Edward Harrison of Credit Writedowns is an Austrian School economist that has integrated MMT. Taking a cue from Rogue Economist's suggestion that Austrians and MMT'ers have many significant points in common they should explore, Harrison composed a thoughtful piece, On Ideology, economics and the compatibility of Chartalists and Austrians, which is followed by many comment from a variety of viewpoints. Having a foot in both camps, he is perhaps the ideal person to comment on this contentious area of debate between two apparently opposing schools of thought.
Just an Off Topic Comment: These German Financial Ads I've the pleasure to read every time I visit the site are only ridiculous. So I shall mix in Gold/Silver/… in my portfolio because Japan might be bankrupt next week?
ReplyDeleteI don't have the time right now to integrate Austrians into my world view. What do they bring to the table other than heterodox solidarity?
ReplyDeleteOf course, that may be needed more than ever. Krugman posted about Hard Keynesianism today, referring to the recent Quiggin publication which many of us discussed at the Crooked Timber blog. I haven't seen any good defenses of Hard Keynesianism from Krugman or Quiggin or the others. Just more insistence that they are right, with an occasional obscure reference to a "liquidity trap" or the "limits to seignorage"...
Stephan,
ReplyDeleteI keep getting ads of a picture of moron Michelle Bachmann wanting me to sign her petition for Congress NOT to raise the debt ceiling. If not that then to buy gold.
resp,
Dan,
ReplyDeleteHave we ever figured out what Krugman means by 'seignorage'?
Resp,
I asked Quiggin about that on his blog. He sees deficits not matched by taxes or bonds as seignorage. I asked why creating IOUs with interest is seignorage but creating cash is not, but he didn't respond. (I don't blame him for not responding, as the discussion was running overtime with a lot of posts from all sides.)
ReplyDeleteAnyway, it doesn't add up as far as I can tell. Look up "seignorage" on Wikipedia and it's an old concept that has been updated a couple of times, but the Krugman/Quiggin usage seems convoluted...
Tom wrote that it was a term used in economics texts years ago.
ReplyDeleteFor me, policy is everything. If you can't agree on policy then what good comes from finding common ground economically?
Mainstream economics has become a commodity. The level of political corruption is such that there is no room for genuine economic debate.
actually DD, reserves are also interest bearing these days (cos that's what govt spending actually becomes, doesn't it?......so adds more weight to your question.
ReplyDeleteTo bridge the gap with Austrians, some MMTers also need to be careful about the terms they use in discussion, as some use the term "printing money" loosely when they really mean deficit government spending. Yes, we know that when the government deficit spends, it is effectively printing money, but the printing per se is not the point, the spending is, when government steps into the void created by deficient private sector demand or deleveraging. But "printing money" is also the term used by the mainstreamers for quantitative easing, which does not fill the demand void, but inflates bubbles and depreciates the currency. Being identified with mainstream easers does not help MMT, and we know Austrians hate money printing with a passion.
ReplyDeleteAnd MMTers also need to put more stress on how the private sector is empowered by their prescriptions rather than focusing on the inevitability of government deficit. Yes, we know it’s inevitable if we look at sectoral balances, and we see that private sector wants to save, but Austrians are allergic to anything that reeks of government expansion.
There’s a sea of people out there with basic monetary concepts ready to hear the monetary mechanism as described by MMT, which after all, starts out mainly as a pragmatic explanation of the economy. I believe many already are shifting, and there’s really only a small base of those politically fanatical about maintaining a small government regardless of overall condition, and who are being very vocal about it.
What the small government folks don't get is that this generally translates into either higher unemployment or increasing private indebtedness.
ReplyDeleteAgree that it is best to avoid "printing money." MMT economists avoid using "money" at all since the term is ambiguous at best, if not actually misleading. Cognitively, the concept "money" is a meme that has ambiguous denotation and both positive and negative connotations. Much better to specify precisely what one means.
Right now MMT is mostly on the defensive in that it is arguing in a context that is out of paradigm. We need to take to the offense by shifting the context through putting forward an economic plan/policy that voters can understand and appreciate the benefits of.
Two overarching points of agreement perhaps (with the policy implications dependent on who the people elect President):
ReplyDelete1. Edison's point that a dollar bill is just as good as (and no more inflationary) than a dollar bond, Tsy should issue its own interest-free money instead of selling T-bonds.
2. The Fed should be under the "direction and supervision" of the Secretary of the Treasury.
http://moslereconomics.com/2011/04/27/from-press-conference/#comment-50873
The most damaging thing about the Fed is the lack of political accountability. If (when) they screw up monetary policy, there's "no soul to damn or body to kick" at the ballot box. If the Secretary was in charge and he screws up monetary policy, the voters will rightly hold the President and his party responsible.