Wednesday, February 29, 2012

Bill Black — Addressing the Dominant Critique of MMT

I'll begin by addressing today the dominant concern critics have expressed here -- the government might act badly with the funds. This is, of course, a real concern. But it is some ways a very odd concern and not a logical objection to MMT. The extreme variant of this critique argues that MMT is "fascist." 
he good news from the standpoint of MMT is that this critique agrees that MMT is accurate and makes available policy choices that are effective in increasing income and employment -- and claims that MMT's effectiveness is the problem because the government leaders might use the increased income and wealth for evil purposes. 
If that is a valid criticism of an economic theory (it works -- it increases income, wealth, and employment) then virtually any accurate economic theory that improves the economy is "fascist" because the government might be ruled by a fascist and the ruler might use the increased wealth and income to do evil. No one (economist or otherwise) can ever guarantee that a government ruler will not be evil and use the increased national wealth to do evil. Under this logic all effective economic theories are fascist and we should try to make the world as poor as possible so that fascistic governmental leaders have fewer resources with which to do evil.
Read it at New Economic Perspective
Addressing the Dominant Critique of MMT
By William K. Black
(h/t Clonal in the comments)

"Under this logic all effective economic theories are fascist and we should try to make the world as poor as possible so that fascistic governmental leaders have fewer resources with which to do evil." This is position of the folks that want "small government" in order to block "the road to serfdom."


Clonal said...

Bill Mitchell has an excellent article - When common sense fails

I was at a social function last weekend and the conversation turned to economics – surprise surprise. I was the only professional economist in the group. I try very hard to avoid discussing economics in these circumstances because experience tells me that misunderstandings quickly occur as the “intuitive” or “common-sense” economists seek the floor. I would much rather talk about weeds growing than the sustainability of budget deficits in times like that. But, alas, someone said “but we’ve got a 50 million-dollar deficit who is going to pay for that?” Another member of the group, who is very articulate and fairly well-read in Modern Monetary Theory (MMT) but not a professional economist stepped in to save the day. She proceeded to explain how common sense is a dangerous guide to reality and that not all opinions should be given equal privilege in public discourse. The conversation deteriorated because the “deficit worrier” and others immediately personalised this observation and considered it to be a attack on their life’s experience. Notwithstanding the tenseness of the situation, it was an interesting demonstration of the flaws in logic that govern the way people think about economics and the way politicians exploit our (flawed) reliance on common sense. Our propensity to generalise from personal experience, as if the experience constitutes general knowledge, dominates the public debate.

Bob Roddis said...

It has become clear to me and other Austrians that you naïve MMTers are never going to engage even basic Austrian concepts which refute almost the entirety of MMT “theory” (as opposed to your factual tracking of and inquiry into where the funny money comes from and where it goes in the short run).

Just the other day, another Austrian and I we musing about the cause of this deep seated anti-intellectualism and intellectual incuriosity that has been exhibited by Keynesians of all breeds and stripes for decades. My theory is that you guys just cannot face the ugly truth that Keynesian ideas are the cause of our endless misery while you have devoted your lives to spreading this misery.
Any thoughts?

Matt Franko said...


Just speaking for myself, I am not a Libertarian, so my divergence with the Austrian POV probably starts right there and only gets wider...

It's a foundational difference in "world view".


Matt Franko said...

I think after the Italy event, both Black and Hudson may (at least for a while) not be afraid to refer formally to "MMT" in their communications.... so look for more of this from those 2 at least..

Hmmmm, too bad J Galbraith couldnt have gone to Italy with the MMT group...


Bob Roddis said...

Mr. Franko:

It's a foundational difference in "world view"

Indeed it is. You guys don’t know how the world works and you really really don't want to know. On the other hand, we will fearlessly analyze your endless basic errors. Heck, Mises pointed out 100 years ago that Knapp's "state theory of money" was acatallactic. MMT is acatallactic. Human existence is nothing but catallactic, which concerns exchange. Your "theory" lacks people and human action.

Tom Hickey said...

@ Bob

Thanks for your comments. This is the umpteen time that you have repeated this here. Probably everyone here gets is it.

We are not interested in arguing with you, since experience shows that all argumentation between Keynesians and Austrians ends in disagreement over fundamentals, where we agree to disagree or less accuse each other of benig obtuse.

