In Monte Python’s Life of Brian we were introduced to the “People’s Front of Judea”, which was “one of many fractious and bickering independence movements, who spend more time fighting each other than the Romans”. The segments featuring the Front were very amusing. It was humour but redolent of the sort of historical struggles that have divided the Left over the centuries. In Australia, the history of the Communist Party, for example, is one of many factions, splintering into new parties and leaderships after disputes about Bolshevism, then the Communist International and Stalinism, then the so-called “imperialist” war by the Allies against Nazism, then Krushchev’s revelations about the crimes of Stalin, then the Soviet invasion of Hungary, then the split between the Soviet Union and China and the rise of Mao, then the Soviet invasion of Czechoslovakia, and so on. This sort of division is mirrored around the world on the Left side of politics and struggle. I have been reminded of this history in recent weeks as the ‘war’ against Modern Monetary Theory (MMT) has been ramped up from so-called progressives. However, this ‘war’ seems different to the sort of internicine struggles that have historically bedevilled the Left. We now have all manner of strategies emerging, ranging from classic Association fallacies to ridiculous claims that MMTers perpetuate ‘anti semitic tropes’, and on to plain invention, a.k.a. straight out fabrications or lying. There is no real attempt to embrace the body of work we have created over the last 25 years. Quite the opposite – the ‘critics’ haven’t an original thing to say about the substance of MMT. They have instead decided to smear us with increasingly hysterical assertions. Which raises the interesting question for me – what is driving this aberrant behaviour? Fear, a sense of irrelevance, jealousy, Brexit, spite, … what? I have conjectures but no real answers....I would agree that criticism of MMT is mostly memes and tropes with very little substance, as if the developers and proponents of MMT were simpletons that had not thought things through and were just spouting bromides or selling snake oil. The number of serious critiques of MMT are few and far between and well-informed one are even rarer. In fact, I can't recall even one that demonstrated familiarity with the body of MMT literature. Sad state of affairs.
Bill Mitchell – billy blog
When the Left disgraces itself
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
"what is driving this aberrant behaviour? "
ReplyDeleteIts NOT aberrant behavior... this is simply the way the platonist/dialectic (modern day "Liberal Arts") method works... dogmatic advocacy for one's own thesis... there is never a scientific adjustment made by any of the parties... there may be an eventual synthesis conducted by the survivors of the different opposing theses (hence the "one funeral at a time" figure of speech ie "the ration of sin is death" Rom 6:23 figure of speech) and this is the BEST case scenario just to get ANY part of your thesis accepted under that method... ie first requires your death (great method you got there LOL!)
Convert over to a scientific method and all of this goes away... everyone on that side is trained to make the immediate proper adjustment...
Show me an example in history... ANY example... where you had two platonist/dialectic morons arguing one with Thesis A and another with anti-thesis Thesis B arguing back and forth where all of a sudden in real time all the Thesis A people just suddenly say "hey! we are now all going to convert immediately over to Thesis B!" or vice versa...
ReplyDeleteNever happened... doesn't work that way... never going to...
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ReplyDeleteHere is a serious criticism of MMT: there is no coherent price level (inflation) theory. Bill Mitchell, Warren Mosler and Randall Wray do not defend the same price level theory. Each one of them tells something different. Also, all of them seem lacking.
ReplyDeleteFor example, Bill Mitchel theory can be summarized as "all spending (government and non-government) carries an inflation risk" and "in the absence of an institutional bias towards inflation (indexation schemes, etc) or a imported raw material (for example, energy) shock, inflation will be low if not negative if aggregate spending growth in the relevant ‘economy’ is weak (in relation to what is required to maintain high pressure and low unemployment)". He focuses on resource utilization, although he recognizes other factors ("institutional bias", whatever it means and "imported raw material shock").
Then how can Venezuela face 862.6% inflation rates (according to its own central bank) and, at the same time, face 40%+ unemployment rates? It is surely not because of resource overutilization, and it doesn't seem to be an imported raw material shocks (are shocks happening every month for years now?), hence it must be "institutional bias". What is this institution bias? How was it introduced? How can it end? Is it independent and unrelated to government spending? Or, on the contrary, was it introduced by government spending, even in the face of idle resources? It is a very lacking theory.
Of course, the fact that MMT has, in my view, its problems, it doesn't change the fact that mainstream is much worse, as evidence is making clear every day.
