Tuesday, January 22, 2019

Bill Mitchell — Operationalising core MMT principles – Part 1

Things seem to come in cycles. We have been at this for some years now – trying to articulate the principles of Modern Monetary Theory (MMT) in various ways in various fora. There is now a solid academic literature – peer-reviewed journal articles, book chapters in collections, and monographs (books) published by the core MMT group and, more recently, by the next generation MMT academics. That literature spans around 25 years. For the last 15 odd years (give or take) there has been a growing on-line presence in the form of blog posts, Op Ed articles etc. More than enough, perhaps too much for people to wade through. 

Each period seems to raise the same questions as newcomers stumble on our work – usually via social media. The questions come in cycles but there is never anything raised in each cycle that we have neglected to consider earlier – usually much earlier. When we set out on this project we tried to be our own critics because our work (in this area) was largely ignored. So we had to contest each of the ideas – play devil’s advocate – to stress test the framework we were developing (putting together pieces of knowledge from past theorists, adding new bits or new ways of thinking about them and binding it all together with interesting and novel connections and implications). So it is continually testing one’s patience to read the same criticism over and over again. 

Please do not get me wrong. When these queries are part of the learning process from a reader who is genuinely trying to work out what it is all about there is no issue. Our role as teachers is to see each generation safely through their educative phase in as interesting a manner as we can. But when characters get on the Internet, some with just a year, say of postgraduate mainstream study and start making claims about what we have ignored or left out or got wrong then it can be trying. Ignoring them is the best strategy. But then the genuine learners get confused. So this blog post is Part 1 of a two-part series seeking to help answer two major issues that we keep being asked about – (a) Does MMT only advocate tax increases to fight inflation?; and (b) How can any meaningful jobs be offered in a Job Guarantee if the workforce is ephemeral by construction? Part 2 will come tomorrow....

Bill Mitchell – billy blog
Operationalising core MMT principles – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia


AXEC / E.K-H said...

The misleading nitty-gritty defense of MMT principles
Comment on Bill Mitchell on ‘Operationalising core MMT principles’

Yes, there is a lot of idiotic critique of MMT. Yes, there are tons of rubbish on the Internet about MMT from some “economics PhD student at a low-tier US university” or non-economists who either play dumb in order to derail a discussion or claim to know how to rectify economics and to save humanity and the planet.#1

This is nothing new in economics: “A sure sign of a crisis is the prevalence of cranks. It is characteristic of a crisis in theory that cranks get a hearing from the public which orthodoxy is failing to satisfy.” (Joan Robinson)

Bill Mitchell takes it upon him to defend MMT against all types of misinterpretation and rubbish by going at great length into the details of Inflation Theory and of the practical realization of a Job Guarantee. His arguments are sound and there is not much to say against them except that they are beside the point.

By addressing a lot of nitty-gritty stuff, Bill Mitchell deflects from the fact that MMT has been refuted at the level of principles. The material and formal inconsistency of MMT has been proved.#2, #3, #4 The fact of the matter is that MMT is dilettante macroeconomics.

Bill Mitchell’s defense of MMT is as absurd as the answer of a bloodletter#5 who is told that his underlying theory of humors is false and that bloodletting does more harm than good: “What do you want, my handling of leeches is second to none and I have practically demonstrated this time and again.”

The fault of MMT does NOT lie at the operational level of how money can be created out of nothing and spent into the economy for all kinds of social purposes but at the level of theory.

This is the core of MMT’s scientific failure. The false MMT balances equation reads (I−S)+(G−T)+(X−M)=0, the correct equation reads (I−S)+(G−T)+(X−M)−(Q−Yd)=0 and it boils down to Public Deficit = Private Profit. In other words, the MMT policy of permanent deficit-spending/money-creation amounts to a permanent free lunch for the Oligarchy. MMT policy is NOT social as claimed, just the opposite.

Because the foundational sectoral balances equation is false the whole analytical superstructure of MMT is false. Because the theory is false, the policy is counter-productive and it does not matter much whether the operational execution is perfect or not.

Bill Mitchell fills his blog with the nitty-gritty defense of MMT policy but never addresses the refutation of the theoretical foundations of this policy. Compared to the low-IQ critique of an “economics PhD student at a low-tier US university” and other trolls, Bill Mitchell’s defense is well-argued and convincing at the operational level. Unfortunately, he cannot disprove that MMT does not satisfy the scientific criteria of material and formal consistency. Bill Mitchell never addresses the argument that MMT amounts to bloodletting WeThePeople.

Egmont Kakarot-Handtke

#1 Debunking idiots does not prove that MMT is valid

#2 MMT sucks

#3 The final implosion of MMT

#4 Down with idiocy!

#5 “Bloodletting, whether by a physician or by leeches, was based on an ancient system of medicine in which blood and other bodily fluids were regarded as ‘humours’ that had to remain in proper balance to maintain health. It is claimed to have been the most common medical practice performed by surgeons from antiquity until the late 19th century, a span of almost 2,000 years.” (Wikipedia)

Noah Way said...

#4 Down with idiocy!

You can put that into practice by not posting.

Dean said...

Egmont is 100% correct

Deficit spending (by anyone!!!) is wealth for another