My office was subject to a random power failure for most of today because some greedy developer broke power lines in our area. So I am way behind and what was to be a two-part blog series will now have to extend into Wednesday (as a three-part series). That allows me more time today to catch up on other writing commitments. The three-part series will consider a recent intervention that was posted on the iNET site (September 6, 2018) – Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?.
At the outset, the iNET project has been very disappointing. Very little ‘new’ economic thinking comes from it – its offerings are virtually indistinguishable from the New Keynesian consensus that dominates my profession. The GFC revealed how impoverished that consensus is. It has also given space for Modern Monetary Theory (MMT) to establish itself as a credible alternative body of theory (and practice). The problem is that the iNET initiative has been captured by the mainstream. And so the Groupthink continues.
The article I refer to above is very disappointing. It claims to offer a synthesis between Modern Monetary Theory (MMT) and mainstream macroeconomics by way of highlighting “what really divides” the two schools of thought. You might be surprised to know that according to these authors there is not much difference – only that mainstream economists think that monetary policy should be privileged to look after full employment and price stability and MMT economists (apparently) think fiscal policy should have that role. The authors claim that for the on-looker these minor differences are opaque in terms of outcomes (if the policies are applied properly) and suggest that there is really no reason for any debate at all. Accordingly, the New Keynesian consensus is just fine and the mainstream economists knew all the MMT stuff all along.
It is an extraordinary exercise in sleight of hand engineered by constructing the comparison in terms of two ‘approaches’ that cull the main aspects of each. The real issue is why would they waste their time. Degenerative paradigms (or research programs in Imre Lakatos’ terminology) typically try to absorb challenging paradigms that, increasingly have more credibility and appeal, back into the mainstream through various dodges – ‘special case’, ‘we knew it all before’, ‘really nothing new’, etc.
This is Part 1 of my response. It won’t be an easy three-part series but stick with it and I hope it gives you a lot of insights into the abysmal state of the mainstream macroeconomics profession.I figured that Bill would be all over this.
I wasn’t surprised by the discussion. Resistance from the dominant paradigm is part of the evolution of a new idea....
BTW, I introduced some paragraphing into the above for easier online reading.
Bill Mitchell – billy blog
The divide between mainstream macro and MMT is irreconcilable – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
24 comments:
“greedy developer broke power lines in our area.”
Maybe they should have been using the preferred MMT picks and shovels????
Dialectic method in action here ... the inet people are starting to synthesize and Bill is having none of it and still adamantly advocating solely for his own theory...
Going nowhere....
“Resistance from the dominant paradigm is part of the evolution of a new idea..”
Under what methodology???
Science doesn’t work this way.... what methodology is Bill thinking about?
Predictable dialectically. Dialectic is based on opposites clashing. There is either compromise ("win-win") or conflict ("zero-sum").
Bill's position is that MMT is the correct economic theory, which rules out theories and aspects of theories that are not in paradigm. Period.
That's a hardened position dialectically.
Dialectic has three major aspects.
1. Dialogic — based on debate, hopefully open and informed debate, but often influenced or biased. It proceeds on advancing of a position, the raising of objections, and attempts to rebut or overcome the objections.
This is called Socratic dialectic.
2. Conceptual or rational dialectic — based on opposition within the mind leading to contradiction, either real contradiction or paradox as apparent contradiction that can be resolved by further insight.
This is called Kantian dialectic (which Kant used, e.g, in the Transcendental Dialectic section of the Critique or Pure Reason and Hegel used in the Logik).
3. Historical — based on emergent facts.
This is called Hegelian dialectic. It's what Hegel used in the Phenomenology and Marx adopted and adapted it.
Bill is using the dialogic aspect (debate). Who wins and how that unfolds (which POV become the normal paradigm in Kuhn's sense) determines the historical aspect.
Science doesn’t work this way.... what methodology is Bill thinking about?
Because you have not studied the history and philosophy of science — to which Bill refers?
Correct I’ve never studied Phil of Science I’ve just been rigorously trained didactically in Science .... Bill is not doing Science Tom... this is my larger point...
Also did you notice he’s not getting anywhere?
The best he can hope for is some sort of synthesis of his and the mainstream theories...
They all are using the wrong methodology for working with material systems...
Correct I’ve never studied Phil of Science I’ve just been rigorously trained didactically in Science .... Bill is not doing Science Tom... this is my larger point...
