David Howdle posted a commenton this blog in which he said:
Professor Murphy, thank you for your thoughts which I find most interesting. I share a lot of your blogs on pro Scottish independence Facebook group. I find that MMT resonates with many supporters. However, not with all by any means.In response to sharing this blog someone has said “Check his blog. Murphy is peddling a new-ish economic fad called Modern Monetary Theory. This controversial and untested approach is evangelised by small clique of left-leaning economists and intellectuals mostly in the US who are looking for an unsuspecting guinea pig. Step forward Scotland”.
Are you able to point me to something robust to show that MMT is not as he labels it? That is “untested”. I’d be most grateful.I take the comment seriously. Modern Monetary Theory does suffer from being called a theory. It also suffers on occasion from being a little too dogmatic (I include myself in that criticism, perhaps). And sometimes it just needs to be explained for what it is.
The truth is that modern monetary theory is as much a theory about money creation as sexual intercourse is a theory of how procreation in humans happens. In other words, it's a description of what happens and not an explanation of what might be....Tax Research UK
MMT: economics for an economy focussed on meeting the needs of most people
Richard Murphy
20 comments:
Richard Murphy: the MMT fraudster dressed up as realist
Comment on Richard Murphy on ‘MMT: economics for an economy focussed on meeting the needs of most people’*
Realism is practical idiocy but most people like it. And they dislike ‘theory’. So, Richard Murphy opens his post with: “Modern Monetary Theory does suffer from being called a theory.” Note, first of all, nobody else than MMTers themselves has chosen this designation.
Richard Murphy makes it clear that he is not an unworldly theoretician but a down-to-earth realist and that MMT is as realistic as one can get: “In other words, it’s a description of what happens and not an explanation of what might be.”
Richard Murphy plays the old cliches of theoretician and practitioner against each other. Needless to emphasize that a theory is NOT something lofty, unreal, unworldly, or impractical, just the opposite: “There is nothing so practical as a good theory.” (Kant) A scientific theory is the humanly best representation of reality. The whole of civilization is built upon good theories.#1
The problem most people have with science is that is often counter-intuitive. Personal experience tells one that the sun goes around the earth but the Theory of Gravity says it is the other way round.
The issue has been addressed by the great methodologist and economist J. S. Mill: “People fancied they saw the sun rise and set, the stars revolve in circles round the pole. We now know that they saw no such thing; what they really saw was a set of appearances, equally reconcileable with the theory they held and with a totally different one. It seems strange that such an instance as this, ... , should not have opened the eyes of the bigots of common sense, and inspired them with a more modest distrust of the competency of mere ignorance to judge the conclusions of cultivated thought.”
Fact is that in the political arena the bigots of common sense are on their own. The ambition of agenda pushers like Richard Murphy is to win over the majority of the bigots of common sense. To enlighten the world scientifically is NOT his business.
So, what is wrong with MMT? MMT is scientific junk and political fraud.
Richard Murphy argues:
(i) “Let me absolutely clear: what this says is that government spending actually creates the money to enable the apparent payment of tax that appears, in popular imagination, to fund that spend. It also creates the money to buy government bonds ― which are private wealth. In other words we don't have tax and spend. We have spend and tax.”
(ii) “This logic is core to modern monetary theory: it is tax that provides value to a state’s money. It is the government’s promise to accept its own currency in payment of tax that gives its money its worth.”
(iii) “So money has value because the government endows it with that quality. And then, and only then, is the supposed left-wing quality added to this whole issue, because modern monetary theory then notes that when markets do not create full employment … then the government can create its own money to just to indirectly boost economic activity …, but to do it directly by investing itself.”
See part 2
Part 2
All three arguments are commonsensically plausible but scientifically false.#2, #3 What MMT boils down to is that economic problems can and should be solved with money-creation/deficit spending. Of course, it is long known that deficit-spending stimulates the economy, what seems to be unknown is that the macroeconomic Profit Law says that Public Deficit = Private Profit. So MMT is first and foremost for the benefit of the one-percenters.#4
However, MMT claims to promote the cause of the ninety-nine-percenters: “The only twist most explicit modern monetary theorists add is that we could use this power of the government to create money out of thin air … for the good of everyone by trying to boost employment, investment, productivity and median wages by direct government activity or investment. If that’s cultish, faddish, or left wing, then so be it, I say.”
Needless to emphasize that Richard Murphy never mentions the profit effect of deficit spending. Worse, MMTers regularly make this effect verbally disappear by speaking of benefits for the private sector a.k.a. ninety-nine-percenters while the benefits actually go to the business sector a.k.a. one-percenters. And this is not only bad science but plain political fraud.
