The paradigm is shifting – and MMT and the Green New Deal have to be understood in that context — Richard Murphy

Richard Murphy addresses specific issues raised questioning MMT.

"Paradigms" are overarching conceptual models of systems that create a framework in terms of which competing theories can be generated in response to issues, especially emergent ones at the frontier of knowledge. The paradigm that has been in force with respect to policy issues since the rise of the Chicago School and the replacement of John Maynard Keynes with Milton Friedman has been neoliberalism, the basis of which is various iterations of neoclassical economics.

 Richard Murphy sees that paradigm changing in favor of the MMT-based world view, which is institutionalist and historical rather than formalistic and naturalistic.Moreover, it's foundation is solidly empirical, being ground on the availability of real resources. Real scarcity rather than scarcity of capital ("money) is the actual issue, and the challenge is to allocate real resources effectively to solving emergent issues as efficiently as possible. Effectiveness is about goals and priorities, while efficiency is about means the means for achieving these objectives. To paraphrase management überguru Peter F. Drucker in The Effective Executive (not "efficient executive"), efficiency is about doing things right and effectiveness is about doing the right things.

The basis of neoclassical economics is the assumption that leaving individuals left free to choose will result in spontaneous natural order and that "planning" will reduce both the efficiency and effectiveness of the "magic of free markets," which includes free trade and free capital flows. The basis of capitalism is that favoring capital over the other factors of production, labor (people) and land (environmental), will result in maximum growth.

The basis of institutional economics is that economics is one aspect of society, along with many others, including the social and political. Society is a system of embodied individuals making decisions based on self-interest, however, "rational" self-interest is not limited to the economic other than in rather trivial matters. Moreover self-interest and its pursuit is affected by many factors arising from social embeddedness. Society is a complex adaptive system adapting through coordination to changing circumstance, a large part of which is environmental.

Now, externalities have become an existential threat, and social dysfunction also threatens security and order as a result of increasing inequality of distribution that is being perceived as rising injustice. Consequently, humanity rising to the need to adapt to the new conditions, and this is bringing about a paradigm shift socially, politically, and economically.

Tax Research UK
The paradigm is shifting – and MMT and the Green New Deal have to be understood in that context
Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum