Tuesday, March 26, 2019

Randy Wray — A Must Read: Why does everyone hate MMT?

The attacks on MMT continue full steam ahead. Janet Yellen (former Fed chair, but clueless on money and banking)—a centrist–has joined the fray. Jerry Epstein—on the official left–has ramped up his ridiculous claims, now associating MMT with “America First” and fascism (you knew that was coming—it has always been the refuge of critics who couldn’t come up with valid critiques).
But there are some rays of light. Bloomberg published a more balanced assessment (https://www.bloomberg.com/news/features/2019-03-21/modern-monetary-theory-beginner-s-guide). The authors of that piece actually took the time to go through our new textbook (Macroeconomics, by Mitchell, Wray and Watts—now available for purchase in the USA : And in Australia).

However, here is the best response to the critics I’ve seen:
WHY DOES EVERYONE HATE MMT? Groupthink In Economics, by James Montier, March 2019,
Not only does he take down prominent critics like Summers and Rogoff, he also provides a very useful 400 word summary of MMT. Some of you have asked for a concise statement, and this is as good as you’re likely to find....
New Economic Perspectives
A Must Read: Why does everyone hate MMT?
L. Randall Wray | Professor of Economics, Bard College

Here is a more direct link to James Montier, WHY DOES EVERYONE HATE MMT?


AXEC / E.K-H said...

Love and hate in economics: the PsySoc shell game
Comment on Randy Wray on ‘A Must Read: Why does everyone hate MMT?’*

James Montier summarizes: “Modern Monetary Theory (MMT) seems to provoke a visceral reaction amongst the ‘great and the good’ such as Rogoff, Krugman, and Summers. However, when reading their criticism I am often left with the impression that they haven’t actually bothered reading anything on the subject of their critique.” and “Sadly, the behaviour of the great and the good is far from exemplary in terms of economic debate. Terms like mess, foolish, fringe, nonsense, and voodoo alongside fear-mongering mentions of hyperinflations may make for an exciting story but they do little to advance the debate. In fact, the use of these words and the generally dismissive (but thoroughly unsubstantiated) nature of these articles appear to be typical of the output of those suffering from groupthink.”#1

To complain about economist’s ceaseless blather is either naive or insincere. Economics claims to be science since Adam Smith/Karl Marx but has never been anything else that political propaganda. In the political sphere, nobody cares about scientific truth. The point of political communication is to engage the audience and the tools are well-known since the ancient Sophists: rhetoric, storytelling/lying, empty promises, fear-mongering, and smearing.

It is no secret how politics works and there would be no problem at all if the political sphere and the scientific sphere were strictly kept apart. However, this is not the case with economics. Economists claim to do science but instead push a political agenda. Economics is the worst scientific failure of modern times. So, the profession’s claim to do science as expressed in the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud. Economists are not scientists but useful political idiots.#2

The scientific mission of economics is to figure out how the monetary economy works. Economists have failed at this task. Instead of figuring out the mechanics of the economic system, they have exhausted themselves with pointless speculation about Human Nature/motives/behavior/action. The point is, though, that Human Nature/motives/behavior/action is the subject matter of Psychology, Sociology, Anthropology etcetera. That is, economists have never understood what their subject matter is. The scientific fact of the matter is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and that all get the foundational concept of the subject matter ― profit ― wrong. MMT is no exception.#3

And this makes it inevitable that economic debates degenerate in the shortest possible time to folk-psychological sitcom blather. Explanations do not consist of the identification of objective economic relationships but of speculation about subjective motives/emotions which, in turn, boil down to hate, revenge, resentment, greed, imperiousness, and other psychological/social pathologies. Thus, economics leaves the scientific sphere and ends in PsySoc blather.

See part 2

Noah Way said...

Superb piece by Montier. Easily digested. The way he replies to MMT critics via footnote is pointed and crippling.

AXEC / E.K-H said...

Part 2

The current Mainstream vs MMT debate is no exception. Each side accuses the other of stubborn groupthink. This psychological explanation is beside the point. Each side pushes a political agenda. The lethal defect of economics is not cognitive impairment but political corruption.

In order to get out of the mess, the first thing to do is to proceed from PsySoc blather to science. MMT has to be rejected because it is materially/formally inconsistent. The lethal blunder of MMT is located in the foundational sectoral balances equation (I−S)+(G−T)+(X−M)=0. Because there is a crack in the foundations the whole analytical superstructure of MMT is scientifically untenable. #4, #5

MMT has not to be flushed down the drain because some random moron hates it or because some academic loudspeakers suffer from groupthink but because MMT is provably false, i.e. does not satisfy the scientific criteria of material/formal consistency. This is how science works. Economists, though, are to this day not guided by the principles of science.#6

Nobody hates MMT but everyone despises stupid/corrupt economists.

Egmont Kakarot-Handtke

* James Montier, Why does everyone hate MMT

#1 See also Bill Mitchell ‘Fake surveys and Groupthink in the economics profession’

#2 For details of the big picture see cross-references Political Economics

#3 MMT is better than mainstream economics but still not good enough

#4 Refuting MMT’s new Macroeconomics Textbook

#5 For the full-spectrum refutation of MMT see cross-references MMT

#6 For details of the big picture see cross-references Failed/Fake Scientists

Noah Way said...

Egmont is pissed because Montier didn't footnote him. Poor little Egmont, ignored again. Alas.

S400 said...

Scrolled down to Egmont text ”part 2”. Then i scrolled further. Scrolling is good.