I've just been engaged in a discussion with Cullen Roche over at Pragmatic Capitalism -- http://pragcap.com/shiller-is-economics-a-science. He is quite vehement in his opposition to MMT, but I don't really see any big differences between his Monetary Realism and my MMT. MR provides a nice counterpoint to MMT in that it challenges us in a reasonable manner, in my opinion. The differences between MMT and MR are more about talking points and points of emphasis as opposed to fundamental differences with regard to how the monetary system works.
On the other hand, I just see no sense in engaging with Market Monetarism, IS-LM, and Austrian economics. I just don't see any value in engaging with these schools. Market Monetarism starts out with ridiculous assumptions (the Fed can control the economy by announcing NGDP targets). IS-LM is so unhelpful that Krugman starts every post on the subject with a disclaimer that it is nerdy (i.e. unintelligible). And the Austrians are so far removed from the legal and monetary realities of our current system that their ideas must be considered revolutionary. Revolutionary isn't necessarily bad, but it's highly speculative and needs to be recognized as such. (Yet they speak with great certainty.)
The MR-MMT split is good to the extent that it provides greater political and philosophical space for the discussion of economic ideas. We in the MMT camp are, for the most part, proud liberals. The MR folk are more prone to conservative politics. Beowulf voted for Ron Paul and Mitt Romney, for example. But we know Beowulf is a macroeconomic genius and respect him.
There are a lot of hard feelings on both sides with regard to the MMT-MR split. But the truth is that we understand and need each other. We each need an intelligent foil to challenge our ideas. The job guarantee, for example, is a mostly untested idea. I'm all for it, but it's a somewhat revolutionary idea and much different from the more descriptive facets of MMT. The MR folks, on the other hand, seem overly willing to compromise with anyone and everyone. They lose integrity in my book when they indulge the IS-LM and/or Market Monetarist platforms. Open-mindedness and humility are great traits. I respect the respect MR gives to everyone, but MMT is much clearer and more courageous in giving the charlatans the respect they deserve.
Cullen went away so pissed off it was ridiculous. He can't handle any criticism whatsoever.
ReplyDeleteI still remember his parting line:
"I'm done writing about MMT. It hardly brings me any traffic anyway."
Wah,wah,wah.
So, like a little child, he took his toys and went away to build his own little sand castle that nobody pays attention to.
In the early summer he announced to everyone that he would be in NYC, so I asked him on my show; the one I tape at the NYSE. He blew me off.
Whatever. He's a little boy who got his name mentioned one time by Paul Krugman. Big deal.
I agree that Cullen has taken the MMT-MR split personally. If you read my exchange with him, it's all about his perceptions of MMT as a political operation. But he does understand the economics of MMT.
ReplyDeleteI certainly understand your frustration with his attitude. He's pissed off for some reason. That parting line of his does not put his rationale in a good light, and it fits with my discussion with him. It's up to him to defend himself...
It's water under the bridge. Doesn't really seem worth talking about. People should just follow their own research and interests wherever it leads them without worrying the alphabet soup of labels.
ReplyDeleteThe lack of understanding of the economics and sociology of the Job Guarantee is the problem.
ReplyDeleteYou either have an unemployed buffer or you have an employed buffer. The employed buffer outside the private sector is more employable by the private sector, disciplines the private sector better - stopping them paying slave wages, and increases liquidity in the jobs market (less people in jobs they hate).
For me it's a no brainer - because it *has* operated quite successfully before.
After the War the UK introduced unemployment benefit and an implicit understanding that the public sector would hire anybody who couldn't get another job.
So we had agencies like 'Remploy' that engaged those who were disabled in a productive manner.
That worked fine until the oil crisis, the capital degradation issues of the 1970s and monetarism.
'Remploy' final bit the dust a couple of years ago, and now we have more disabled people on income support and less productive output.
The reason you need an explicit Job Guarantee is the reason you need an explicit Social Security Fund - politics.
Implicit Job Guarantees get optimised away in the meaningless quest for 'efficiency' - forgetting that the job of the public sector first and foremost is to be 'effective' in its social purpose.
I don’t agree with Dan’s claim that JG is “untested” and “revolutionary”. The WPA in the 1930s was JG writ large. Plus the workhouses of the 16th, 17th, and 18th centuries were JG of a sort. Plus Pericles implemented a JG scheme in Ancient Athens 2,500 years ago.
ReplyDeleteJG is an idea with potential, but MMTers need to get it into their heads that JG is not a new idea: it’s been tried dozens of times. In fact Bill Mitchell made the absurd claim once that he and Warren Mosler thought up the idea!! Complete nonsense.
MMTers need to study historical examples of JG and look at the empirical evidence as to what types of JG work and which types don’t, else MMTers will just spend their time re-inventing wheels.
