Monday, March 5, 2012

Carney responds to Wray — Social Security, the Financial Crisis & Modern Monetary Theory


Randall Wray, one of the leading lights of Modern Monetary Theory, has responded at length to some of my critiques.
His response actually demonstrates one of my critical points: MMT is too complacent about the harm government inflicts. In what follows, I’ll show how Wray’s view of Social Security as “credit bank accounts” leaves him with a myopia when it comes to the behavioral effects of the Social Security program. Then I'll show how this same myopia effects how MMT tends to view the financial crisis.
Read it at CNBC NetNet
Social Security, the Financial Crisis & Modern Monetary Theory
by John Carney | Senior Editor


17 comments:

Dan Kervick said...

I posted the following in response to Carney at NetNet:

John, the issues you raise about Social Security are large and philosophical ones, but I would just say this: What you regard as a problem for Social Security many would regard as progress. That the costs of supporting our seniors are socialized and born by the whole society rather than individual families and the lottery of life strikes people like me as more practical and civilized than the traditional system. It also doesn't strike me as an especially appealing aspect of the traditional non-socialized system that decisions on reproduction and family size are made on the basis of how big a personal economic safety net parents want to generate and rear. Nor does it seem to me to be a problem that with the socialization of support for elders, family size will decline.

When a whole generation of people depends on the generation that follows them, that is an excellent way of building social solidarity and extending social concern. Citizens in a such a society must be concerned not just with their own children, but with all the children in the generation that will support them.

Matt Franko said...

This is interesting:

"The focus on the fact that the government can never run out of money seems to encourage a blindness to the myriad ways that government spending inflicts non-monetary harm, harm that diminishes real world wealth. "

Govt spending > diminishes real wealth... Is this possible?

govt spending is monetary, non-govt wealth is real... need to think about this some more....

I think for sure the taxation side of fiscal results in behavior modification, dunno about the spending side...

resp,

Matt Franko said...

PS

It's like if you get taxed so much that you cant afford kids, you dont have them....

Resp,

TomatoBasil said...

Pensions cause low birth rates!?!

Dan Kervick said...
This comment has been removed by the author.
Dan Kervick said...

Again, we see that it is a mistake to mix up Carney's critique with the MMR guys, since Carney just has very conservative, anti-government, laissez faire views and has a much bigger beef with the role of government in our society than whether or not to do a job guarantee program.

By the way, as long as we are discussing this issue about the evils of government on the internet using the medium of the world wide web and the amazing blogosphere it has spawned - Carney's site is itself called "NetNet" - it's worth recalling that the internet was created primarily at state-run university systems, by state-employed researchers.

LVG said...

Wray's childish response is an embarrassment for all of MMT. I am stunned that anyone would applaud it or think that it was a good critique. Carney should have attacked him back, but like most MMT critics he was mature about it. It looks like MMT has turned another friend into an enemy. Nice work!

Anonymous said...

Yes Dan, and the private sector just loves piggy backing off govt research (see the pharmaceutical industry as one glaring example). Besides, I thought that the GFC completely invalidated the idea that the private sector knows best, and if it was just left the hell alone to sel-regulate (lol) then all the wealth scooped up by those at the top would trickle down to the plebs (double lol). Even without the blast furnace of real life experience, this was a bad and corrupt theory in the first place. The idea that govt misallocates and wastes money (it does at times) and the private sector doesn't (my word it does!) just doesn't stand scrutiny ... It is ideology over pragmatism. It is self interest over common interest. Even the mild version of laissez faire (regulation lite) tore the globe new one in the end. I shudder to think what the full blown version can do.

Apj

Jonf said...

Sounds like two more straw men. What we pay our seniors s dependent on productivity, resources and innovation, not on numbers of chidren. Imagine in 1945 we proposed that everyone in the US would have an IBM computer? Well, we do and it is better than the one back then. And what about the productivity we get from Microsoft office and the Internet to name just two. So your argument does not work,except to poke at undefined fear.

On financial regulations, the very existence of MERS and unregulated derivatives speak to that. They both and a myriad more let to this crisis.

Anonymous said...

You think those intra-governmental bondsbeing held by SS are money good? Where does one sell those? Oh ya, you have to do a putback to the Treasury Dept., as the surplus of 30 years went to the General Fund to help fund the government. We will have to pay this twice. First when we were paid along with our employer who also paid their share and a second time whenever current contributions to SS run a deficit against receipts, and there's only Treasury to bail SS out. It's called a Ponzi Scheme unless the government does it..

Adam1 said...

John needs to stop hanging out neo-liberal economist types. His chief claim relies on pure assertion (that at 42.1 elder dependents to workers) that there is no way to sustain this. Population stats alone don't tell you anything about the sustainability of Social Security. One very productive American could theoretically sustain all of aggregate demands created by SS if his/her productivity was high enough.

But the sad and laughable part is the cherry picking of data. I recommend every click through to the actual 2006 report...

http://aging.senate.gov/crs/ss4.pdf

If 42.1 elder dependents is so burdensome, how could we have afforded a 76.5 minor dependents per working in 1965 with little if any inflation. We feed, educated and clothed them with no worries at all. The combined dependent ration in 1965 was 94.7 dependents (minors and elders) per worker and the economy was 1/4 of what it is today. And John asserted that 2080's 86.1 dependents per worker in an economy likely to be far larger than today's wont be sustainable. Go figure.

dave said...

thank god for randy. my mom and dad received an email from my uncle who is a right wing big time. it was an email about how bad social security is and how it is a ponzi scheme. i gave mom a copy of randys article comparing bus tokens to social security. randy seems to care about what happens to the average working class stiff. please keep up the good work.

James said...

I saw this quote a couple of days ago, and immediately thought of neo-liberals and their ideology.

"One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back."
— Carl Sagan

paulie46 said...

You know, in the horizontal world these guys seem to long for one can only succeed at the expense of someone else.

So the idea of privatizing retirement funding means that at best, only 50% of the population will be able to accumulate savings while the other 50% go in the hole.

The same is true for stocks and other equities. For every winner there has to be a loser. It can't work to provide for everyone.

The problem is magnified when the wealth becomes concentrated among a small subset of the population like we have now. Even with massive government spending we aren't able to provide retirement for everyone because the few are continuously sucking all of the oxygen out of the room.

Libertarians and right-wingers in general truly believe in an every-man-for-himself world. And they don't mind sucking on the government teat while they deny the same for everyone else.

Mean, nasty, self-important hypocrites, most of whom were born on third base but think they hit a triple.

Unforgiven said...

"You know, in the horizontal world these guys seem to long for one can only succeed at the expense of someone else."

Talk about unearned benefits. When they aren't busy ripping it off, they're busy calling someone else a thief.

Leverage said...

"Govt spending > diminishes real wealth... Is this possible?"

Given that wealth 'consumed' by the government creates both: a) revenues to the people (both directly to public servants and indirectly to corporations working for the state) and b) public function in enhancing the functioning of society (which is also real capital) or direct providing of good & services to the population; I don't think you can say that is diminishing real wealth.

Now, the question if the private sector would have been able to allocate these resources more efficiently is a different one (and the answer may be yes or no, depending on circumstances and a lot of variables; the answer is never always yes or always no, that's an ideological bias).

John Carney said...

"His chief claim relies on pure assertion (that at 42.1 elder dependents to workers) that there is no way to sustain this. Population stats alone don't tell you anything about the sustainability of Social Security. One very productive American could theoretically sustain all of aggregate demands created by SS if his/her productivity was high enough. "

Actually, that's not my claim.

My claim is that we'll have to be very productive for this to work. We'd have it easier if people had had more children.