Steve Keen ·
Chief economist at IDEAeconomics
Excellent explanation. I hope this gets widely read in the Austrian community. I'm happily promoting it to Post Keynesian and MMT economists, because it is such a clear statement of the structure and logic of the actual monetary system. Scott Fulwiler first alerted me this this post, and he was also most impressed.
12 comments:
"A Critique of Modern Monetary Theory (MMT)"
http://z822j1x8tde3wuovlgo7ue15.wpengine.netdna-cdn.com/wp-content/uploads/2015/06/Modern-Monetary-Theory.pdf
Podtkey: I read the first 30 pages. The author (Cullen) simply repeteadly states that MMT is wrong but doesn't explain why. I quit.
Does he explain why in the next handful of pages? Can you summarize?
" Some involuntary unemployment is the natural state of a
capitalist system where capitalists will hoard profits over time and fail to maintain zero
involuntary unemployment because it would be unprofitable for them to always maintain such an
environment. "
What an idiot Cullen has become. This garbage doesn't deserve a reply.
So he basically is throwing the NAIRU argument around? What a fool...
Actually unemployment is not a feature of a capitalist system, with no wage floor there can be zero involuntary unemployment. It would be slavery in anything but name (well, worse than slavery, because you don't receive anything on exchange, at least slaves have to be feed), but hey, they would be employed...
90% or 95% or so employment is the best the current moron leadership can foment...
What is Roche up to nowadays? How's that Monetary Realism working out for him?
He made his name as an MMT evangelist, then turned against MMT and hasn't had much of interest to say since.
One of my favourite LOL'S at Cullen is one where he tried to put various schools of thought to their political positions, most were OK Austrian free market etc. Then came the classics Marxists apparently are 'radical liberals', Neo-Keynesians are Liberals, Post-Keynesians are apparently 'centerists' in what reality is that true?
Nice to see the MMT crowd is as cheerful as ever! :-)
Here's the short version for those who care:
http://www.pragcap.com/modern-monetary-theory-mmt-critique/
I don't think anything in there is terribly controversial. MMT just overreaches on some things in my opinion. Which is fine I guess.
I'm sorry my commentary has hurt so many feelings. That was never my intent. I am just a market practitioner trying to describe the world as I see it.
Best to all.
CR
http://www.pragcap.com/modern-monetary-theory-mmt-critique/
I think some of you are missing the point in regards to Cullens comment about unemployment. He's saying UN-regulated capitalists will leave some people unemployed because it is always in their interest to have as few people working as possible. Most business owners wouldn't hire a single person if they could do all that needed to be done by themselves. I dont think that is controversial. This is why privatizing everything is a sham and why tax cut for business owners dont help unemployment. Just because a business owner keeps more at the end of January doesn't mean he will hire someone in February. He makes his employment decisions based on his needs to move the amount of product or services that he has been promised to be paid for, not on the amount of money he has available after tax. If he isnt doing it for those reasons he is a silly business man. This is why there needs to be a public sector that uses a different calculus for employment decisions AND that doesn't feel the need to tighten the belt when private sector employment is negatively affected by deteriorating private credit conditions.
He's on our side guys.
Roche's post comes a bit as a surprise to me (I didn't read it at the time, in 2011).
I won't comment on the first 4 myths he writes about: I'm not qualified enough. Besides, I believe others have replied to his post. For what it is worth, I'm not convinced by his arguments, but that might say more about my own limitations.
However, I find myself quite in agreement with his position in Myth 5. It's clear that Keynes was rabidly anti-Marxist, as Roche writes. He gave an example, I'll give another:
"How can I adopt a creed [i.e Marxism] which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeois and the intelligentsia who, with whatever faults, are the quality in life and surely carry the seeds of all human advancement?"
To the extent that MMT adopts Marxist insights, Keynes would have rejected it. You can bet your sweet ass.
For that reason alone, if membership in the post Keynesian club depends on Keynes' approval, don't count on having your names in the guest list.
Keynes, too, as Roche rightly argues, believed in the need for balanced budgets over the cycle. That was his beef with Abba Lerner and functional finance. To embrace functional finance, is to go against Keynes' wishes.
Keynes never rejected the neoclassical theory of value, either. Again, Roche is spot on:
[Unemployment is] "due to the refusal or inability of a unit of labor … to accept a reward corresponding to the value of the product attributable to its marginal productivity,"
Here, however, I think Roche doesn't perceive a problem: this goes against MMT, alright. But it also goes against post Keynesianism. In fact, given that New Keynesians are claiming now not to believe that, Keynes is left in the company of neoclassicals (kind of ironic, isn't it?).
Where Roche and I part company is in this (and let me be crystal clear, he never says it explicitly, but it seems clearly implied): he appears to believe Keynes was right on all those things, and that's why MMT is wrong.
In other words, Roche puts Keynes on one side and MMT on the other. He looks at one, then at the other and he chooses: Keynes. That's why his argument hinges on Keynes' opinions.
I, on the other hand, am convinced Keynes was wrong. But I never had much respect for Keynes' opinions.
Besides, I wouldn't want to join a club where Keynes was a member (not that he would like to have me in it, either).
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Incidentally, many post Keynesians also have big problems with Sraffians, like Matías Vernengo.
Post Keynesianism never was a happy family.
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