for example, then, if it does not change monetary policy, the increase in the exchange rate due to the increase in aggregate demand reduces exports. Thus, all fiscal policy can do is change the composition of aggregate demand, not its level. The model Mundell used in 1960 to show this is now called the Mundell-Fleming model, after Mundell and Marcus Fleming, who developed a similar, though less extensive, model around the same time.”

      An important point that Shelton does not get. A little more:

      “Mundell’s other big idea in the 1960s involves optimum currency areas. Rather than take it as given that each country should have its own currency, Mundell noted that if states within countries all shared the same currency, more than one country could do the same. Again, this seemed like a theoretical curiosum at the time (1961), but as the history of the euro has shown, it is anything but. Mundell cited the reduction in transactions costs for trade across borders and the related ease of knowing various prices as the major advantages of a currency area (see MONETARY UNION). The major disadvantage, he noted, is the difficulty of maintaining full employment when one country suffers from some event that other members of the currency area do not suffer from. What if, for example, Canada and the United States are in a currency area, but the demand for softwood lumber suddenly declines? This would hurt Canada proportionally much more than the United States and, with a floating exchange rate, Canada could let the value of the Canadian dollar fall and save somewhat on the need for Canadian lumber workers’ wages to fall. But with Canada and the United States in the same currency area—the ultimate in fixed exchange rates—the Canadian dollar cannot fall relative to the U.S. dollar because they are the same dollar. One immediate implication, noted Mundell, is that high labor mobility (i.e., allowing workers to move from one country in the currency area to another country in the area) is key so that workers can have an easier time finding jobs. Of course, the euro is now the world’s largest currency area, and, in line with Mundell’s thinking, many EU supporters are advocating that workers be free to move from one EU country to another.”

      Trump is opposed to this type of labor mobility if the workers are not white. And yes Europe is on the Euro as Mundell advocated. A lot of economists warned that the adoption of the Euro would create the type of macroeconomic instability that worried Mundell. It does seem the Euro experiment has been a disaster and yet Judy Shelton advocates we repeat that mistake here.

    1. pgl

      Whoever wrote this Wikipedia nailed two things. Your point:

      ‘In 2000, she advocated for open borders with Mexico. During the Obama years, she criticized the Federal Reserve’s low interest rates. During the Trump presidency, she advocated for the Federal Reserve to adopt lower interest rates as a form of economic stimulus. (Trump frequently criticized the Federal Reserve for not lowering interest rates.) She supports the Republican Party’s Tax Cuts and Jobs Act, and the Trump administration’s deregulative agenda. Before Trump became president, she was a longtime advocate for free trade, but after he became president, she supported his administration’s trade war with China.’


      “She is known for her advocacy for a return to the gold standard (which is dismissed by almost all mainstream economists) and for her criticisms of the Federal Reserve.”

      Then again – Stephen Moore has said that every economist on the FED is stupid and should be fired! No wonder our Usual Suspects love these two!

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