Monday, February 27, 2012

MMR: "A family balances it's checkbook, a nation balances financial sectors."

The Three MMR Musketeers have come up with a pretty good tagline here (consider it stolen guys!) .


Dan Kervick said...

Except nobody seems to be arguing that a nation's sectors have to "balance". The sectoral balances equation just says that the sum of the sectoral balances always sums to zero, no matter what.

We wouldn't want people to think that a government needs to follow some kind of policy of balancing its sectors.

Tom Hickey said...

Not very apt analogy since sectoral balance is a national accounting identity. Sectors always balance as a matter of accounting.

Assuming that the non-govt fiscal balance is non-discretionary and the govt balance is discretionary, then the government can attempt to maintain the sectoral balance at full employment by adjusting the size of the govt fiscal balance to change in non-govt saving desire. That is quite different from balancing a checkbook.

Matt Franko said...


We "balance" the sectors against employment and output?


I like the way that this line thru implication brings in the external sector as something a nation has to account for...

Also, many people have automatic overdraft features in their checking accounts so that they never "run out of money".... like many of our (and now the UK's) morons think we do.

It takes the focus off of the govt/household analogy. It implies that the household has to mind it's checkbook, but for the govt, it is more complicated than that (which it is), may get people thinking differently about household vs govt which would be helpful.

I think they have come up with something catchy that may help bring some more people in.

I'm sure we can find something wrong with anything, no need to go all "S = I + (S - I)" on them....


paul meli said...

Go over there and read through the discussions on "monopoly supplier of the currency" and the definition of "money" and see if they are going to bring MMT to the masses.

Matt Franko said...


I believe their stated mission is to bring the info on how current policy operates "to the masses", not MMT.

I'll take it as if people can be made to understand the unjust nature of current policy, the just among us can project a what a new policy could look like...


paul meli said...


Yeah, their version of how current policy operates.

It looks a lot different to me than the way I understand it. Maybe not so much to others but it will cause confusion.

Tom Hickey said...

What I find a bit off, Matt, is the suggestion that the sectors have to be balanced, when they are balanced as an accounting identity. Adjustment of the sectoral balance proactively, e.g., through functional finance, brings in causality and therefore macro theory, which the MMT economists admit.

I think that many would just be further confused by the notion of "balancing the sectors," and economists would think it a freshman mistake, saying that the sectoral balance is an accounting identity.

So I don't see this as a step forward out of the govt.-household analogy. Better to just use the distinction between currency issuer and currency users.