So, what is the real political and scientific reality? MMT policy is an abuse of the fiat money system with massive and virtually unlimited redistributive effects in the interest of the one-percenters. MMT is phony social policy designed by Wall Street and marketed by roll-up-the-sleeves realists like Richard Murphy and heart-winning Progressives like Stephanie Kelton.#5 The marketing is good but the product is real crap.
Egmont Kakarot-Handtke
* Tax Research UK
http://www.taxresearch.org.uk/Blog/2018/06/10/mmt-economics-for-an-economy-focussed-on-meeting-the-needs-of-most-people/
#1 Why J. S. Mill had no friendly word for the bigots and votaries of common sense
https://axecorg.blogspot.com/2015/01/why-j-s-mill-had-no-friendly-word-for.html
#2 For the full-spectrum refutation of MMT see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#3 MMT: Richard Murphy’s battle-for-money hoax
http://axecorg.blogspot.com/2018/06/mmt-richard-murphys-battle-for-money.html
#4 Keynes, Lerner, MMT, Trump and exploding profit
http://axecorg.blogspot.com/2017/12/keynes-lerner-mmt-trump-and-exploding.html
#5 MMT and grassroots movements
https://axecorg.blogspot.com/2018/01/mmt-and-grassroots-movements.html
"macroeconomic Profit Law" LOL
More mental diarrhea. For self-references see AXEC's website (his only reference, where logical fallacies abound).
I think that Egmont Kakarot-Handtke and I finally agree on a few things.
What MMT boils down to is that economic problems can and should be solved with money-creation/deficit spending. Of course, it is long known that deficit-spending stimulates the economy, what seems to be unknown is that the macroeconomic Profit Law says that Public Deficit = Private Profit. So MMT is first and foremost for the benefit of the one-percenters.
Comment: All monetary and “fiscal” stimulation is an unsustainable subsidy to someone from someone else. Stop the process and the system collapses. Also, the fiat funny money creation process is what sustains the endless unwinnable wars, which is sub-category of “for the benefit of the one-percenters”. The most fundamental purpose of the "modern money" system is to allow this perpetual embezzlement from the have-nots to the .1% in such a purported boring and incomprehensible manner that average people cannot and will not figure it out.
So, what is the real political and scientific reality? MMT policy is an abuse of the fiat money system with massive and virtually unlimited redistributive effects in the interest of the one-percenters. MMT is phony social policy designed by Wall Street and marketed by roll-up-the-sleeves realists like Richard Murphy and heart-winning Progressives like Stephanie Kelton.#5 The marketing is good but the product is real crap.
Bob Roddis:Comment: All monetary and “fiscal” stimulation is an unsustainable subsidy to someone from someone else.
So all gold mines should be permanently closed if a country has a gold standard?
I agree. :-) Would hasten the end of worshiping the golden calf.
Pretty much every economic system is abused to benefit a few. Instead of trashing MMT we should be expanding the concept to deal with obvious problems.
The politics of MMT prevents talking about taxation, which is a critical component of any economic system. Not for the purpose of generating revenue, but for the purpose of regulating the economy and regulating behavior. Taxing wealth would eliminate its power and return control to the people (in theory, at least).
Trashing MMT because of the human condition is absurd. What we need is a system that can survive and enhance the human condition. AXEC offers nothing except an overblown ego. Every statement he makes is supported by some other statement he makes - circular reasoning at its finest.
NOAH WAY WRITES: “The politics of MMT prevents talking about taxation, which is a critical component of any economic system. Not for the purpose of generating revenue, but for the purpose of regulating the economy and regulating behavior. Taxing wealth would eliminate its power and return control to the people (in theory, at least).”
Yes. Taxation is a useful tool for widening or narrowing the gap between the rich and the rest. Unfortunately the masses collectively choose to allow taxation to be used for widening the gap.
Taxation is also a useful tool for deceiving the masses, or for awakening the masses to the truth. For example, when the masses choose to believe the lie that FICA taxes pay for Medicare and Social Security benefits, the masses choose to believe the lie that money is physical and limited. In this way the masses choose to be impoverished and enslaved.
NOAH WAY WRITES: “Trashing MMT because of the human condition is absurd.”
Correct again. It would be like trashing the theory of aerodynamics because people use aircraft irresponsibly. Yes, the theory of aerodynamics is correct (since it allows aircraft to fly) but because some people abuse it, the theory is “false.”
NOAH WAY WRITES: “What we need is a system that can survive and enhance the human condition. AXEC offers nothing except an overblown ego. Every statement he makes is supported by some other statement he makes - circular reasoning at its finest.”
Once again correct. In order to have a system that can survive and enhance the human condition, we must collectively choose such a system. Everything in life comes down to choices, both individual and collective.
