Sunday, February 19, 2012

Jared Bernstein puts his toes in the MMT water

I know some visitors here will be happy to see this piece on “modern monetary theory” in today’s WaPo today, as was I.  It’s particularly gratifying to see my friend Jamie Galbraith featured, a rare economist who’s ability to see outside the box has enabled him to be consistently right about a lot of things that others have missed.
 For me, I’m down with MMTs up to a point.  I very much agree that deficit reduction has been deeply miscast as pure virtue, with little regard for its economic impact.  As I’ve written many times here, the first question re fiscal policy, at least until we’re reliably headed toward full employment is not “how quickly does your deficit come down?”  It’s: “is your deficit large enough to replace lost private sector demand?”
Read it at Jared Bernstein | On the Economy
MMT in the Headlines
by Jared Bernstein
(h/t Clonal in the comments)

Bernstein: "For me, I’m down with MMTs up to a point." Translation: I'll adopt the save parts until enough other names come aboard to make it respectable.

This illustrates the huge risk that Jamie Galbraith took and how the entire country is indebted to him for doing so. MMT is only getting mainstream traction because of his bold adoption of it. He is going to be one of the heroes in this, along with the economists that developed MMT and staked their careers and reputations on it.

John Carney's giving MMT exposure is extremely significant, too, even though he is guarded about it. But just bringing it up on CNBC, populated by people like Rick Santelli, is telling. If John were not the guy in charge over there, it would not happen. So props to John, too.

This article also shows that a lot more people know about MMT than are letting on. It's happening. So don't be concerned that people are not jumping in with both feet yet. They are just testing the water.


wh10 said...

Completely agreed, Tom. Exciting news.

geerussell said...

I speculate that at this point for every one person who puts his toe in the water publicly there are another dozen privately considering and discussing it. It's going to look like an "overnight success" when critical mass is reached.

As an aside, I was also happy to see that Mitchell is in the states hunkered down with Wray working on their textbook. The system being what it is, it's hard for an idea to even compete in a teaching setting unless there's a book to teach it from.

Clonal said...

The WaPo article and the Bernstein post have led Kevin Drum to jump in at Mother Jones - Who's Afraid of a Little Inflation?

Now this I don't get. Sure, MMT says we should run large budget deficits during severe recessions. But so does Old Keynesianism. And post-Keyenesianism. And New Keynesianism. If that's really MMT's most important contribution, who needs it?

The more important side of MMT is its insistence that we should run substantial deficits even when the economy is in good shape. Only when inflation appears ready to run out of control should we use budget surpluses to rein things in. But MMT proponent Jamie Galbraith says that pretty much never happens:
In some sense, this all comes down to a question of how scared we should be of inflation. Mainstream economic opinion says that a strong focus on full employment will inevitably risk high inflation, just as our current obsession with low inflation produces generally high unemployment.

Letsgetitdone said...

Yes, the folks are seeing if they can stand the pushback if they side with MMT. I wish they'd get a little more background on it before they commented on it. I don't agree that Jared's post was good it was good. I think it was plain ignorant.