An oppositional view.
It isn't a matter of whether MMT works (in narrow economic terms) but the social consequences. As an approach to economic policy, MMT fails the 'dictator test' - would the policy tools help or hinder some future totalitarian leader. And there is no question at all that the model - however much it fits with the current structures of central banking and finance - would result in the obscene situation where people are taxed for reasons other than the raising of finance for government."Morality" runs strong. Facts? Not so much.
The View from Cullingworth
Modern Money Theory - the economics of tyranny
Simon Cooke
(h/t Andy Baltchford on FB)
15 comments:
This is what it all boils down to....
This faithless, rebellious cohort has no view of authority... dark.
This guy must be the Bob Roddis of the U.K....
"...where people are taxed for reasons other than the raising of finance for government."
Don't you have to have a reserve-add before you can have a reserve-drain?
Don't you have to spend before you can tax?
They don't believe in the authority of math either...
We really are dealing with morons here...they would screw-up any task that required analytical math skills.
In the MMT framework, the public needs to tax itself so that it can carry out its own desired public spending plans without generating demand pressures on output that exceed the public's capacity to produce that output. That seems like a perfectly sensible and entirely non-tyrannical reason for taxation to me.
MMT is a difficult outlook for people who have a hard time wrapping their heads around democratic and pro-social ways of thinking, and who incline toward frustrated views of society as consisting of a bunch of put-upon individuals standing against some mysterious alien entity called "The State".
If you want to plant new rows of veggies in your garden, you might have to uproot some of the older plants so that you don't overwhelm the capacity of the soil to nourish them all.
Some people don't seem to get civilization and culture as a product of conscious community rather than individual choices based on rationally maximizing utility in market exchange. The two are complementary rather than oppositional. Each has its own purview. Personal freedom involves freedom of choice when the choice is personal and only has personal consequences. Social freedom involves self-determination of the rule of law when choice has social consequences.
The real subversion of a democratic republic is through plutonomy, when the donors get to choose who runs for office, since a chief criterion is the ability to raise funds. In developed nations the bulk of the funding comes from a very, very small percentage of the voting public. They constitute the oligarchy.
I'm almost certain, he is the brother of Frances Coppola.
That would make sense James, I picked up on it from Frances's twitter feed so h/t is really hers.
Paul,
"Don't you have to spend before you can tax?"
Not under metals imo.
This is where I believe Warren is coming from when he mentions his "gold standard thinking"...
Under metals, you tax first (payable in mass measures of the metals) then the govt can spend... see Hamilton's Federalist 12 on this for instance...
When we subject ourselves to the metals, think of the system barrier as the surface of the ground. Until the metal is taken up from the subterranean regions, you cannot spend, ie "closed system"...
You have to "drain" the metal from the ground first and then "add" it to your Treasury account.
No direct human issuance; our (human) exchange has to be mediated by the presence of these metals in the atmospheric region.
So imo that is where this guy is coming from. We were under the metals for so long (looks like almost 2,000 years) some people cant shake it... even though we have thrown the yoke of the metals and under our current arrangements this guys math doesn't even work as you correctly point out...
What this guy is saying is that we humans should not have our own direct authority to issue our own currency.
We certainly can and do issue our own currency now for decades, and this is born out by the math and by rational observation, (ie "add before drain") yet this guy's behaviour is if MMT is a "model".
Of course we know MMT is not a "model", it is an explanation of what we are currently doing and system optimization.
So to this guy, our current human actions are just a "model". (Weird-o-rama!)
He has lost touch with reality if he ever had it.
He sounds like Bob's "non-aggression principle" is in the back of his mind.... and he is terrified of human "tyranny" or something to the point where he has become irrational ...
iow he is saying "we can't do this" when IN FACT we ARE doing it and have been doing it for decades now...
No contact with reality... sad.
rsp,
Oh..wait
"...And a little on mushrooms."
That explains it, this guy's on mushrooms....
The crucial question, I think, is whether the currency is effectively a government monopoly, not what the currency happens to be made of. If our money was made entirely of gold and silver bits, but our government maintained monopoly control over the introduction of new units of the gold and silver bits into the private sector, and minted the pieces into monetary forms that were hard to counterfeit, then the MMT framework would apply reasonably well.
It's true that the introduction of digital forms of state money reduces the per unit cost of creating those units down to near-zero. But you can get around that to a large degree with metals by minting very high-denomination coins in very small size.
Matt,
It's true that gold-standard thinking changes the dynamic of the system somewhat (quite a lot), but the system itself remains unchanged.
What changes is the input to the system, the "power source", not the system itself.
The economy is a machine that produces goods and services for output. I define the "system" as the economic machine. The input to that system is another system...a monetary system, that supplies it with liquidity or "power".
Gold-standard thinking merely reduces or constrains the performance and output of the economic system if we define the goal of the system to provide for all citizens within it.
Gold-standard thinking limits the amount of liquidity that can be input to the system, and puts control of the source of that liquidity in a few hands.
It's analogous to the power cord on an appliance and the system of controls that operate it. We can choose not to plug in our appliance or to mis-apply the controls but the system has not changed as a result...only it's usefulness.
Many people's thinking seems to be shaped by their impression of two historical conditions that are presumed to be the paradigm case that governs economic behavior and monetary operations.
First, kings had to get gold to pay their soldiers and that was a chief purpose of the taxation of old. Interestingly in this regard, Isaac Newton, who had been Master of the Mint, turned to alchemy in his later years and tried to turn base metal into gold by discovering the philosopher's stone. "After purchasing and studying Newton's alchemical works in 1942, economist John Maynard Keynes, for example, opined that "Newton was not the first of the age of reason, he was the last of the magicians". Wikipedia BTW, Newton had made his major scientific and mathematical contributions by age 28. He was on e of the most brilliant people who ever lived. It seems he may have understood the downside of a fixed money supply and was looking for a way to a flexible one that was metals based.
The second is holdover from the Agricultural Age, when "saving" was equated with seed corn held out that the end of a harvest for "investment" in the next planting season.
Saving, from the Concise Encyclopedia of Economics:
Saving means different things to different people. To some it means putting money in the bank. To others it means buying stocks or contributing to a pension plan. But to economists, saving means only one thing—consuming less in the present in order to consume more in the future.
An easy way to understand the economist's view of saving—and its importance for economic growth—is to consider an economy in which there is a single commodity, say, corn. The amount of corn on hand at any point in time can either be consumed (literally gobbled up) or saved. Any corn that is saved is immediately planted (invested), yielding more corn in the future. Hence, saving adds to the stock of corn in the ground, or in economic jargon, the stock of capital. The greater the stock of capital, the greater the amount of future corn, which can, in turn, either be consumed or saved.... source
"Next thing you know, the government will be running the whole, damn country."
Wait, we ARE the government!
Wait, we ARE the government!
In theory only. While citizens get to vote on those that they choose to rule them, it is the few very wealthy donors that decide who will run that get first choice with their dollar "votes." How does this work? Potential candidates are chosen largely on the basis of their fundraising capacity with voter appeal secondary at this stage of the selection process, since the candidate for office will be sold to the public through professional promotion using the funds raised.
Simon Cooke's sister is Francis Coppola, and I see she's first there is the comments. He's also a local politician in my home city!
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