Regarding that individual reader you mentioned, no one on earth can free him (or her) from his ego-box. He (or she) must voluntarily choose to step outside it. All we can do is offer the key, and let him choose to use it or reject it.
There's nothing unusual about this. All of us sometimes get stuck in ego-boxes. This is a basic part of living and learning. We create some explanation or account that we seal ourselves inside of, and we flatter ourselves that we have the Ultimate Truth. We interpret everything we see through the lens of our little box in such a way that “justifies” our little box. We imagine that everything outside our little box is false. We devote all our energy to justifying our temporary little dream world, which we sit inside of like a cocoon. No can pull us out of it. We alone must choose to emerge from our cocoon.
While we are inside our cocoon, life for us is a paradox (cf. the circular reasoning phenomenon you mentioned above). In order to step outside, we must believe that there is an outside, and that we can reach it. But how can we believe that there is an outside if we have never been outside?
Answer: we can get outside our personal ego-cocoon via compassion for others. That is, we emerge by choosing to make our grief for other people’s suffering stronger than our desire to remain sealed in our own little cocoon. This is how we come to see the truth of MMT. We ask, deeply and sincerely, what is this money thing, and why people are suffering. Through charity, compassion and careful thinking, we arrive at the truth about money. We see that people suffer, and reject MMT, because people choose to remain in their cocoons.
Therefore, as I always say, the denial of MMT is not a failing of intellect, but of moral character. It is a product of choosing to remain in an ego-box. We've all been there in one form or another. And, each of us is in some cocoon in one form or another.
The fundamental principle wrt taxation is that taxation decreases the behavior that is taxed. So taxes are best used to discourage behavior that is socially detrimental.
Wrt economics in general this means taxing away economic rent of all types to discourage rent-seeking behavior. While it is preferable too preempt rent-seeking through institutional arrangements rather than taxation, taxation can be used to mop up the residual. Taxation is also useful in making falsifying tax reports a criminal as well as a civil offense. This increases the risk of being caught and fined, if not also prosecuted criminally.
because modern monetary theory then notes that when markets do not create full employment (and they usually do not, as Keynes first pointed out 80 years ago) then the government can create its own money to just to indirectly boost economic activity (which is exactly what QE was supposed to do, but was not very good at, to put it kindly), but to do it directly by investing itself.
And modern monetary theory says that this can be done until we reach full employment. Then, and only then, will we have inflation because of money creation [bold added]
Both spending by the monetary sovereign and lending (for spending, of course) by the government-privileged banking cartel take place in the same price inflation space. Hence price inflation caused by the banks surely limits how much the monetary sovereign can spend before price inflation becomes unacceptable.
But here's the problem: Spending by the monetary sovereign is, or at least should be, for the general welfare, while with bank loans the rich are the most so-called worthy of what is, in essence due to government privileges for the banks, the public's credit but for private gain.
Therefore, government privileges for private credit creation and by extension, the rich, limit how much the monetary sovereign can spend for the general welfare for a given amount of price inflation.
Noah Way
You say: “Trashing MMT because of the human condition is absurd. What we need is a system that can survive and enhance the human condition.”
The point at issue is NOT thrashing MMT but to answer the question: What is wrong with MMT?
The answer is:
(i) MMT is proto-scientific garbage, i.e. provably false, i.e. materially/formally inconsistent.
(ii) MMT is a political fraud, i.e. it pretends to promote the cause of the ninety-nine-percenters but de facto promotes the cause of the one-percenters.
(iii) MMTers are scientifically incompetent.
(iv) MMTers constantly violate scientific standards/ethics.
The remaining practical question with regard to MMT is how can folks like Murphy, Kelton, Mitchell, Mosler, Tcherneva, Wray, Fullwiler, Forstater, Kaboub, Pettifor, Keen, Tymoigne, Willingham, Grumbine, Ehnts, peterc, Hickey, Calgacus, Konrad, Anderson, Way, Deficit Owls, The Pileus, duncanpoundcake, consbyname, and many other soapbubblers be convinced to leave economics for good and thus to effectively contribute to the betterment of the human condition.
Egmont Kakarot-Handtke
We know your opinion. Can you demonstrate any reasoning behind it? (not including links to your opinion on your web site)
Noah Way
As the saying goes: “You got to know the system if you want to change it.”
MMTers do NOT know how the economic system, i.e. the price- and profit-mechanism, works.
Here is the challenge for all soapbubblers: this is the MMT balances equation (X−M)+(G−T)+(I−S)=0, and this is the AXEC balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0. Which one is materially and formally consistent?
It is a sure bet that you do not understand what the equations say about the systemic interrelations, that is, how the monetary economy works.#1
What makes you think that you have anything of interest to contribute to the discussion?