Sorry, Matt, but this is also an aspect of doing science.
See, for instance, Thomas Kuhn, The Structure of Scientific Revolutions
I will explain briefly.
Kuhn posits doing science in terms of a "normal paradigm," which is what you are basing your assumptions on.
When anomalies arise, then scientists begin to realize that the normal paradigm is insufficient. First ad hoc measures are adopted to get along (think epicycles in Ptolemaic astronomy) but then a new way of seeing the date is introduced (Copernicus) and elaborated (Galileo, Kepler, Newton). Then the new paradigm becomes the new normal. But there is resistance along the way. Same with QM.
In economics the neoclassical paradigm is the normal paradigm. It is based on modeling a barter economy based on assumption naturalistic principles, e.g., equilibrium and rational maximization. Money is assumed to be neutral and disregards institutional influences. It is math-heavy.
The MMT paradigm is based on monetary economics. It models a monetary production economy based assuming that institutional arrangements are determinative. Money is assume to play a major role. It is accounting-heavy.
These are two very different ways of modeling an economy.
The question is which is corresponds better to data, which is more consistent internally, which is simpler and more economical, and which produces the better result wrt causal explanation and predictive confirmation.
MMT economists are claiming that MMT doesn't emerge from neoclassical economics as a variation of this as a normal paradigm but is in conflict with neoclassical economics for being the normal paradigm for doing economics.
Both, mainstream economics and MMT are axiomatically false
Comment on Arjun Jayadev/J. W. Mason on ‘Mainstream Macroeconomics and Modern Monetary Theory: What Really Divides Them?’
Jayadev/Mason argue: “Despite disparate policy beliefs, MMT and orthodox macro rely on many of the same theoretical foundations.” and “While MMT’s policy proposals are unorthodox, the analysis underlying them is entirely orthodox. …The difference between MMT and orthodox policy can be thought of as a different assignment of the two instruments of fiscal position and interest rate to the two targets of price stability and debt stability. As such, the debate between them hinges not on any fundamental difference of analysis, but rather on different practical judgements…”
Nothing could be further from the truth. Mainstream economics is based on Walrasian microfoundations, MMT is based on Keynesian macrofoundations. The unfortunate fact of the matter is that both mainstream economics and MMT are axiomatically false. Now, methodology tells us that if the axiomatic foundations are false the whole analytical superstructure is false. This means, in turn, that economic policy guidance has no sound scientific foundations.
“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum) Neither mainstreamer nor MMTer have the true theory.#1
Jayadev/Mason argue: “Recent incarnations of MMT pool several distinct elements ― a theory of money …, a discussion of current monetary operations, a political program (typically a job guarantee), an exercise in national income accounting (sectoral balances) and a program for macroeconomic policy.”
It has been proved that the MMT sectoral balances equation is false.#2, #3
Jayadev/Mason argue: “Both orthodox policy macroeconomics and functional finance start from the same key assumptions: “… 3. There is a level of output such that the behavior of both inflation and unemployment is acceptable. … This assumption can be represented as a Phillips curve, the same general form of which is used by MMT as in conventional textbook presentations.”
It has been proved that the commonplace Phillips curve is false.#4, #5, #6
Fact is that economists do NOT have the true theory. What all of the main approaches ― Walrasianism, Keynesianism/MMT, Marxianism, Austrianism ― have indeed in common is that they are axiomatically false, materially/formally inconsistent, and ALL got profit ― the foundational concept of the subject matter ― wrong.#7
Egmont Kakarot-Handtke
#1 From false micro to true macro: the new economic paradigm
http://axecorg.blogspot.com/2016/11/from-false-micro-to-true-macro-new.html
#2 MMT and the single most stupid physicist
https://axecorg.blogspot.com/2018/09/mmt-and-single-most-stupid-physicist.html
#3 For the full-spectrum refutation of MMT see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#4 Employment theory as an example of proto-scientific soapbubbling
https://axecorg.blogspot.com/2018/06/employment-theory-as-example-of-proto.html
#5 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2130421
#6 For details of the big picture see cross-references Employment/Phillips Curve
http://axecorg.blogspot.com/2015/08/employmentphillips-curve-cross.html
#7 If it isn’t macro-axiomatized, it isn’t economics
http://axecorg.blogspot.com/2017/02/if-it-isnt-macro-axiomatized-it-isnt.html
Egmont you are just arguing for a third Theory along with Bill and the inet people in a dialectic three-way....
