Tuesday, August 20, 2019

The Economist Who Believes the Government Should Just Print More Money — Zach Helfand

I’d been stewing for a few months in the melange of blogs and YouTube videos and white papers that make up much of the M.M.T. world. Some intricacies lay beyond me—a hazy blur of literature about floating exchange rates and reserve currencies addled my brain. But the basic principle of M.M.T. is seductively simple: governments don’t have to budget like households, worrying about debt, because, unlike households, they can simply print their own money....
This illustrates a major difficulty in public education about MMT. On one hand, the financial and economic concepts are beyond many laypersons, while on the other, the body of literature with which one must be familiar is daunting to non-specialists. So the commonly held view is that MMT is about "printing money," which sounds irresponsible to much of the public.
I asked Ann whether she found Kelton convincing. “I mean, kind of!” she said. “I know what she said was brilliant, I just can’t believe her. She’s gotta be wrong.”
It's not just the public either.
Still, most mainstream economists view M.M.T. as the Cult of the Magic Money Tree, deriding what they see as its theorists’ preference for analogy over mathematical modelling or empirical evidence. “What most concerns me is I can’t actually quite figure out what it is,” Paul Krugman, the Nobel Prize-winning economist and Times columnist, told me. Krugman is a political progressive, and he agrees with many of the spending programs that M.M.T. proponents support. But, he said, “I’ll be damned if I can figure out what it is exactly that they think.”
But this is a whole article on MMT that focuses on Stephanie Kelton as MMT's chief media spokesperson, and "there's no such thing as bad publicity." Free publicity is always a gift, especially in an environment in which the media tends toward marginalization of politically incorrect ideas and people that espouse them.

Zach Helfand concludes on a hopeful note:
I asked Kelton if she worries at all about these fights, further over the horizon. “At the end of the day, what I really hope for is just a better debate,” she told me. “Let both sides put forward their best ideas.”
This is the ultimate dream of M.M.T.: freed from false financial shackles, we could debate, on honest terms, the most fundamental political questions. If money weren’t an issue, would we want to scrub carbon from the atmosphere? Pay for reparations? Expand ice? Maybe we just want to be left alone, with our tax money in our pockets and some Social Security checks when we age. M.M.T.’s architects describe their vision as encompassing not just a better economy but a better, healthier body politic—a goal that is, given the state of things, almost certainly doomed, but is admirable nonetheless. Deficits do matter—not just the financial ones.
The critique is "fair and balanced," with the proviso that the author admits limited knowledge of MMT as a macroeconomic theory. Actually, not a surprising limitation when Paul Krugman admits that he can't figure it out either, based on conventional economic training.

The hurdle seems to be MMT's simplicity:  A currency sovereign funds itself through issuance; the real constraint is availability of real resource, and the financial constraint is price and exchange rate stability. Simple, but it seems to boggle minds. But it is not as simple as it may look, either. It contains the most salient features of macroeconomics as a policy science when unpacked through the theory.

Zach Helfand, New Yorker editorial staff member

4 comments:

Matt Franko said...

"“Let both sides put forward their best ideas.”

That represents no adjustment or maybe to the liberal art people no "change of mind!" ... thats what they are already doing ...

Unknown said...

Dear Tom, this interview-video (followed by several more) might interest you - subtitles in English available! Alain Supiot is a french law professor
with a special interest in institutionalism. He's got a lot to say about neoliberalism and what he calls the institutional crisis of present times. Lookinf forward to getting your feed-back
https://youtu.be/xeG-azZ41f8

Tom Hickey said...

Math and numbers were fascinating to the ancient Greeks and emerged as the replacement for the gods in Pythagoras and Plato, being the universal aspect of ever-changing reality. While we "can't step in the same river twice" (Heraclitus) we can know universal truths that uncannily apply to the world of changing phenomena with relative exactness (the Greeks were somewhat perplexed by irrational numbers).

This trend continued, somewhat in conflict with the empirical that Aristotle supposedly juxtposed with Plato's view although I think the differences tend to be exaggerated but that is beyond the scope of a comment. The two trends, formal and empirical, came together in modern science. At this time, the liberal tradition was in the process of replacing the medieval theological worldview, as the culmination of the renaissance of classical thought.