Egmont Kakarot-Handtke
#1 Do NOT look up the proof here
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
Price and profit are irrelevent. Economic systems are not based on scientific principles and it is not a natural science. Economics is an abstract artificial construct and as such your equations are simply nonsense. They only have meaning in narrowly defined self-referential theories that are used to support various ideologies.
AXEC / E.K-H brings up a good point.
Needless to emphasize that Richard Murphy never mentions the profit effect of deficit spending
I bring this up indirectly in comments on Yahoo news articles and such, where there's a tizzy over deficit spending. I'll put the question, how will corporations make profits in the brave future everybody is forecasting, when nobody is employed making a salary because everyone lost their job to automation and/or outsourcing? And after seeing how people response, I'll respond that the corporate profits will come entirely from deficit spending by the Fed Gov. And that it will be sustainable.
Now that said, is this the outcome we want? Because we're ostensibly on that path. And I would adjust it say that we'll have two tiers of citizens: those whose jobs that haven't been outsourced or displaced through automation. And those whose jobs have been. In a way, not all that different than what we have now. And the population tends to denigrate those who've lost their jobs - we call them deplorables. But no worry, they'll grit their teeth and give them a UBI or a job guarantee. Not because it's the right thing to do. But because the corporations will want it - to keep their profit.
Noah Way
Just answer two questions: Is the foundational macroeconomic balances equation (i) (X−M)+(G−T)+(I−S)=0 or (ii) (X−M)+(G−T)+(I−S)−(Q−Yd)=0 true? Can you prove your answer?
Don’t fear disgrace or embarrassment: Keynes, Post-Keynesians, and all your MMT colleagues flunked this test.
Egmont Kakarot-Handtke
Bogus question.
Mathematical equations don't apply to ideologies.
djrichard
You say: “I'll put the question, how will corporations make profits in the brave future everybody is forecasting, when nobody is employed making a salary because everyone lost their job to automation and/or outsourcing? And after seeing how people response, I'll respond that the corporate profits will come entirely from deficit spending by the Fed Gov. And that it will be sustainable.”
A sketch of the monetary economy after the demise of communism and capitalism has been given here:
The Third Way: Towards the happy zero-tax economy
https://axecorg.blogspot.com/2018/06/the-third-way-towards-happy-zero-tax.html
Egmont Kakarot-Handtke
Noah Way
You say: “Mathematical equations don’t apply to ideologies.”
True but irrelevant because economics deals with the economic system and systems are subject to objective systemic laws. For example, the Profit Law or the Employment Law.
Ideologies are for the retarded soapbubblers of the so-called social sciences.
Aircraft get off the ground because of the laws of aerodynamics and thermodynamics. Likewise, economies get off the ground because of systemic laws and not because consumers maximize utility by choosing between strawberry and raspberry yogurt or because greedy capitalists maximize profit.
Fact is that neither capitalists, nor economists, nor ideologues, nor MMTers, nor Noah Way know where macroeconomic profit comes from. This is the result of 200+ years of soapbubbling.
Egmont Kakarot-Handtke
Only an idiot seeks to apply "objective systemic laws" to human behavior.
I could make up whatever economic laws I want - just like you do, with equations, no less - and they will mean exactly as much. In a word - ZIP.
Noah Way
You say: “Only an idiot seeks to apply ‘objective systemic laws’ to human behavior.”
Very true again. Because of this, scientists apply objective systemic laws to systems. Imbeciles, on the other hand, come always up with a ‘behavioral’ explanation, e.g. the sun moves across the sky because Helios drives his golden chariot each day from East to West, or Zeus throws the thunderbolt because he is pissed off.
The subject matter of economics is the economic system, i.e. the interaction of economic variables like employment, price, profit, productivity, income and so on. Human Nature/motives/behavior/action is the subject matter of Psychology, Sociology, Anthropology, History, Political Science, Biology, Social Philosophy, Ethics and so on.#1, #2
Soapbubbling about human behavior is the chief occupation of brain-dead economists who still have not understood that economics is a system science. As a result, these confused confusers can to this day not tell what profit is.
Macroeconomic profit does not come into existence because some humans are greedy but because Qm=−Sm. There is NO chance that you ever understand this simple but fundamental equation, or what the subject matter of economics is, or what science is all about. This makes you a useful coworker of the MMT snake-oil sales team.
Egmont Kakarot-Handtke
#1 Economics is NOT about Human Nature but the economic system
https://axecorg.blogspot.com/2017/05/economics-is-not-about-human-nature-but.html
#2 Economics is NOT a social science
https://axecorg.blogspot.com/2016/08/economics-is-not-social-science.html
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