There is no use in going through this loop yet again. It's a waste of everyone's time.

Matt Franko said...


Please, Knapp's theory identifies policies that have been going on in the west for at least 2,000 years here is the documentary evidence:

"17 Tell us, then, what you are supposing. Is it allowed to give poll tax to Caesar, or not?"
18 Now Jesus, knowing their wickedness, said, "Why are you trying Me, hypocrites?
19 Exhibit to Me the poll tax currency." Now they bring to Him a denarius.
20 And He is saying to them, "Whose is this image and the inscription?"
21 They are saying, "Caesar's." Then He is saying to them, "Be paying, then, Caesar's to Caesar,..." - Mat 22

State Currency is just how we in the nations roll when we are operating at our best Bob.

There are other monetary systems we can come up with I'm sure... maybe this is what Austrians have cooked up... BUT THAT IS NOT WHAT WE ARE DOING PRESENTLY.


Bob Roddis said...

Mr. Hickey: Yes, it's apparently a waste of everybody's time. But it's outrageous for Mr. Mitchell to claim supreme intellectual superiority when you guys refuse to engage your biggest opponents. If we're so dumb, it shouldn't take much to refute us.

Matt Franko said...


Consider that perhaps where Bill is first and foremost claiming "intellectual superiority" is over the morons who we have put in charge of our monetary economy that implements a state currency who instead are so stupid that they believe govt "gets it money" from taxes and that a deficit is "borrowing from our grandchildren"....

We all have "intellectual superiority" over those morons I would think even Austrians and MMTers can agree on that!


Tom Hickey said...

@ Bob Roddis

I believe that an exchange took place to which some of the MMT economists and many bloggers when Prof. Murphy posted several time regarding MMT.

MMT Wiki has a series of links to the Murphy - MMT debateMurphy - MMT debate that I posted there after the interchange.

downtownred said...

The the statement that MMT models our current monetary system accurately, does not equate to: "it works — it increases income, wealth, and employment"

MMT is not a theory that needs to be (applied, it is a model of how our monetary system works today). At issue is the potential that MMT can serve a progressive agenda.

MMT's foundations are rooted in "complete" monetary sovereignty, of which there are only a handful of examples in the world. Imperialism and Authoritarian Corporatism is how that level of monetary sovereignty has been achieved and maintained. That level of monetary fabrication is not on inherent right of national sovereignty, it is a manipulated condition. A progressive movement seeks to eliminate Imperialism, Corporatism and Fascism(as a nation state who's sovereignty has been subjugated by crony capitalism). In order to "reap the ideological benefits" of MMT, progressives would have to become the authoritarian statists that they have historically been diametrically opposed to. They(we) would have to become the very thing we have so long opposed, or we will loose our ability to maintain monetary sovereignty and the very basis of the MMT model in the process.

"The limit on production for profit is thus circumscribed by the requirement that consumption of capital must itself be productive of surplus value. The expenditure of labor beyond this point, no matter how necessary it might appear materially to society, produces no value. Since capital is the production of value and surplus value, it halts and must halt at the point where labor ceases to produce value. Beyond this point — beyond the point where the expenditure of wage labor has any productive purpose at all and where only a general reduction of hours of wage labor in society makes economic sense — the advocates of modern money make complete economic sense only for those who want to maintain the existing society."

Tom Hickey said...

the advocates of modern money make complete economic sense only for those who want to maintain the existing society.

Please tell us how you propose to get from here to there and what there would look like for you.

Otherwise, you stand accuse of utopian thinking.

MMT proponents don't all think that making the existing society into more of a social democracy based on using the existing monetary system for funding is an end point. Many of of us see it as a people means of taking the next step, preparatory to succeeding steps that gradually improve the liberal system whose economic system is based on economic liberalism equated with contemporary capitalism.

Many progressives agree in the diagnosis, fewer on the etiology and fewer still on the treatment. It's debate that progressives need to being respectfully.

Utopianism without a strategy for achieving it as efficiently and effectively as possible other than by magical thinking or handwaving is a waste of time.

Let's here your ideas.

Tom Hickey said...

Correction: "here" should be "hear."