At any rate, the key point is that (a) Krugman 2011 did not recognize the importance of a currency issuer vs. a currency user in setting interest rates on the national debt, and based his argument against MMT on the potential for bond vigilantes to raise US Treasury rates “for whatever reason,” but (b) Krugman 2014 does recognize this distinction and now appears to view its significance for interest rates on the national debt in much the same way as MMT.
It seems that Krugman’s current view started somewhere in late 2012, such as in posts here and here discussing “invisible bond vigilantes.” Again, it’s quite clear from that post that there’s been a significant change from Krugman’s 2011 view of bond vigilantes’ powers relative to a currency issuer and his related critique of MMT.
In closing, while there are still significant differences between MMT and Krugman’s neo-liberal-based views of the monetary system—see my links above as well as MMT critiques of his views on banking by myself here and by Randy Wray here—there have been important areas of continuing convergence regarding interest on the national debt and also (interestingly) the government’s consolidated financial statements (see this post from Stephanie Kelton and me here and the NEP version here). This is a positive development.New Economics Perspectives
Krugman Now Disagrees with His Earlier Critique of MMT
Scott T. Fullwiler | James A. Leach Chair in Banking and Monetary Economics and is an Associate Professor of Economics at Wartburg College
h/t Jan in the comments)
5 comments:
Glad Wartburg gives Scott a summer break... ;)
This continues the pattern of Krugman adopting MMT without acknowledging that MMT was right all along. So maddening! But so much better than holding onto flawed positions!!
Everyone borrows from Everyone. He's clearly been influenced by the Post Keynesian ideas and MMT ideas in particular. But Krugman maintains his brand of New Keynesianism, I think and is afraid of MMT because Detroit Dan's big red hat scares him! But seriously, I think MMT has gained respect for being 'right' but still isn't considered 'serious' economics. Even Minsky in his day, with his style was heavily criticized for lack of empiricism which is funny now because many of his ideas turned out to be prescient even though they were only loosely observed and not tightly calculated from mathematical and empirical studies. Krugman has repeatedly talked about being afraid of having to talk to the hordes of MMT people in the blogosphere with the implication that they were as irrational as Austrians or something. I don't think you guys are THAT bad. Maybe just strong willed. :)
Well said, Ryan. Finally, my hat gets its due recognition!
MMT is maturing. Perhaps in its early days, it paid to scream and insult because no one was taking it seriously. But now people like Krugman are beginning to realize we are on to something. And the backlash has been fierce from some. So new tactics are called for. Perhaps I should change into a more mellow hat?
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