He's baaack!
Eric Tymoigne and Randall Wray’s (T&W, 2013) defense of MMT leaves the MMT emperor even more naked than before (excuse the Yogi Berra-ism). The criticism of MMT is not that it has produced nothing new. The criticism is that MMT is a mix of old and new, the old is correct and well understood, while the new is substantially wrong. Among many failings, T&W fail to provide an explanation of how MMT generates full employment with price stability; lack a credible theory of inflation; and fail to justify the claim that the natural rate of interest is zero. MMT currently has appeal because it is a policy polemic for depressed times. That makes for good politics but, unfortunately, MMT’s policy claims are based on unsubstantiated economics (The full paper is HERE).This is good, of course. Knowledge goes through debate and debate also has the positive side effect of creating interest around a subject. So let's thank Tom for helping to keep MMT on the front burner.
Economists never agree on any view, anymore than do politicians. This is especially true in macro, where views influence policy and therefore are likely to be shaped ideologically. The important matter is what view comes to dominate policy.
I haven't read the paper yet, so I won't comment on it now.
BTW, Palley calls MMT "modern money theory" because that is what Randy Wray uses rather than modern monetary theory. Confusing, I know, but that's the way it is.
Thomas Palley
3 comments:
Garbage! I'm a private sector employee indirectly engaged in macro economic thinking and I could write a better critic than this trash (and I support MMT)!!!
This new emperor can critique the lack of clothes presumed for others, because he can see them in his mirror! :)
Is Palley-o-lithic a stage of denial?
He is going way off the rails here: "government spending and taxation occur simultaneously so creation of money via money financed deficits and destruction of money via taxation also occur
simultaneously. It is a pointless exercise to try and determine which comes first. All that
matters is that spending, taxes, new money issue, and the monetary operations of the
central bank be properly accounted for in tracking the evolution of the high-powered
money supply."
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