Sunday, April 17, 2011

Brad DeLong on MMT

Disappointingly, Brad criticizes MMT based only on his reading of Steve Randy Waldman's post at Interfluidity and Nick Rowe's post at Worthwhile Canadian Initiative. It's pretty clear that he did not bother with the comments.

My comment at Brad's:

Come on, Brad, that's just being lazy. If you are going to comment on something at least make some effort to understand it by reading what the actual proponents have to say, not what others think that they may be saying and don't really get it because they have not read the lit. There are a number of working papers over at Here is a list of introductory MMT links, too. Thanks for your interest, though.

UPDATE: Only three comments are up, from Ralph Musgrave, Warren Mosler, and Nick Rowe. I guess Brad buried the rest.

Here is my comment to a post of Nick Rowe:

Nick: "Solvency is never an issue if it can print money and inflation isn't an issue. But future inflation might be an issue even if current inflation isn't."

Hi, Nick. MMT recognizes that, of course, and recommends addressing incipient inflation primarily through Lerner's principles of functional finance by withdrawing nongovernment net financial assets fiscally with targeted taxation. MMT follows Godley in saying that the government fiscal balance and nongovernment balance (consolidating private domestic and external) sums to zero, so that it falls to government to offset demand leakage to private private saving/net imports. If the government fiscal balance exceeds this demand leakage, then demand side inflation results as the economy overheats. Conversely, if the fiscal balance does not offset demand leakage, then either the economy will contract as capacity goes unused, or the private sector will choose to net dissave to maintain lifestyle and private indebtedness is not sustainable. According to functional finance, withdrawing net financial assets is superior to monetary policy because monetary policy is blunt and fiscal policy can be tightly targeted. The issue here is whether monetary policy or fiscal policy (functional finance) is the appropriate inflation remedy. MMT says fiscal and explains why not only in terms of functional finance, buit also a job guarantee instead of NAIRU and monetary rules. See Bill Mitchell, "Modern monetary theory and inflation – Part 1"


Anonymous said...

And I see any comments are yet to be published. As an aside, as your genius is equal to SRW's Tom, will you be doing a post on what legitimate criticism we can take away from SRW's post and comments? It gets a little involved during the comments.

apj said...

I can see another letter from Bill Mitchell in my tea leaves....and probably not a polite one.

At some point, when commentators attempt to analyse the critics' version of MMT (like Krugman has, and now De Long), and not MMT itself, you really then have to ask yourself what their real agenda is.

It's the intellectual equivalent of standing behind the big guy and saying "Yeah".

If they were really courageous and confident in their beliefs, then engaging the experts in the field should not be so threatening. The fact that they aren't doing this suggests they're afraid either of what they might find, or what they might struggle to explain.

Matt Franko said...


What DeLong wrote in his post (separate from the quotes from the other blog) is incoherent.

I cannot understand what Delong is trying to say. It is like gibberish to me.

"M is not M is not T, etc" Whaaat?

Then he has French in there with colors???, then a bunch of names that nobody recognizes with 'ian' at the end... it's like he is losing it here.

More public symptoms of cognitive dissonance I think. Similar to Gasparino with Mike in their last face-off using the term "Normanian"? Eerily similar to Delong here... with the 'ian' added to the end of names...

And of course you are spot on where you call him out with his complete lack of academic professionalism in that he does not directly address the academy of MMT, but rather other 'snipers', without thorough review of the body of academic work.

These high profile PhD mainstream economists are a general disgrace to academia.

Detroit Dan said...

I've never gotten anything out of Delong's writings. And I find Nick Rowe equally useless. If it weren't for the MMT economists, I'd be like so many others who are confused and disenchanted...

Tom Hickey said...

What is happening is that there is interest building in MMT and some very smart people are commenting on it, but without taking the time and exerting the effort to actually understand it based on what the major proponents have written. But that is going to increasingly happen when it becomes obvious that they have to get more serious to be taken seriously in their criticism.

I would say it is not going well for them. They can't get a bead on MMT because they don't get what MMT is basically about and what it's method is, and, more fundamentally, they don't understand how the Tsy, cb, and financial system interact in the real world, so they are modeling an imaginary world unrelated to what's actually happening.

The normal course of this kind of debate in academia is for the heavy-weights to weigh in and sink any new thing coming along by dismissing it or marginalizing it. If they can get away with this, all well and good as far as they are concerned. But if it won't go away, and MMT won't, they eventually have to sit down and study it and take criticism of it seriously.

Right now MMT is between the dismissal stage and the dilettante approach. Krugman dismissed it last July, and then returned to it recently. DeLong is still in dismissal mode. Nick Rowe is more or less in dilettante mode. SRW is making a serious attempt after tangling with Winterspeak, especially. But he still hasn't sat down and done the required reading.

The game is heating up, as one can tell from the quality of the comments. The thread at Nick Rowe's is still hot.

The last mile is closing.

googleheim said...

Is the vatican still on gold reserve ?

What would be the Catholic view of MMT ?

I remember Carl Sagan pointed out that Catholicism was the only religion ( perhaps modern ) that has confronted the question of what is the state of grace of Alien lifeforms vis-a-vis Larry King's interview regarding Alien life and religion.

So there has to be a treatise on MMT right ? it ain't alien, but it's getting terrestrial more and more every day !!

Stephan said...

I don't see any comments over at DeLong's blog? Most likely Brad Delong is true to his form and busy deleting any objections. He's notorious for his Gestapo comment policy. I guess this irritating behaviour stems from too much World War 2 blogging.

eryksun said...

He objects to the name "Modern Monetary Theory" in that he claims it's not modern, not monetary (in the sense of Monetarism), and not a theory, unless the language is being strangely misused, for which he offers the following example: The phrase 'snow is white' is true if and only if penguins are orange. This statement is a non-sequitur unless the words are being used unconventionally.

He then compares MMT to the schools of thought that developed around the works of the following economists:

I assume his audience is mostly economists that know what it means to be, for example, a Wicksellian.

Anonymous said...

Theory - an explanation for a set of facts?

According to Bill's latest blog entry, some believe that MMT is already mainstream:
But what most people don’t know is that there’s a whole, mainstream school of economics that actually believes that deficits don’t matter. Not now, not ever. Deficits, they say, simply cannot bankrupt a country with the power to print its own currency. They’re called neo-Keynesians or Chartalists, or proponents of Modern Monetary Theory.
These people hold enormous sway in the Federal Government, and their theories give tacit approval to the Federal Government to do what it will.


Christopher said...

Delong's use of French is based on philosophy of meaning - "A means B" is often glossed in terms of truth functions, ie: " 'Snow is white' is true if and only if 'Schnee ist weiss' "

To base an entire post around the fact that he thinks the term MMT is misleading, is a little silly.

Tom - I hope you are right about being in the last mile; it would be exciting if so!

Matt Franko said...


Saw that.

The 'article' Bill links to is titled "Why Gold and Silver Will Go Higher" by an outfit called 'Resource Prospector'.

It looks like a lead in to a pitch to buy their newsletter because at the end they do a transition into "You can get more insights like this from
Resource Prospector
sent directly to your inbox."

Some of these people are just interested in getting you to buy their newsletters... and right now commodities are the big thing because prices are up, etc..

I also wonder if companies involved in metals production pay these people to put stuff like this out.... say for $150k per year they contract with indiviuals to put up bullish websites promoting metals and other bullish newsletters in order to keep the bid in the marketplace... the industry association could get a small army together for a couple of tens of millions of dollars...

Tom Hickey said...

Christopher, references to MMT are popping up all over now, like acne on a teenager.