Merijn Knibbe — Modern Money Theory and inflation control: look at constant tax inflation

Merijn Knibbe demonstrates that some economists sympathetic to MMT don't grasp the finer points — yet. 

Just pointing them to the literature is probably not sufficient or the best strategy. The literature needs to be organized in terms of topics, and links provided for easy access, for example.

There are two fundamental principles in sales, and now we "selling" MMT. That is, we want people to "buy in."

Some buyers are exhibit resistance that needs to be overcome. Others are open but need to be persuaded to take action. Others are ready to buy and the task is to make it simple to take cation by making the buying experience easy and enjoyable for them.

Real-World Economics Review Blog
Modern Money Theory and inflation control: look at constant tax inflation
Merijn Knibbe

Here is a comment I left there:

Tom Hickey
February 17, 2019 at 5:28 pm

MMT economists emphasize that spending and taxation are both part of the existing automatic stabilization mechanism, with transfer payments (welfare) increasing with economic contraction and tax revenue decreasing. The opposite holds for expansion.

Since fiscal policy is not designed this way at present, the spending and offset mechanism is not functioning as well as it could to optimize performance along the cycle. Instead, fiscal policy is determined under mistaken assumptions about both spending and taxation, as MMT economists have pointed out. 

This is what the debate needs to be about.

An ideal fiscal policy would incorporate this in modeling the cycle in order to optimize stabilization policy and reduce the need for ad hoc measures to correct, although that might be called for in special cases, such as the GFC and ensuing deep and persistent contraction owing to a financial cycle culminating in the stage of Ponzi finance. Incorporating heterodox knowledge could have avoided or mitigated that.

MMT economists were also pointing this out based on stock-flow consistent modeling, functional finance, and incorporation of understanding Minsky had provided prior to the crisis and they also provided a fiscal remedy that was not deployed. MMT is based on Keynes, Lerner, Godley and Minsky, for example, but integrates this knowledge and develops it further.