Wednesday, May 1, 2019

Edward Harrison — Hippie punching the MMT crowd

So, you have to tune out all of this MMT hippie-punching. That’s politics. Now, you don’t have to agree 100% with the MMT framework. The real question is, first and foremost, what parts of MMT make sense as a descriptive framework. That means understanding the framework and ignoring the policy prescriptions, where all of the vitriol is focused.
One basic thing that works for me: Chartalism
In March, I tried to show you where MMT dovetails with the economics of six economists of repute. I called my piece “MMT for Dummies” – even though it was actually a relatively dense piece. But, the point was to get away from the policy prescriptions and focus on the descriptive side by distilling MMT down into recognized precursors....
I don't think it is quite the case that all the vitriol is focused on the policy formulation. A lot is, to be sure. But there is also a lot of focus on the basic idea of chartalism, that the government is the monopoly provider of its currency, which gives it monopoly power if it chooses to use it.

Critics know this now that MMT has let the cat out of the bag, and some probably knew it prior to MMT telling them in the sense that the Post-Bretton Woods institutional arrangements were designed to either give the impression that a gold standard is still in place, or to constrain government to act as if it were instead of using its actual power in the public interest.

This is key to neoliberalism, which is a political theory based on economics that seeks both to enable rent extraction and to justify rent-seeking behavior, since economic rent is the primary way that capitalism transfers wealth from the productive classes to the ownership class that produces nothing of real value.

The "mortal sin" of MMT as neo-chartalism is to blow away the smoke and reveal the mirrors that create the illusion of a gold standard where one no longer exists. "Fiscal rectitude," "fiscal discipline," "fiscal responsibility" and "fiscal austerity," as well as "expansionary fiscal austerity," are all code words for acting as-if constrained by a gold standard.

This is the basis for all the hyperventilating over inflation, hyperinflation, currency debasement, and the like. The basic idea is that if a currency sovereign is not on the gold standard, it must nevertheless act as it it were in order to maintain the value of the currency, which is the basis for wealth accumulation.

Credit Writedowns
Hippie punching the MMT crowd
Edward Harrison

1 comment:

AXEC / E.K-H said...

The not so funny MMT vs Neoliberalism slapstick
Comment on Edward Harrison/Tom Hickey on ‘Hippie punching the MMT crowd’

Tom Hickey summarizes: “This is key to neoliberalism, which is a political theory based on economics that seeks both to enable rent extraction and to justify rent-seeking behavior, since economic rent is the primary way that capitalism transfers wealth from the productive classes to the ownership class that produces nothing of real value.”

Tom Hickey correctly observes that neoliberalism “is a political theory based on economics”. He forgets to mention that the underlying economic theory is provably false, i.e. materially/formally inconsistent. So neoliberalism never has been anything else than political agenda pushing in the garb of science. The problem of neoliberalism is not so much that it is a fraud but that it abuses and corrupts science. To this day, economics is not a science because economists are too stupid/corrupt for science.#1, #2

Tom Hickey is wrong by maintaining that “economic rent is the primary way that capitalism transfers wealth from the productive classes to the ownership class”. First of all, he does not know what profit/rent is.#3, #4 Accordingly, he does not realize that MMT actually promotes the biggest transfer of financial wealth in all of history.

The macroeconomic Profit Law implicates for the relationship between the business sector and the government sector Public Deficit = Private Profit. So, roughly speaking, the Oligarchy’s financial wealth and public debt grow in lockstep. In the final analysis, the Oligarchy’s financial wealth is roughly equal to accumulated Public Debt with WeThePeople as ultimate bag holders (currently $22 trillion).

So, what Tom Hickey accuses neoliberalism of is exactly what MMTers are doing on an even larger scale. The whole MMT vs Neoliberalism debate is a bad joke of stupid/corrupt economists at the expense of WeThePeople.#5

Egmont Kakarot-Handtke

#1 Macroeconomics: Economists are too stupid for science
https://axecorg.blogspot.com/2019/04/macroeconomics-economists-are-too.html

#2 Still beyond the reach of economists: The Holy Grail of Science
https://axecorg.blogspot.com/2019/02/still-beyond-reach-of-economists-holy.html

#3 When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1932119

#4 Mad but true: 200+ years after Adam Smith economists still have no idea what profit is
https://axecorg.blogspot.com/2019/05/mad-but-true-200-years-after-adam-smith.html

#5 For the big picture see cross-references Political Economics/Stupidity/Corruption
http://axecorg.blogspot.com/2015/11/political-economics-cross-references.html