The neoclassical foundational assumption of rational maximization and Buchanan's rational choice theory are "thin" theories of the actor. As a result the models created on the basis of such assumptions are simplifications. The questions is whether they are oversimplifications. That depends on the case. Such assumptions may apply generally in certain simple cases but not to all. Moreover, the assumption of methodological individualism on which microfoundations depends is similarly limited. These assumptions don't scale owing to social embeddedness and historical, cultural and institutional influence. Attempting to scale them beyond their limits results in the the fallacy of composition, that is, incorrectly assuming that a whole is the sum of its parts when the relationship of the parts supervenes.
The place for thick theories of the actor in philosophy
Daniel Little | Chancellor of the University of Michigan-Dearborn, Professor of Philosophy at UM-Dearborn and Professor of Sociology at UM-Ann Arbor
The problem is that MMT refuses to do any work here. It's much cleaner to pretend it doesn't exist and stick with single-level accounting aggregates in a single period and pretend that sub-sector composition and temporal changes don't matter. Just let politics and invisible hand can sort out those thorny issues while mocking the Austrians who already have fairly nuanced theories here far beyond anything in MMT (or any other economics).
ReplyDeleteIf you look at the top economic forecasters, who are most right consistently, they are never orthodox economists, never MMT economists either! They are often what I'd call soft Austrians, not hardcore gold bugs but good at seeing what humans are doing and why.
ReplyDeleteThe soft part comes in because they also appear to understand finance, markets and accounting. If you aren't interested in pushing MMT and a progressive ideology but in understanding what is going to happen next, MMT is a useful framework for analysis and GDP prediction. Beyond sectoral analysis and GDP prediction out 1 or 2 quarters, MMT performs pretty dismally.