Wednesday, February 22, 2012

Izabella Kaminska on MMT at FT

Read it at The Financial Times
Yes Virginia, there really is Modern Monetary Theory
Posted by Izabella Kaminska

On the MMT flurry resulting from Dylan Matthews WaPo article on MMT.

Read it at The Financial Times
Crossposted at New Economic Perspectives)
Posted by Izabella Kaminska 

On a different way of looking from the MMT perspective.

MMT goes global. Many consider The Financial Times to be the summit of the mountain of economic media. This has been a big week for MMT so far and it isn't over yet. Looks like break out into the mainstream is occurring. It's now respectable to admit knowledge of MMT, if not yet to embrace it.

I give John Carney a lot of credit for being the ice breaker. Props to Dylan Matthews and Ezra Klein, too. Dylan was working on this article for some time, and Ezra provided the WaPo venue. 

BTW, the MMT economists are headed to Italy today for the MMT conference there. Report to follow.


Clonal said...

Also Lynn Parramore at Alternet - The Challenge to Status Quo Economics Everybody is Talking About

Over the last week, an important approach to economics that has spent years on the sidelines went mainstream: Modern Monetary Theory. This is good news for anyone who wants to see the neoliberal paradigm challenged, and a positive sign to heterodox economists who have difficulty getting a hearing in a field still gripped by outmoded models.

The theory, which provides unusual perspectives on issues including currency, debt, and government spending, kicked off in the mid-90s and has since grown into a movement. Its roster of proponents includes James K. Galbraith; Australian economist Bill Mitchel; Randall Wray and Stephanie Kelton of the University of Missouri-Kansas City; Rob Parenteau; Scott Fullwilier; Warren Mosler; and blogger Marshall Auerback. Their insights have been particularly valuable in countering the deficit hysteria which reached a fever pitch in the U.S. during the summer of 2011, and still darkens policy debates worldwide.

Also Greg Mankiw links to the WaPo article in his blog, but makes no comment.

Matt Franko said...


Do you have anything on why Klein tasked Matthews to write it up?

Did someone else task Klein who delegated to Matthews? Or did Klein pick up on this himself?

I guess how did this get to Klein?


AndyCFC said...

As a long time reader of FT Alphaville think you will find Izabella is very sympathetic and has done a few MMT related stories
they even Linked Cullens primer on MMT (the old version before recent events)and further reading post the do every day quite often links in pragcap stories

geerussell said...
This comment has been removed by the author.
Tom Hickey said...

@ AndyCFC

Let me know in the comments here when something on MMT goes up at FT and I'll put it up. Or email me at tom.hickey at thanks.

Tom Hickey said...

Don't recall the sequence now, Matt. This has been in the works for some time.

Tom Hickey said...

Thanks, Clonal. I promoted it to a post.

Andy CFC said...

course will do Tom

wh10 said...

Holy eff.. Greg Mankiw linked to MMT??


Does he think it discredits it?

Or is it honest interest?

Bob Roddis said...

We learn from Bill Mitchell that it isn’t the free market that causes the spectre of involuntary unemployment but the introduction of state funny money:

“So it is now possible to see why mass unemployment arises. It is the introduction of State Money (which we define as government taxing and spending) into a non-monetary economics that raises the spectre of involuntary unemployment.”

Now what was the problem that the MMTers were trying to solve by inflicting upon us “the government sector”? No “government sector” and there is no need to balance against it.

Further, as noted by Biden’s lackey, the MMTers claim that it’s a simple matter to mop up this inflationary funny money with additional taxes and then just burn the receipts. But David Colander, a co-author of a 1980 book with the original Abba Ptachya Lerner (King of the MMTers, author of “The Economics of Control” fame) wrote that Lerner wanted to make it illegal to change prices without a permit:

Initially he [Lerner] toyed with various administrative wage and price control policies, but he found those lacking and soon gave them up. He replaced them, first, with a tax based incomes policy and ultimately, a market based[!!!] incomes policy in which property rights in prices are set and individuals have to buy the right to change prices from others who change their price in the opposite direction. It was this idea that formed the basis of our market anti inflation (MAP) book. (Lerner and Colander 1980) Under MAP, rights in value added prices would be tradable so that any firm wanting to change its nominal price would have to make a trade with another firm that wanted to change its nominal price in the opposite direction. Thus, by law, the average price level would be constant but relative prices would be free to change [page 12]

Boy, that sounds like a fun place to live, doesn’t it? So, “mopping up” inflation is a bit problematic, eh?

Of course, MMTers resolutely and meticulously avoid having any familiarity with even basic Austrian School concepts such as catallactics, human exchange and economic calculation which would be thrown for a loop with MMT funny money inflationism.

Tom Hickey said...

@ Bob Roddis

Yep, and good luck getting modern states to give up state money. It's tantamount to getting them to give up their militaries and internal security forces. The state's monopoly on currency and use of violence go hand in hand. States are authoritarian by construction.

Unfortunately, there are few frontiers on earth beyond the reach of the moden state. Pretty much the the only out is exist in libertarian communities within the state system by remaining as invisible to it as possible. There are various flavors of libertarian communities out there. The downside is that authoritarians do all they can to suppress this option, so it is necessary to keep a very low profile. That can be difficult when children are involved.

But where some people go wrong here is in thinking that they can avoid taxes due, and now the US taxes all transactions, even barter. So some interaction with the state is generally necessary, unless one is able to live quite remotely. That often involves giving up the benefits of modern civilization, but some hearty folks do choose this option.

Septeus7 said...

Quote: "Yep, and good luck getting modern states to give up state money. It's tantamount to getting them to give up their militaries and internal security forces. The state's monopoly on currency and use of violence go hand in hand. States are authoritarian by construction."

