An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
Personally, I love the arrow from "Austrian" pointing at "Neoclassical". And how "Austrian" is located a long way from "Marginalist" which also points at "Neoclassical".
“MMT draws from institutional economics (recognizing the role of large institutions as well as classical markets), chartalism (the basics of fiat currency), Keynesianism, financial instability considerations, and a sectoral balance perspective (accounting based economics).”
Let’s keep it simple. Monetarily sovereign governments create money out of thin air by changing the numbers in bank accounts. (Banks create loan money in the same way.)
Monetarily sovereign governments destroy money (send it back to thin air) by changing the numbers in bank accounts.
It’s the same as creating and destroying points in a sports game. We do it by changing the numbers on the scoreboard.
The 1% enslave the 99% because of the false belief that dollars (or pounds or pesos or whatever) are physical and limited.
When you stop to consider the range of influences on MMT from various schools of thought it is a reminder that the orthodox economist, who typically will not have been exposed to these ideas, will be at a disadvantage in understanding what the theory is actually saying.
In the public debate I am pretty quick to suspect commentators of being disingenuous, and no doubt there is plenty of that, but there may also be a degree of actual confusion. Either it won't be clear how MMT differs from orthodoxy ("we knew it all along") or it will seem totally alien ("crazy talk").
Because of institutional realities of the economics discipline, heterodox economists usually will have studied the orthodoxy, often to PhD level and maybe beyond, in addition to whatever their preferred heterodox approach now is. It makes it quite a bit easier to understand and anticipate opposing arguments than is perhaps the case for orthodox economists.
To be clear, heterodoxy is not immune to similar blind spots, especially across the Marxist/non-Marxist divide. These two camps often demonstrate poor understanding of each others' perspectives, presumably due mostly to lack of exposure. It takes a lot of work to become a heterodox economist due to the need to cover orthodox material while trying to learn a preferred approach. So time constraints may be a large part of the reason for poor understanding on both sides.
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Gratuitous addendum:
I'm sure adherents to every school of thought get annoyed by how their approach is caricatured by others.
In my case, I have always been bemused by claims that Keynesian economics is "simplistic" and Marxist economics "airy-fairy".
I think students struggle much more with Keynesian ideas than neoclassical ones, because the former are macro in nature and require cognizance of interactions and feedbacks. Is it much easier to think "at the margin" and in the micro holding everything else constant.
And Marxism, whatever else might be said, strikes me more than most perspectives as hard-nosed. Half the time I can't tell the difference between a Marxist view on MMT and a right-wing burn the poor market-fundamentalist position. :-)
I tried to post that in response to a question on Naked Capitalism and it disappeared. So I posted on my own blog to save for future reference. It's not really a good "elevator speech" though, as Internet links are not very effective on elevators. Perhaps I'll rewrite with the pertinent info from the links in brief verbal format.
Anyway, I appreciate the feedback and am glad that MMT is getting more serious discussion.
6 comments:
Personally, I love the arrow from "Austrian" pointing at "Neoclassical". And how "Austrian" is located a long way from "Marginalist" which also points at "Neoclassical".
Iggle Biggle Wiggle Schmiggle Mish Mosh Gooo.
Iggle Biggle Wiggle Schmiggle Mish Mosh Gooo.
The most intelligent thing Roddis has ever said.
“MMT draws from institutional economics (recognizing the role of large institutions as well as classical markets), chartalism (the basics of fiat currency), Keynesianism, financial instability considerations, and a sectoral balance perspective (accounting based economics).”
Let’s keep it simple. Monetarily sovereign governments create money out of thin air by changing the numbers in bank accounts. (Banks create loan money in the same way.)
Monetarily sovereign governments destroy money (send it back to thin air) by changing the numbers in bank accounts.
It’s the same as creating and destroying points in a sports game. We do it by changing the numbers on the scoreboard.
The 1% enslave the 99% because of the false belief that dollars (or pounds or pesos or whatever) are physical and limited.
When you stop to consider the range of influences on MMT from various schools of thought it is a reminder that the orthodox economist, who typically will not have been exposed to these ideas, will be at a disadvantage in understanding what the theory is actually saying.
In the public debate I am pretty quick to suspect commentators of being disingenuous, and no doubt there is plenty of that, but there may also be a degree of actual confusion. Either it won't be clear how MMT differs from orthodoxy ("we knew it all along") or it will seem totally alien ("crazy talk").
Because of institutional realities of the economics discipline, heterodox economists usually will have studied the orthodoxy, often to PhD level and maybe beyond, in addition to whatever their preferred heterodox approach now is. It makes it quite a bit easier to understand and anticipate opposing arguments than is perhaps the case for orthodox economists.
To be clear, heterodoxy is not immune to similar blind spots, especially across the Marxist/non-Marxist divide. These two camps often demonstrate poor understanding of each others' perspectives, presumably due mostly to lack of exposure. It takes a lot of work to become a heterodox economist due to the need to cover orthodox material while trying to learn a preferred approach. So time constraints may be a large part of the reason for poor understanding on both sides.
---
Gratuitous addendum:
I'm sure adherents to every school of thought get annoyed by how their approach is caricatured by others.
In my case, I have always been bemused by claims that Keynesian economics is "simplistic" and Marxist economics "airy-fairy".
I think students struggle much more with Keynesian ideas than neoclassical ones, because the former are macro in nature and require cognizance of interactions and feedbacks. Is it much easier to think "at the margin" and in the micro holding everything else constant.
And Marxism, whatever else might be said, strikes me more than most perspectives as hard-nosed. Half the time I can't tell the difference between a Marxist view on MMT and a right-wing burn the poor market-fundamentalist position. :-)
@ peterc:
Rejection of MMT arises not from a failure of intellect, but of moral character.
Active opponents of MMT can be grouped into three main categories. . .
[1] People who are consumed by ego and smugness
[2] People who seek to please the rich
[3] People who shill for snake oil nonsense, such as a “gold exchange."
Thanks for posting, Tom.
I tried to post that in response to a question on Naked Capitalism and it disappeared. So I posted on my own blog to save for future reference. It's not really a good "elevator speech" though, as Internet links are not very effective on elevators. Perhaps I'll rewrite with the pertinent info from the links in brief verbal format.
Anyway, I appreciate the feedback and am glad that MMT is getting more serious discussion.
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