Monday, April 23, 2018

Justin R. Harbour — For Bold Solutions We Ought To Include MMT in Economic Discourse

In a recent Financial Times article, Martin Sandbu identifies three major economic failures of competitive capitalism in the West: growing inequality; the disproportionate effects of The Great Recession on young people; and the threat of displacement in labor markets brought by improving technology and the presumed ubiquity of artificial intelligence. Sandbu connects these failures to recent victories of populist “extremist” parties in the EU, UK, and US, and asserts that if liberalism and competitive capitalism are to remain a viable and persuasive platform for the next generations a bolder thinking from the Western political economy is now more necessary than ever.
This need to revamp Western capitalism has brought renewed attention to Modern Monetary Theory (MMT), a school of thought that offers an important and bold perspective on economics and policy solutions. A universal basic income (UBI), universal basic services (UBS), and a job guarantee by the State are most commonly cited as a bold fix to current problems. So, it is worth asking, what are the merits of these aforementioned proposals, through the lens of MMT?...
The Minskys
For Bold Solutions We Ought To Include MMT in Economic Discourse
Justin R. Harbour, ALM


Konrad said...

There are many impediments to economic equality. One impediment is sloppy thinking.

The article above is guilty of sloppy thinking. It purports to extol MMT, and yet it includes this…

“Each of these proposals includes explicit costs that must be heavily weighed. For example, the literal cost of providing a UBI substantial enough to achieve its purpose is very high. Some have suggested that its cost could range in the 30-40 trillion-dollar range in the United States.”


The notion of “costs” only applies to entities that are revenue constrained. It does not apply to entities that create money out of thin air, like the U.S. government does.

The U.S. government creates infinite money as easily as a sports arena creates (or destroys) infinite points on a scoreboard -- i.e. by simply changing the numbers. A scoreboard faces no points “costs.” Likewise the U.S. government faces no monetary “costs.” Not ever.

Nor does the U.S. government “spend” money. On a sports scoreboard, we create or destroy points by changing this numbers. Likewise the U.S., government creates or destroys points by changing the numbers in bank accounts (crediting or debiting). A scoreboard does not “spend” points, nor does the U.S. government “spend” money.

When we erroneously speak of U.S. government “costs,” we prevent people from understanding MMT. We strengthen the lies of pundits, professors, and politicians who falsely claim that the U.S. government is “bankrupt.” We cause the masses to cut their own throats, since we cause them to ask, “How will you pay for it?” whenever someone suggests a means to help the masses.

Sloppy thinking. Let’s always be on the watch for it.

Konrad said...

“For bold solutions we ought to include MMT in economic discourse.” ~ Justin R. Harbour

For bold solutions we ought to include MMT in all public education, beginning in grade school.

Children easily and immediately grasp the basic principles of MMT. I have explained MMT to two different children on two separate occasions (one aged 14, the other aged 15) using the Monopoly board game as an aid. They grasped MMT effortlessly.

Latino immigrants get it too. I live in the American Southwest, and although I am white (Scotch-Irish) I speak fluent Spanish. At least 15 times, during chats with immigrants, I have explained to them the facts about money. All of them grasped it fully and instantly.

Children get it, but adults are crippled because they choose to be.

When we grow up in the lower classes, we form opinions and world-views that “explain” our economic hardship. We use our (mostly bullshit) “explanations” to rationalize our suffering. Some people comfort themselves by deciding that their misery is caused by immigrants. For other people everything is the fault of Muslims, or Jews, or Blacks, or liberals, or “toxic masculinity,” or “white privilege,” or “homophobia” or “anti-Semites,” or whatever. On and on.

These delusions comfort us. They justify our righteous “victimhood.” They keep us from jumping off bridges – but they also imprison us. They blind us to simple truths, and therefore doom us to lifelong poverty and slavery. Our self-serving bullshit “explanations” reduce us to being mere peasants. (Whether or not we are peasants depends on how we think, not on how much money we have or do not have. No child is a peasant.)

The peasant is stunted and frustrated, and therefore hostile and hateful. He believes lies (e.g. Social Security is “bankrupt”) so he can blame his misery on his chosen scapegoat (Blacks, immigrants, “homophobes,” “Anti-Semites,” etc etc etc). He validates his wretched delusions by chanting false slogans like, “There’s no such thing as a free lunch.” He believes that his chosen villains rule the world, and that those villains keep everyone poor, and keep the U.S. government poor. If we explain to him that the U.S. government creates infinite money out of thin air, we challenge his entire belief system. We question his coping mechanisms. We threaten his bullshit delusions and stunted dream-worlds, which he has developed over his entire life, and which collectively form his personal identity.

Therefore he smugly rejects the truths of MMT. He rejects whatever would free him from the hell of his delusions. He regards freedom as a threat. He clings to his warped little dream-worlds, because these are security blankets that comfort him through nights of anxiety. “Why am I so poor? Because of Muslims!” (Or whatever.)

