Tuesday, June 4, 2019

Dirk Ehnts — Modern monetary theory: a simple macroeconomic model

Why has modern monetary theory come out of the academy? Because it helps model the current economic predicament and how to get out of it.
"Anything we can actually do we can afford. Once done, it is there."John Maynard Keynes (1942)
Excellent post by MMT's representative in Germany.

It's a bit wonkish (graphs and variables) but it is addressed to a higher level audience than a popular venue and the math is kept simple. Probably not any more wonkish than the posts that Paul Krugman labels as wonkish.

I would have started with the sectoral balance graph that most explicators of MMT use. First, it is likely to be familiar, and secondly, it brings the point home strongly. I suggest that this is the graph that should be the basis of the elevator speech on MMT.

But posts are limited by space, the authors have to take into consideration the one big ideal they want to get across. Dirk Ehnts does excellent work with the space allotted.

Social Europe
Modern monetary theory: a simple macroeconomic model
Dirk Ehnts | Lecturer at Bard College Berlin

1 comment:

André said...

Simple model? Look at the graph! There is no way this can be called "simple"! Actually, he made a simple thing into a complex monster...

Isn't it much simpler to claim that (S-I) = (G-T) + (X-I)?

I don't even know whether what he claims is true and compatible with MMT... for example, this seems wrong:

"Be it an increase in government spending, in debt-financed private investment and/or in exports, all these transactions create new net (bank) deposits in the economy. Deposits are in turn drained away by private saving (repayment of debts, for instance), taxation and imports. It is thus plausible that there is a relatively stable connection between changes in net deposits and income"