As more people become aware of Modern Monetary Theory (MMT), extreme reactions emerge to basic concepts that, in any reasonable sense, should evade such reactions. For example, when the concept of the Job Guarantee (JG) is explained the reactions include hysterical comments such as “This is Socialism”; “MMT advocates the government employing everyone – they are stealth Communists”; “MMT is Communism in disguise”; and the rest. I get several E-mails along these lines per week – all which go into the trash immediately – so why bother sending them! I also get many (polite) E-mails suggesting that we (MMTers) should adopt a compromise line and embrace the ideas of those, who while clearly holding ideas that are inconsistent with MMT, do advocate government-led stimulus in the present context. Apparently we should also use terminology that is consistent with the mainstream to minimise the chasm that has to be be crossed to jettison that orthodoxy and accept MMT. These tactical suggestions have resonated once again in the current little dispute about whether various economists, who operate in the New Keynesian paradigm are channeling Minskian ideas. The suggestion is that, while they might not have foreseen the crisis and hold to various theoretical concepts that are inconsistent with MMT development, we should, as a matter of strategy, form alliances with these economists because they are now advocating policy more or less similar to that proposed by MMTers. So our common purpose should be prioritised over our theoretical differences. I disagree. History shows us that it is very dangerous to develop a new approach by minimising the differences between it and the dominant, but erroneous paradigm just to make it easier for adherents of the latter to embrace the former.Read it at Bill Mitchell — billy blog
On strategy and compromise
by Bill Mitchell
Since my own academic background in my previous life was in philosophy, I find this whole business of compromises, alliances and political tactics we see at work in economics to a somewhat alien world. The frequent calls for this kind of coalition-building and politicking only underlines that economists themselves view economics is a practical art and policy tool, not just a science or field of rational intellectual inquiry.
ReplyDeleteI would suggest that one of the reasons we are in this mess to begin with is that economists have, over the years, sacrificed far too much intellectual integrity and respect for realty for the sake of political expediency and the construction of an orthodoxy that would be credible to politicians, and congenial to the prejudices and interests of the powerful.
If an economist honestly believes that we have a serious long term public debt problem that needs a strategy, then by all means they should argue for that view and defend it. But if they are only saying things like this because the conventional wisdom of the crowd has settled on that opinion, and the politicians they advise are afraid to challenge sacred cows, then they are part of the problem.
Dan,
ReplyDeleteWhile I think it is EXTREMELY important to expose the current mainstream falsehoods and rebuke those who continue to dispense them, it may also be appropriate to point out that this goes a LONG way back... this from Hamilton in Federalist 21:
"There is no method of steering clear of this inconvenience, but by authorizing the national government to raise its own revenues in its own way. [Ed: Who is authorizing who here????, this is interesting]
Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen [Ed: Where do they 'get the money" in the first place????]
will in a degree be at his own option, and can be regulated by an attention to his resources."
http://www.constitution.org/fed/federa21.htm
So even Hamilton back in the late 1700's was already out of paradigm as the context of his Federalist 21 here imo assumes exogenous "money", and that govt has to "raise revenues" from the people etc.....
iow you dont see Hamilton here writing "we're 'gonna need to levy taxes to regulate aggregate demand.... etc.."
So these falsehoods go a long way back and in this regard Hamilton was as much a moron as any of the mainstream econ hacks we have had foisted upon us today...
Plenty of disgrace to go around and apparently even to go way back in the history of the west...
Resp,
Right on the money, as usual, Dan.
ReplyDeleteQuoting David Collander: "Why were the neoKeynesians willing to agree to such a synthesis that theoretically precluded Keynesian economics? As I argued in The Coming of Keynesianism to America their primary interest was policy; theory for them was something that led to a model with acceptable policy conclusions… Like many compromises based on short-run policy concerns, the neoKeynesian compromise had within it the seeds of destruction of neoKeynesian economics.”
There is also a new book by Thomas Palley that argues: “the crisis is at a deep level the product of a flawed economic policy paradigm derived from a set of flawed economic ideas. Escaping the crisis means replacing that policy paradigm and the ideas from which it derives. That is a massive challenge involving both a political contest and an intellectual contest. We need to win both.”
By all means, MMTers should not mince words when explaining their theory that unconstrained fiat funny-money dilution and government deficits and debt CAUSE prosperity and cure depressions. Keynes was smart enough to enunciate his “theory” in unintelligible jargon that was incomprehensible to average people who could be bamboozled into thinking that they weren’t smart enough to understand it.
ReplyDeleteAverage people do not understand that inflation is not a mysterious force of nature but is a purposeful government policy put forth by people called “Keynesians”, the operational reality of which is the surreptitious theft of purchasing power from the powerless to the powerful and the distortion of the price, investment and capital structure.
So you MMTers, don’t compromise and don’t mince words. Shout it from the rooftops that your program calls for solving the problem of scarcity with the unlimited creation of fiat funny-money dollars and debt by the government
This Yglesias headline says:
Hassle Ben Bernanke! The economy will never recover unless the Fed loosens monetary policy. So why are liberals so afraid to talk about it?.
http://tinyurl.com/buwv4zw
Liberals are rightly afraid to talk about it. Average people will reject the idea that fiat funny-money dilution will cause anything but theft and more recession to the extent they understand it at all.
Academically MMT can not compromise the way the ideas are presented without becoming inconsistent.
ReplyDeletePolitically it can. Laws and regulations will never be enacted to become the ideal modern money system in any democracy. (Not that we have circulated a Modern Money Reform Act of Draft legislation in any country!) Building political coalitions and supporting alternative forms, albeit less effective forms of controversial ideas such as the buffer stock is hardly dangerous. We do it all the time.