What’s that Biblical saying? “Ye shall know the truth, and the truth will make you free.” (John 8:32) For most people in the lower classes (which are most people on earth) the truth will NOT set them free, since the truth is terrifying. Freedom is dreadful. The end of misery is intolerable. Unthinkable. Impossible. Immoral.

Thus, when we explain MMT, most people flee into their delusions by mindlessly quipping, “There’s no such thing as a free lunch!”

To repeat, most people dread letting go of the delusions and “explanations” that comfort them, but which also enslave them. Most people are smugly ignorant, willfully dense, and militantly apathetic. They choose to be this way. It is how they cope with their misery.

(Continued below in next comment)

Konrad said...


Ultimately, then, the refusal to grasp the simple truths of MMT is not an intellectual failing, but a moral failing. It is a failure of character. It is a product of fear, selfishness, and sheer habit and inertia.

We cannot defeat this stupidity in the world; only in ourselves. No one has the power to wake us from our wretched delusions. We alone have that power. We alone must make the choice.

The choice to awaken from our pathetic dream worlds is a by-product of a deeper choice to be compassionate and empathetic toward others. We escape our dream-worlds by sincerely trying to see things from other people’s perspectives.

THEREFORE it is vital that we begin MMT education in grade school, before students have time to build up impregnable layers of hate, delusion, and victimhood. Layers that doom them to a life of suffering.

Naturally this MMT education would be resisted by rich oligarchs and their toadies (i.e. pundits, professors, and politicians). By pundits I mean people like Paul Krugman, the neoliberal who claims to be a “progressive.” Krugman dreads MMT, and vehemently opposes it, because when people understand MMT, they see Krugman as a liar and an elitist obfuscator.

In a society were money brings power and status, the rich are motivated to keep the lower classes deprived of money. They are motivated to continually widen the gap between the rich and the rest, since this is what makes rich people feel “wealthy.” The rich seek to keep the lower classes in enough poverty so that the peasants remain wretched and submissive, but not so much that the peasants revolt. And one way the rich keep the masses in poverty is by preventing them from hearing about MMT. The rich start the process, and peasant delusions finish it.

Introducing MMT to K-12 schooling will be difficult, since teachers today may not deviate from the lies that form the approved curriculum. Some high schools teach basic economics, but if a principle were to catch a teacher using a Monopoly board game to explain MMT, the teacher would probably be terminated as a “threat to the community.”

All we can do is keep learning and keep fighting. For the moment, mass stupidity is just something we have to live with, like cancer, locusts, and the Kardashians.

lastgreek said...

Heather Long @byHeatherLong
2h2 hours ago

Just in: @BernieSanders will unveil a plan for the federal government to guarantee a job paying $15 an hour & health-care benefits to every American worker (who can't get good work elsewhere)

Bernie Sanders to announce plan to guarantee every American a job

Konrad said...

@lastgreek: Whenever someone suggests some program that will help the masses, everyone rejects it by screaming, “How will you pay for it?”

No one protests when the outlay for the Pentagon increases by $80 billion each year, or when Wall Street gets multi-trillion-dollar bailouts.

No, the peasants only scream, “How will you pay for it?” when someone actually wants to help the peasants. They are in a dungeon that grows darker each day. If one of the inmates says, “Hey the door has been open all this time; let’s walk out of this dungeon,” the peasants sit still and respond with, “How will you pay for it?”

From the Washington Post: “A representative from Sanders's office said they had not yet done a cost estimate for the plan or decided how it would be funded, saying they were still crafting the proposal.”

Sanders will suggest “funding” the program via increased taxation, even though the US government has no need or use for tax revenue, and effectively destroys tax revenue upon receipt.

There is infinite money to do whatever we want to do. Sanders knows this, since Stephanie Kelton has explained it to him. Sanders is just trying to dream up something that might make people vote Democrat.

Political correctness and Social Justice Warrior trash won’t make people vote Democrat. Russia-gate won’t do it. “Assad-is-a-dictator” won’t do it. “Putin is Hitler” won’t do it. Campaigns to disarm the population won’t do it. Maybe this new stunt will do it.

I call it a stunt, because Sanders knows that it will easily be destroyed with the question, “How will you pay for it?”

Andrew Anderson said...

... because Sanders knows that it will easily be destroyed with the question, “How will you pay for it?” Konrad

I'm for a UBI, not a JG, but part of the answer is NEGATIVE INTEREST/YIELDS on the inherently risk-free debt of the monetary sovereign with the shortest maturity debt (demand deposits at the central bank, aka "bank reserves") costing the most, i.e. most negative interest. That said, individual citizens should be exempt from negative interest up to, say, $250,000 US via checking accounts of their own at the central bank.

The banks and the rich have been getting a free rise via non-negative yields and interest on inherently risk-free assets and that should cease.