Neil,
Where’s the evidence that “After the War the UK introduced unemployment benefit and an implicit understanding that the public sector would hire anybody who couldn't get another job.” That’s a new one on me.
Thanks for the post Dan. I followed much of your discussion with Cullen over at his place.
ReplyDeleteI too think there is mostly just a different lens that MR and MMT are using. MR starts with banks and looks at how these private deposits flow through the system and drive output. How they integrate with Treasury ops and how they respond to CB policies is also examined.
MMT starts with govt and unifies CB and Treasury for convenience (which I think is helpful and for all intents and purposes correct). So Cullen is correct when he says MMT is govt centric, but he sees that as a negative. Of course the political winds of the day are that anything govt is to be mistrusted and MR is responding to that reality BUT I think those winds are changing some, especially in places like Europe.
As far as the liberal conservative thing. I dont see many of the MR folks being modern conservatives. They might vote for some republicans but Romney (until his last attempt to be pres) has always been republican lite and Ron Paul, if you take out his gold buggishness, is not that weird. Now being gold buggish is some heavy baggage that leads to some pretty awful places for liberals (and some republicans too) so its kind of like saying "Well she's cute if you can ignore that eye in the middle of her forehead" but Ron has sounded downright reasonable at times when hes not talking economics or money.
Prag Cap is a great site I think and Cullen brings a wide array of interesting discussions I think. His debunking of things like "The govt IS NOT 16 Trillion$ in the Hole" and stuff like that are necessary and effective.
I agree whole heartedly about the JG being about a bufferstock of employed vs a buffer stock of unemployed and that this should be the comparison. Its a point of sound logic I think. A buffer stock of gold needs to be thrown in their too as a point of comparison to bring in all the schools. Monetarists dont seem to do buffer stocks, they just target shit.
I'm glad the heat has been turned down some in this MMT/MR stuff so we can laser focus on the monetarists, who BTW are running the shows in all CBs it seems. How sad!
For goodness sakes, its just a blog.
ReplyDeleteI think I have a pretty good understanding of JG but I don't feel strongly about it one way or the other. However, where the rubber meets the road I reckon the critical feature of a JG is to make sure that people employed under it are doing something productive like necessary infrastructure, not bridges to nowhere. I guess you could say the Egyptian Pharaohs had a full employment JG in place to build the pyramids and while they are among the wonders of the world, I wonder if building them did anything to make the lives of average Egyptian any better. Likewise, the US had full employment in WW2 which was an existential struggle for national survival, the outcome of which was never in doubt, but it in reality was just an extension of the unresolved conflict of WW1.
ReplyDeleteOuch, Mike!
ReplyDeleteI deserve it. I've been hard on some of the MMT people over the years and it's largely because I misinterpreted the fact that the JG and the "money monopolist" concepts were central components of MMT that couldn't be separated from the Sectoral Balances and a lot of the other stuff that I find so appealing. That was my fault. I should have never put the label "MMT" on my work and it was unfair for me to then turn around in such a public way and lash out against MMT.
I probably took it a bit personally at the time, which is a reflection of my personal weakness and errors, more than anything else. That wasn't cool. I don't hold a grudge though and I hope you guys don't. I defend my views at times, but I try to always keep things operational and not personal. Not sure if I always succeed there, but I do try.
Anyhow, MR and MMT see the world thru different lenses. But we're not seeing totally different worlds which is the case with many of the MM and NK economists. It's okay to have some differences of opinion as long as we're not saying utter BS trying to convince people that the country is "bankrupt" or stuff like that.
Here's to hoping we can disagree without forgetting that we still agree on a lot (and most of the important stuff).
'MR' is basically a few texts written by Cullen Roche and JKH. Out of these two, only JKH's work has any intellectual value. Roche's MR work is amateurish and generally just a pointless waste of time.
ReplyDeleteI don't know if anyone has read his "critique of MMT". It's a muddled piece of nonsense full of misrepresentations:
http://pragcap.com/mmt-critique
However, where the rubber meets the road I reckon the critical feature of a JG is to make sure that people employed under it are doing something productive like necessary infrastructure, not bridges to nowhere.
ReplyDeleteEd, having a job and being employable instead of deteriorating is something constructive in itself, regardless of the output. Moreover, one of the goals of the US government is the general welfare, per the US Constitution. Every good government governs with respect to public purpose, which includes the welfare of the populace.
Y, I think you're being a little unfair. I would say my work is at least sophomoric. And I would also say that JKH's understanding of the monetary system is not just intellectually valuable, but probably among the very best in the world. I am sure glad he agrees with me on most things. :-)
ReplyDeleteI rather enjoy reading Cullen's blog. Cullen's postings are often interesting, as are the comments.
ReplyDelete