This has led to a sort of deification of numbers as the universal epistemological and ontological basis of knowledge, as science became the replacement for religion. Those who were expert in numbers and their use became not only the new priesthood, but the new oracles.

So I regard everything else he says as essentially correct, but I would back up more in the direction of the foundations, although he does allude to this.

The problem then is seen as emerging from the nature of number. Numbers in the themselves say nothing about the world. They are given a voice by being embedded in assumptions, e.g., stipulations such as axioms and postulates in formal systems that are then interpreted semantically. Then the question is to what degree models approximated what they purport to model and that is an empirical question. In the so-called hard sciences this is capable of being established universally, which is why they are called hard sciences. In the soft "sciences," however, not so much.

The problem is that numbers still retain their mystique and can be used to persuade sophistically, either intentionally or through inadvertence. In conventional economics, for example, formal models of idealized "possible worlds" are taken as indicative of reality. If reality doesn't match up, then something must be interfering and government is the chief suspect since it is the gorilla in the room.

Interestingly, this sort of foundational (philosophical) analysis is considered de rigeur in France, and Germany has its own cultural approach that is similar but conducted somewhat differently. This is quite at variance with the Anglo-American approach, and Western approaches are different from the Asian approaches, e.g., Chinese and traditional Indian (although most educated Indians are fluent in English and conversant with Anglo-American thought). But because much the work is in the regional languages, it is not known outside the region unless translated, and then the author is dependent on the capability of the translator. Unfortuantly, continental thought is either unknown in the Anglo-American world, or else dismissed as "soft." A real problem is now emerging in the split between English and Chinese are publication languages, and the problem is growing now that most research is published in Chinese.

But what we all agree on is the universality of numbers and mathematical rules. This is the only "absolute" that is available as a criterion.

To cut to the chase, numbers (formal systems, algorithms, scientific theory, etc.) allow us to "play God." Technology and its products are used to justify this view consequentially, along with the foundational universality of numbers ontologically.

Matt Franko said...

Empiricists appear to have left the modern Platonist/dialectic academe at Cambridge/Oxford in about 1860 and founded a new Science degree program in London around 1860 around when Darwin published “Origin of the Species” , US land grant institutions founded around the same time mine founded 1855 as mainly Ag school...

They probably had the last straw when this moron hypocrite methodology came up with Darwinism and those people tried to tell them that their great great great great... grandparents were chimpanzees.... they just couldn’t take it anymore... gtf out of there..

They just left the Platonist system and established the Science degree program ... 100 years later we were on the moon...

Goes all the way back to the Greek scriptures iirc the words of the Lord “broad (plateau) is the gate that leads to destruction.... use the narrow gate”... “hypocrites!” which is ‘under-decide” ’ ... Platonists can’t make a decision they let everything go through even the shit... .

You take a nice clean sanitary glass of water and take some bacteria laden fecal matter ... synthesize that (Platonist Liberal Art 101) and you have shitty water... dysentery ... cholera

So you’d want to filter (narrow gate) that and discriminate between the water and fecal bacteria...filter/ discard the bacteria , safely drink the water... Platonists would say “well where does that leave the bacteria?!?!?”... and I’m not exaggerating....

Platonist methodology (today’s Liberal Art) uses synthesis the “broad (Plato) gate” .... Science “narrow gate” uses discrimination....

Platonist methodology doesn’t work for material endeavors... it allows failure to synthesize with success which then you can never make material progress... you have to discriminate truth/success from false/failure ... discard the failure and make adjustment towards success...

You see it with these people and (to them) their Platonist view of the “QE”, where their thesis was “QE will cause hyperinflation!” then govts do $trillions of QE and prices collapse and they won’t discard their false thesis , instead they are in some sort of period of attempting synthesis... and they are still all talking about QE and QT, etc.. no discrimination/adjustment has been made...

Their thesis of “Phillips Curve!” “Low unemployment causes inflation!” then you see unemployment at record lows and prices collapse..., they are still all going around saying “Phillips Curve!!” looking for something to synthesize with... they will not simply discard it and make an adjustment...

These people are sick.... their methodology might have some purpose in the world but it is certainly not applicable to material endeavors... maybe something else...