Tuesday, April 10, 2018

Brian Romanchuk — MMT Versus "Structural Keynesianism"?

Professor Thomas Palley has once again launched a critique of Modern Monetary Theory (MMT) in "Modern Money Theory (MMT) vs. Structural Keynesianism." One could argue that there are some useful nuggets in his argument, but they are arguably behind the times. His critique is of how he perceives MMT -- which has only a limited relationship to MMT as it exists now.
I probably should have ignored his article, but too many people have discussed it, and so I do not want to leave the impression that his arguments actually represent weak points of MMT....
Bond Economics
MMT Versus "Structural Keynesianism"?
Brian Romanchuk


Ralph Musgrave said...

Re Palley’s criticism of the “permanent zero interest rate” idea (advocated by Warren Mosler and Milton Friedman), the basic merit of a zero rate is that it results in a genuine free market rate of interest, which ought to maximise GDP (on the grounds that GDP is maximised where prices are at the free market level, unless there’s a good social case for subsidising something, as is the case with kids’ education).

I.e. if the state issues an excessive amount of liability, it then has to pay interest to “liability holders” to induce them not to spend away that excess (which would result in inflation). That results in artificially high interest rates.

Put another way, under the existing system, interest rates are kept at an artificially high level, with mortgagors paying an artificially high rate of interest on their debts, just to enable central banks to cut rates come a recession.

AXEC / E.K-H said...

MMT vs Keynesianism: nothing to chose
Comment on Thomas Palley on ‘Modern Money Theory (MMT) vs. Structural Keynesianism’

MMT and Keynesianism are macro approaches. The fact of the matter is that macrofoundations were intended to replace microfoundations but this did not happen and cannot happen because both approaches are axiomatically false which means that they are both beyond repair and that nothing less than a paradigm shift will do.

As a result, to compare MMT and Keynesianism is to compare a rotten apple to a rotten banana.

Fact is: MMT policy proposals are NOT based on sound scientific foundation.#1 MMTers do NOT understand how the price- and profit mechanism of the monetary economy works. The lethal flaws of MMT are:
• MMT has NO consistent macrofoundations,#2
• MMT’s profit theory is false,
• MMT’s sectoral balances equation is provably false,
• MMTers are too stupid for the elementary mathematics of National Accounting,
• MMTers violate scientific standards on a daily basis,
• MMT is political agenda pushing in a scientific bluff package.#3

MMT claims that public deficit is good for the ninety-nine-percenters and for democracy while the fact of the matter is that because of Public Deficit = Private Profit MMT policy is good for the one-percenters and for oligarchy.#4

With rather insignificant differences in detail, all these points hold also for Keynesianism.#5

Egmont Kakarot-Handtke

#1 See cross-references MMT

#2 Rectification of MMT macro accounting

#3 MMT is dead: An unfriendly critique of Bill Mitchell

#4 Keynes, Lerner, MMT, Trump and exploding profit

#5 See cross-references Keynesianism