“Sorry, Matt, but this is also an aspect of doing science.“
Not for people trained correctly...
You didn’t see anyone associated with the Challenger disaster going all around saying “let’s just use the same solid fuel system without changing it!” as a way to proceed...
“They all are using the wrong methodology for working with material systems...”
As you can see, some idiots think that economics, which involves human decisions, human politics, and human subjectivity, is a “material system.”
One nitwit above boasts that his lunacy is a product of “rigorous training.” He condemns anyone who questions his stupidity as an “art major.”
Pathetic.
Matt, this is really doesn't concern you, since you think economics is doing art an not doing science. Problem solved from you point of view, sinc in art, it an dispute over taste rather than truth.
Anyway, the argument is assuming that doing econ is scientific. It involves the theory of how major changes in science come about in the process of doing science, which is not doing science but reflecting on it.
The INET think that MMT can accounted for in the current normal paradigm for doing economics, with a few ad hoc tweaks maybe. Bill disagrees saying that this is a new paradigm for doing economic, since the methodological assumptions are incompatible.
Maybe this is too nuanced for many people to get.
Tom both Bill and the INET people are trained in the dialectic methodology....
Probably those ancient “scientists” like Galileo and Copernicus,etc too...
Not everyone is trained in that methodology these days....
If you are not trained in that methodology it looks like they don’t know what they are doing...
They are just arguing from their biases....
Like Bill said the other day road building is better with picks and shovels ....
“ay, the argument is assuming that doing econ is scientific”
You’re not getting it....
There is the Discipline and there is the methodology....
The discipline is Economics... it can be taught EITHER by a Liberal Arts or Scientific methodology....
I’m saying the liberal arts methodology (dialectic) is improper for teaching the discipline of Economics....
Iow there is not a problem with Economics... there is a problem with attempting to teach Economics via a dialectic methodology....
The Science Degree hasn’t been around that long (just the same as the industrial revolution):
“The first university to admit a student to the degree of Bachelor of Science was the University of London in 1860.[6] Prior to this, science subjects were included in the BA bracket, notably in the cases of mathematics, physics, physiology and botany.[7]”
https://en.m.wikipedia.org/wiki/Bachelor_of_Science
Probably responsible for the acceleration in technical progress in material systems ever since....
No, Matt, Bill knows exactly what he is doing and is doing it well.
It is fairly a widespread conclusion that there is something amiss with the way the conventional economics is doing economics. The search is on for a new paradigm. MMT offers one and explains the key differences in methodological assumptions in terms of the differences between neoclassical approaches and the approach of monetary economics as MMT economists propose.
But you assume that economics and social sciences are really arts, or don't you?
1. There is doing science, which is applying scientific method within a discipline. This requires learning about the methodology and how to apply in in a discipline as a prerequisite. Those with the prerequisites are deemed qualified to do science. In theoretical science this ordinarily necessitates a PhD.
2. Then there is teaching about a discipline, which usually is accomplished using various methods at different levels of the subject. At the university level, teaching requires a PhD, or else a terminal degree in the field.
In general science are taught mostly didactically at the lower levels, e. g. out of textbooks that lay things out step by step. But not exclusively.
Similarly, training is from the simpler problems and challenges to the more complicated., where creativity become more important.
Learning and training are approached differently at the post-grad level from the high school and undergrad levels. There is a lot more dialectical interaction with the profs and among students.
To receive the PhD the candidate has to successfully defend the dissertation before the committee. This is purely dialectically.
Philosophy used to be taught didactically at the intro levels. It was called scholasticism. Now it is approached through critical thinking. Logic, a key component of critical thinking, is taught didactically, just like math. But the approach of critical thinking employs a lot of dialectic even at the intro level.
Business schools generally use the case method to prepare student for doing business.
3. Then there is application of science to technology through engineering. That requires learning theory and training how to apply it to particular kinds of problems. This requires a lot of problem solving by applying theory and math. This requires creative and critical thinking skills. Qualifying in engineering generally requires at least a bachelor's degree.
4. Then there is the history of science, which involves determining how the various disciplines developed. This requires qualification in doing historical research and generally requires a PhD.
5. Then there is philosophy of science, which involves reflecting on all this. There is a lot of controversy involved and the field is very dialectical, with different views being pitted against each other. This generally requires a PhD.