I disagree that taxes are authoritarian.

I've pointed out that before that pricing the use of state services in whatever token the "service provider" decides is a fundamental liberty and that it make no difference if the fundamental reason for the use of the credit is public gain or private gain see the parable of the private Bakery franchise versus the State highway builder.

I find it authoritarian to claim as the Austrians that people can't collectively decide on a productive venture via democratic processes and provide a common good via self issued credit but a so-called private ventures can use the same credit system but only so long as privatizes the gains into a small number of hands of monopolists.

The Austrians are the thieves because they think they have the right to the monopoly of the value created by the use resources in the public domain without taxation.

Avoiding taxation is stealing wealth created out of the commons.

Ben Franklin refuted the totalitarian Austrian school's claims to be "above taxation" as hopelessly aristocratic nonsense that it is back in 1783.

Quote: "All the property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it."

Austrians leave our Republic alone and go back the that private Hapsberg estate called Imperial Austria that garbage bin of history that it crawled out of.

Truth Squad said...

Because "libertarian" (total hijack of the European origin of the word btw by capitalists) paradise can exist without coercion and lack of freedom off course...

Get a clue please, your economic 'freedom' (abusing your power position as owner of capital) is others enslavement. A modern economy where the 90% of the population is economically dependant and employed without any power control resort is a society of slaves.

Fantasy-economics from "austrians" know very well their capitalist masters interests and want to promote this failed idea.

Tom Hickey said...

Humans originally lived in biologically based groups, i.e., clans, tribes, and nations, "nation" etymologically stemming from the Latin for "born." The Latin for "nation" was gens, meaning a related people. The nation state (Greek polis, Latin civis) only came later, with the development of "civilization," i.e., city-life. City life was only possible after an agricultural surpluses were generated, enabling humanity to surpass subsistence living characteristic of ancient tribal life. Agricultural surpluses were made possible by technological innovation and slavery, which, of course, involved the use of force. The Greek city-state was chiefly dependent on slave labor. The Stoics were the first to oppose slave labor.

Before society became sufficiently complex to required impersonal organization, there was no authoritarian structure that depended on enFORCEment. When a human group becomes large enough, then a greater degree of organization is required and consensus decision making becomes more difficult. When close interpersonal relationships and consensus are replaced with hierarchical organization, then the character of the society changes, including the type of life that individuals live within it.

I have lived in left libertarian communities with predominant commons modeled on so-called primitive tribes, which exist within the larger context of modern society. Going from one type of society to the other is an enormous contrast. One gets to experience first hand the difference between close interpersonal relationships as the basis of a group and enFORCEment as the basis of a modern society. The contrast is huge, but it would not be noticed unless one were living in terms of two entirely separate contexts. We used to call one the same asylum and the other the insane asylum.

Modern societies are run on models inherited culturally from the past. The tribal ways are long gone from the memory of developed societies, which are built on more recent types of society. Western society is still climbing out of its feudal roots, for example, and it is still enmeshed in the capitalistic roots of the industrial age as it enters the digital age, whose basis in consciousness is entirely different — as different as machines and computers. Beyond the digital age lies the organic age, where the difference will be between computers as fixed devices and as organisms capable of changing and growing.

Forward looking thinkers are seeing that the digital age has already resulted in a level of global personal interaction that makes participatory democracy possible now. And we are quickly approaching the singularity. See Wikipedia-Technological Singularity. This is the basis of a lot of anarcho-communitarian visionary thinking at the moment. This is a hugely important developing trend that is in the process of making a strong impact on global culture.

How this will affect global society is, of course, as yet unclear. But it is consciously based on a so-called primitive tribal consensus model of personal interaction as the basis of participatory democracy in the future.

Bob Roddis said...

Libertarianism simply forbids the initiation of force and requires the strict observance of private property in things and bodies. The end. There is nothing to stop the multitude of various voluntary associations that now make up the bulk of human existence. All that would stop would be the crime and pollution. It is baseless to suggest that humans require Keynesian “stimulus” to be enticed to engage in economic activity. Read a book about the Spanish conquest of Mexico and Central and South America. You will see lots of energy for economic activity and mass slaughter. Libertarianism puts an end to the mass slaughter. These musings you guys make about the motives of libertarians are just silly.

Your problem is that you cannot respond to the substantive challenges that have been made to your half-baked totalitarian theory. You don’t at all understand the concept of economic calculation which is at the core of economics and which is completely distorted under the current and your proposed monetary regime. You are also clueless about the fact that our current kleptocracy is the inevitable result of granting a democratically elected government plenary economic power which you guys only want to enhance and amplify.

Thus, you MMTers 1) want to make even worse the economic distortions and dislocations caused by fiat money; and 2) seeing an elite kleptocracy, you wish to grant it more ability to do evil by handing it yet even more plenary economic power.

Don't the results of the Republican primaries give you pause over granting a plurality of voters plenary economic power over the rest of society? Privacy issues are always property rights issues.

Tom Hickey said...

Bless you on your way, Bob. Maybe someday Ron or Rand Paul will be elected president and both branches of Congress will be chiefly Libertarian. Then the Libertarians can appoint Libertarian judges and justices and transform America into a Libertarian paradise.

Meanwhile, the rest of us will attempt to work with the system that is in place as best we can.

Tom Hickey said...

Bob Roddis: Libertarianism simply forbids the initiation of force and requires the strict observance of private property in things and bodies.

Left libertarianism agree with the first point and disagrees with the second. Left libertarians recognize no absolute natural human right to property, and they generally encourage preservation and expansion of the commons in contrast to privatizing the commons. For libertarians of the left, property rights are matters of positive law to be determined differently by different communities based on the choice of those affected by the laws of their own creation.