Why and how economics must change — Jayati Ghosh

While this post is not MMT, it is consistent with MMT and implies that MMT is needed to address the issues that stem from wrong assumptions about the relationship of economics, finance, money and banking, as well as the mistaken view that money is neutral, being only a veil over what is at bottom a barter economy under the veneer of a monetary economy.

While MMT doesn't deal directly with the relationship of economics and power, being an institutional approach is incorporates the role of power implicitly in its analysis of the the relationship of economics and finance. 

Much of what is presented as received economic wisdom about how economies work and the implications of policies is at best misleading and at worst simply wrong. For decades now, a significant and powerful lobby within the discipline has peddled half-truths and even falsehoods on many critical issues for example, how financial markets work and whether they can be “efficient” without regulation; the macroeconomic and distributive implications of fiscal policies; the impact of labor market and wage deregulation on employment and unemployment; how patterns of international trade and investment affect livelihoods and the possibility of economic diversification; how private investment responds to policy incentives such as tax breaks and subsidies and to fiscal deficits; how multinational investment and global value chains affect producers and consumers; the ecological damage wrought by patterns of production and consumption; whether tighter intellectual property rights are really necessary to promote invention and innovation; and so on.

Why does this happen? The original sin could be the exclusion of the concept of power from the discourse, which effectively reinforces existing power structures and imbalances. Underlying conditions are swept aside or covered up, such as the greater power of capital compared with workers; unsustainable exploitation of nature; differential treatment of workers through social labor market segmentation; the private abuse of market power and rent-seeking behavior; the use of political power to push private economic interests within and between nations; and the distributive impacts of fiscal ani.e. monetary policies.

The influence of power on economics and finance has been institutionalized legally in spite of blatant conflicts of interest and double standards.

The relationship of economics and power is studied specifically by economic sociology. For example, neoliberalism is a political theory based on economic liberalism. For example, state capture results from economic liberalism in a democracy through the influence of the donor class on institutions and policy. This also results in the capture of academia, resulting in "orthodox" quasi-religious doctrine.  

Real-World Economics Review Blog

Why and how economics must change

Jayati Ghosh | Professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, at the Jawaharlal Nehru University, in New Delhi