Friday, April 1, 2011

Krugman v. MMT continued

Steve Randy Waldman jumps off from Krugman's recent post in The MMT solvency constraint. As usual, some of the heavyweights join the debate in the comments. Good stuff by some very savvy people. I'll leave it at that, and let you check it out if you are interested in some deep thinking on the subject.

The Rogue Economist also riffs on the Krugman controversy in When does a country loss access to the bond markets? Also a post on the value of MMT. He concludes:

"Krugman wrote the post to illustrate his differences with the MMT crowd. Which is again unfortunate, because I’ve found that MMT descriptions of how the macroeconomy works is the most technically correct , provides a seriously objective framework to understand what actions cause which vs. what, and is the only economic framework that incorporates how credit and investment actually functions and affects the overall economy.

"To put it in analogy, MMT looks at a fire and notices that firemen are the most effective method to combat the fire. By comparison, the classical explanators are those who notice that whenever there is a fire, there always seems to be a lot of firemen. So hence, the best way to decrease the number of fires is to decrease the number of firemen.

"Previously, if you were in any finance type of work, you could safely ignore macroeconomic prognoses on your industry based on the classical view, and your ignorance of the prognoses would not affect you in any way. Now you ignore macro analyses based on the MMT framework at your peril." (hat tip to Stephan Ewald)

Thanks for the kudos. All MMT'ers take a bow.

The Rogue Economist first broached MMT with some questions about "Chartalism" in February, 2010, here and here.

UPDATE: Robert Vienneau of Thoughts On Economics posts on Krugman v. MMT here.


Anonymous said...

Tom - I was happy to discover recently that you are now blogging! Thanks for the effort, I appreciate your perspective.

Any time you feel inspired to summarize key excerpts from some of the longer/deeper MMT related discussions that occur (interfluidity, PK, etc) (as you have done a little of), those of us who don't spare the time to read the full threads will definitely benefit. Of course, I know that's easier said than done and that "key excerpts" is subjective, but I figured it was worth encouraging more of to the extent you find it feasible/desirable :)

Tom Hickey said...

Thanks for the kudos, hbl.

Good idea to summarize the comments on important threads that will otherwise disappear into the blue.

Some time ago, I thought that this would be a worthwhile project to put on an MMT wiki when one was developed. The wiki is now in the works, thanks to selise, and I hope that eventually the great comment threads will be available there.

Some really smart people have argued positions from a variety of perspectives, It is really the kind of debate that our economists should be having instead of the nonsense that passes for "debate" now.

Anonymous said...

Good point... the wiki would be a useful place to highlight in more detail the outcomes of various in depth discussions. It's great that after all these years of people suggesting it, someone finally got the ball rolling on that!

And a third function the wiki could serve would be the much-requested FAQ... organized by question/topic with the answers including details plus links to other content, both on the wiki and elsewhere. Probably that's already under discussion.