Much of the critique that Palley delivers was also waged against Abba Lerner’s ‘functional finance’ approach — on which much of MMT is based — back in the 1940s and 1950s. Even if some of today’s ‘Keynesian’ economists do not understand Lerner, there once was one who certainly did:
Lars P. Syll’s BlogI recently read an interesting article on deficit budgeting … His argument is impeccable.John Maynard Keynes (CW XXVII:320)
Thomas Palley claims MMT fails to provide plausible macroeconomics
Lars P. Syll | Professor, Malmo University
1 comment:
Post-Keynesianism vs MMT: a zombie debate
Comment on Lars Syll on ‘Thomas Palley claims MMT fails to provide plausible macroeconomics’*
Thomas Palley is asked: “What are the major flaws you see within Modern Monetary Theory?”
Clearly, the question is about the scientific truth/falsehood of the theory called MMT. Scientific truth is, in turn, defined by material and formal consistency: “Research is, in fact, a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant)
The problem is that economics is NOT a science but political agenda pushing. Economists are NOT scientists but useful political idiots. Because of this, economic debaters do not spend much time, if any, on clarifying and finally deciding questions of material/formal consistency but turn at the first opportunity to political blather.
Accordingly, Thomas Palley gets straightforwardly lost in the woods of meta-communication and practicability:
“MMT is the counterpart to the [budget] hawks. And here’s the rub. MMT is needed as an anti-dote to austerity hawks, but neither make for good economic theory.”
“… MMT economists used to say it is easy to have full employment without inflation. I don’t think that is true.”
“… MMT economists tend to say the central bank should park the interest rate at zero and forget about it. I think that is crazy. It is throwing away an important economic policy tool,”
“Once MMT starts addressing these critiques, it collapses into fairly standard Keynesian economics. But MMT does not want to acknowledge that because it undercuts its policy polemic and claim to fame.”
“As a political polemic, it [MMT] has done a lot of good by riposting the budget hawks and by persuading people that government has much more financial space than the hawks say.”
“…we need to persuade the general public about the role of government. Persuade people we need government to stabilize the economy.”
Note well that it is NOT the task of an economists to persuade the public of anything. This is the business of politicians. The task of economists is to figure out how the economy works.
And here is the problem: economists are NOT scientists and have NOT produced scientific knowledge in the last 200+ years but proto-scientific garbage. The fact of the matter is that both Post-Keynesianism and MMT are provably false.#1, #2 So, any debate between the two camps is not a scientific debate but at best an entertaining talk show.
Thomas Palley fails to identify the lethal defect of MMT. MMT is based on the sectoral balances equation (I−S)+(G−T)+(X−M)=0. This equation is provably false.#3, #4 Because the foundations are false the whole analytical superstructure is false. Which, in turn, means that MMT policy guidance has NO solid scientific foundations. MMT is scientifically worthless and a political fraud. The fatal effect of MMT is on distribution and NOT on inflation.
Fact is that Post-Keynesianism is not one iota better.#5, #6
In the final analysis, there is nothing to choose between Post-Keynesianism and MMT. Both approaches go down the scientific drain. The actual problem of economics is how to get all these scientifically incompetent/politically corrupt folks#7 out of the way and to make economics a science.
Egmont Kakarot-Handtke
References
https://axecorg.blogspot.com/2019/04/post-keynesianism-vs-mmt-zombie-debate.html
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