Probably responsible for the acceleration in technical progress in material systems ever since
The term "science" did not become current until then. Prior to that what we now call "science" was called "natural philosophy."
"Science" is from Latin scientia, which just means knowledge. It correspondences to Greek episteme.
Later, "science" came to mean chiefly disciplines that used the scientific method, the key assumptions of which were naturalism, formalism, and empirical testing.
The acceleration of science took place as the normal paradigms became refined to the degree they produced highly reliable results. Science really took off with the application of science through technology, which, of course, resulted in a huge payoffs that acted as incentives.
The exponential growth can be tracked in terms of harnessing energy sources — steam turbines, electricity, petroleum, and nuclear fission.
I guess that one day I will understand what you are arguing about. It doesn't seem that it will be today, though
“But you assume that economics and social sciences are really arts, or don't you?“
No I’m saying that the discipline of Economics is 99% taught via an Art (Liberal Art) methodology... and this is the problem...
If you’re trained in Economics via a Science methodology you approach Economics scientifically...
If you’re trained in Economics via a Art methodology you treat it as an Art....
You guys are always complaining that these people eg “don’t learn from Japan!!”... why don’t they learn from Japan? Because that is not the way the dialectic methodology works...
They will never learn from Japan....
For pity's sake, Matt, why don't you listen to people like Tom? Or people who actually studied sciences and mathematics at university to the highest level. Tom is spot on in his appreciation of how the subject is taught and learned. I know because I went through it. Your description is fantasy mixed with irrationality. If anyone tried to learn the subject the way you describe it, they'd come out blithering morons who knew more than when they went in.
As for methodologies, different subjects need different methodologies. You can't expect the methodology a low temperature experimental physicist uses to be the same as that of an algebraic topologist uses or that of a linguistic anthropologist. If researchers had approached the world as you describe, we'd have learned nothing about the world. Or still talking about earth, air, water and fire as the elements which make up the world.
Matt: "Probably responsible for the acceleration in technical progress in material systems ever since...."
You need to read a decent book on the history of science. A change of acronyms doesn't lead to intellectual progress. And anyway, between Oxford and Cambridge, who still award BA degrees in the sciences, they probably have more or as many Nobel Prizes as all other universities put together. Where does that leave your BA classification?
Econ at the undergrad level is taught like any other STEM subject, didactically out of textbooks supplement by lectures with some time for questions and discussion (dialectical method). The problem is not with the teaching method. The problem is that the textbooks are wrong. The subject matter has to be changed, not the methodology of teaching.
At the graduate level in econ, there are some textbooks, but it is mostly reading papers and doing formal modeling, preparing for the oral exam, and then writing the dissertation.
BTW, the didactic method is being questioned across the board in education now, since it is not very effective as a development tool. It stifles creativity and is boring, for example.
Now the emphasis is on creating an intellectually stimulating and emotion-rich environment for learning. Finland, a leader in educational reform, is experimenting with abolishing the traditional classroom model in favor of a more integrated, balanced and holistic approach to learning.
https://www.mnn.com/green-tech/research-innovations/blogs/finnish-schools-embrace-nontraditional-classroom-design
It's not the "smartest" that get ahead in life, but the most creative and adventurous. The approach to qualifications is shifting away from teaching to the test toward learning for life and turning out geniuses rather than cogs for the machine. Of course, this doesn't imply that traditional knowledge and skills are less important but they are being seen more as an aspect of a complete system. This is not new actually.
American philosopher John Dewey proposed this kind of education decades ago and wrote many books about it. It was called "progressive education" back then and traditionalists saw it as a communist plot to destroy the country.
Here is Sir Ken Robinson
https://www.ted.com/talks/ken_robinson_says_schools_kill_creativity?language=en
https://www.ted.com/talks/ken_robinson_changing_education_paradigms
Tom Hickey, Matt Franko, André, Konrad, Ed Zimmer
Before things get even deeper into the dark woods a reminder: both mainstream economics and MMT are axiomatically false and materially/formally inconsistent. The proofs are open before all eyes. So, there is no use to discuss this cargo cult science stuff any longer.
The right thing to do is to bury orthodox and heterodox economics at the Flat-Earth-Cemetery and to forget it. As Joan Robinson said: “Scrap the lot and start again.”
MMTers and other incompetent scientists can do something useful for a better world and a brighter future by giving up blogging but instead taking part in an MMT Job Guarantee Program.
Egmont Kakarot-Handtke
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