Mike Cornips of Trader's Circle advises his readers:
I notice that Modern Monetary Theory (MMT) is slowly gaining more prominence in the blogosphere with websites such as Pragcap.com, Bill Mitchell's website, Macrobusiness.com.au and others analyzing the economy in the context of MMT, rather than the Neo-Classical economic view of the world pushed by most politicians and main stream media.
MMT is a much more simplistic and rational way of viewing the flows of the economy, since it looks at the various national accounts from accounting perspective that requires all the flows to balance. Unheard of really, in terms of our addiction to "headline media", but MMT is truly a framework which allows the average interested reader to sort out the bull from the dust.
MMT's conclusions tend to be counter-intuitive, but it is a consistent and robust methodology that I would recommend to all readers with an interest in macro-economics to study. An understanding of MMT will also give you a perspective when analyzing investment trends....
Read the rest here: Modern Monetary Theory (MMT)
Thanks, as always...
ReplyDelete@ tom:
ReplyDeletehttp://crookedtimber.org/2011/04/26/hard-keynesianism-in-the-european-union/#comments
tentative discussion of mmt over at crooked timber. prof. quiggin is looking for some links. you seem great at helping such people out...
@studentee
ReplyDelete"Martin Bento" leaves an eloquent comment there.
A snippet:
"It looks more like MMT is simply being ignored for partly moralistic reasons – people have an instinctual belief in “fiscal rectitude”, however defined, because creating money from nothing seems like getting something for free, which suggeststo some people’s intuition, there is theft going on somewhere. This isn’t rational: every efficiency discovered produces “something for nothing” relative to what was previously possible, and the natural environment provides a great deal “for nothing”."
fwiw, i left 2 comments at crooked timber: one with a link to randy's piece, Teaching the Fallacy of Composition: The Federal Budget Deficit for the general deficit discussion and another on the galbraith/krugman differences with, iirc, 4 links back here.
ReplyDeletethey are currently in moderation (i'm not a regular commenter there).
studentee, thanks for the heads up about Quiggin's request. I forward it on to some of the MMT professionals.
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ReplyDeleteFYI, so we're not just barraging them with data they haven't asked for, Quiggen specifically wanted to see hard data, empirical/quant research to back MMT's claims. Honestly, MMT is lacking in this regard. I posted Scott F's paper modeling the ELR, which is the closest quant research I know of,
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ReplyDeleteClearly, Quiggins has a long history with Bill Mitchell and some of the MMT concepts. He may be asking for empirical data, but he hasn't been at all specific as to what data he is curious about. MMT covers a lot of territory, and without knowing specifically what parts of MMT he is questioning, it could be a huge waste of time trying to satisfy him on this score.
ReplyDeleteI posted quotes from a paper by David Colander (hat tip Beowolf on Trader's Crucible) which describes the importance of functional finance as a theoretical basis for policy in both the short and long terms. Quiggins doesn't seem to object to functional finance so much as he doubts the need for MMT. Colander describes the way in which Keynesianism was marginalized in the 80s and 90s because the long run was ceded to rational expectations. Without a long term theoretical underpinning, Keynesianism fiscal policy has been marked as a policy which produces a series of short term palliative actions that make no difference, or are negative, in the long run....
I find it interesting that Quiggin is looking for links since he worked with Bill Mitchell at CofFEE - so I would have thought he would have been clued in.
ReplyDeleteHeading over to read.
Read a lot now but to resolve a bugbear of mine with MMT.
ReplyDeleteWhen we say there is no inflation risk until full employment is achieved, we mean "accelerating inflation" right?
'Stable inflation' is fine and does not constitute the inflation risk right?
There is price stability and price instability. Price instability includes increasing inflation or deflation. Deflation is generally not acceptable. Stable inflation of about 2% is considered OK. The Fed targets about 2%. However, higher rates of inflation have accompanied growth in the past, so it is not clear that moderate inflation is bad for the economy.
ReplyDeleteInflation benefits some (debtors and those that see nominal gains, creating a wealth effect) and disadvantages others (creditors and those living on fixed incomes).
Accelerating price instability in either direction is not OK.
The aim would be full employment (everyone willing and able to work has a job offer) with price stability (low and stable inflation).
Here is the summation of John Quiggins'concerns with MMT:
ReplyDelete"The sticking point for me is the suggestion* that, in normal circumstances, governments can finance a significant part of their expenditure through their control of the monetary system, without resort to either taxation or debt. Unsurprisingly, given its appeal, this proposition has been tested many times, invariably failing. There is a small potential benefit from seignorage, but it’s only around 1 per cent of national income, so can be disregarded for most purposes."
I don't have time to address this now, but if anyone can reply that would be good...
I responded, but Martin Bento had already made the important points...
ReplyDeleteQuiggin does not get how a fiat monetary system works and how to optimize it wrt policy. This is what MMT is about. Quiggin, like Krugman, is stuck in his model and literally can't see the forest for the trees. His specialty is micro.
ReplyDeleteI don't think the MMT advocates that have persisted on the CT thread have been very considerate given afaict they're not the MMT professionals and they're weighing in with well-versed academic (& presumably practising) economists on CT (that's what the CT blog is).
ReplyDeleteLinks to MMT literature as someone noted will just be a huge time-sink that most will not have time to read. This will amount to having MMT ignored.
Scott Fullwiler weighs in at the end and corrects misconceptions. In fact I find that Scott does this quite a bit across quite a range of blogs and I am very thankful for it.
SG at the very end (at the time of writing) seems to at the very least get the point we're making about deficits.
I wrote much here but it seems this blog doesn't like me posting twice in a row, that's the second time its happened.
ReplyDeleteI'll skip the speculation of Quiggin's and Bill's history this time.
Basically I said Quiggin isn't bad check out his website JohnQuiggin.com and if we can convince him and Saul Eslake in Australia, MMT has it made in Australia.
Some don't understand because they don't want to understand and it is pretty easy to see who they are after they have responded a couple of times.
ReplyDeleteWhy don't they want to understand? The logical foundation of an ideology consists largely of norms with some transformation rules thrown in. These norms are the criteria that set the boundary conditions for the ideology. They masquerade as descriptions but they function as rules against which other propositions are tested. The norms of an ideology are built into the meaning of terms. They are the foundational memes and memeplexes that underlie conventions and institutions.
There is no such thing as an objective "fact." Facts are embedded in the way people structure their view of reality based on their ideology. So people of different ideologies don't even share the same "facts."
There is no arguing between ideologies. Just shouting. If one is to convince another, it requires a conversion of one to the other's ideology. Religions are ideologies, so you get the idea of how difficult such conversion is.
My post with links in it is stuck in the spam filter - beyond that I agree with you entirely Tom
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