Andre--
ReplyDeleteThe Venezuelan government obviously has legitimization issues fostered by the U.S. and its allies. MMT is quite clear that most money is fiat currency and that fiat currency depends upon the credibility of the government to be viable. So there's no need for an elaborate theory to explain inflation in Venezuela. A currency is only as strong as the government backing it.
With regard to price level (inflation) in general, I'm not sure what you're looking for. Basic logic indicates that prices will go up when demand for something is higher relative to the supply of that thing (prices go up when demand goes up or supply goes down, other things being equal). MMT adds value by contesting conventional notions of inflation that are incorrect, such as that monetization of government debt will lead to high inflation.
Go to Brazil, for example. It faced hyperinflation and high unemployment rates at the same time for many years. It was not resource overutilization neither imported goods. So what is left is the "institucional bias". And Brazil didn't face legitimization issues. There are many cases like that in history and today.
DeleteAlso, in Venezuela the government is still collecting taxes, and I don't believe that the credibility of the state is being challenged in that regard.
MMT doesn't explain that kind of inflation. I'm pretty sure that it was caused by excess government spending even in the face of underutilized resources.
How MMT disgraces itself
ReplyDeleteComment on Bill Mitchell/Tom Hickey on ‘When the Left disgraces itself’
Tom Hickey argues: “The number of serious critiques of MMT are few and far between and well-informed one are even rarer. In fact, I can’t recall even one that demonstrated familiarity with the body of MMT literature. Sad state of affairs.”
Fact is
(i) The foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is provably false.#1 Therefore, the whole analytical superstructure is false.
(ii) MMTers purposefully deceive people.#2
(iii) MMTers violate scientific standards and systematically block/suppress refutation.#3
(iv) MMTers are NOT scientists but agenda pusher for the Oligarchy
(v) The MMT policy of deficit-spending/money-creation undermines Democracy.#5
The philosopher Tom Hickey is a disgrace for the community of philosophers which defines itself through the voluntary commitment to high ethical standards.
Egmont Kakarot-Handtke
#1 For the full-spectrum refutation of MMT see cross-references MMT
http://axecorg.blogspot.com/2017/07/mmt-cross-references.html
#2 MMTers are false Progressives and false Friends-of-the-People
https://axecorg.blogspot.com/2019/07/mmters-are-false-progressives-and-false.html
#3 Economists/MMTers: agenda pushers, distractors, blockers, muters, censors
https://axecorg.blogspot.com/2019/02/economistsmmters-agenda-pushers.html
#4 Very busy these days: Wall Street’s agents
https://axecorg.blogspot.com/2018/10/very-busy-these-days-wall-streets-agents.html
#5 MMT undermines democracy
https://axecorg.blogspot.com/2019/07/mmt-undermines-democracy.html
Andre: Read Mark Weisbrot and Francisco Rodríguez on Venezuela. The essential cause of the inflation was their multiple fixed rate currency exchange system and their usage of this as a terrible way to favor consumption by the poor. As in Brazil this was exacerbated by high interest rate "to fight inflation" policy. In the much lower range of interest rates prevalent in major developed countries, there is some room for doubt about the effect of interest rates on prices. Sometimes higher rates can disinflate. Sometimes they will inflate. But in the Latin American chronic inflation case, there is no doubt that this "cure" does and has always done the opposite of what it is advertised as doing.
ReplyDeleteCommodity price declines and later American economic sabotage, wrecked the fragile system they had built. Tragically, because they just had to stop doing very stupid things to make it into a robust one that might have resisted these influences beyond their control.
The stupid things amount to excess government spending in the face of underutilized resources, as you say.
MMT doesn't explain that kind of inflation.
Yes, it does. MMTers have always recognized that there can be inflationary bottlenecks, as well as monopolists exerting their pricing power, well before resources are fully utilized.
Wray says something like - we would have to build an enormous - and inflationary - number of ballistic missiles before we employ the last worker in Harlem.
Goes back to Keynes distinction between semi-inflation and inflation, Lerner's distinction between low full employment and high full employment - both before the Phillip's curve.
The very existence of this kind of inflation is the reason for the Job Guarantee rather than generalized (so-called) Keynesian spending.
I don't think that the MMT theorists' theories are incoherent or incompatible. Some may focus more on one thing than others. They could do with assembling their thoughts together, which are widely scattered over many papers. Maybe they have in their recent books.
I can find many real world examples and many theoretical ways a government can create intentionally or not inflation, with no relation with resource utilization, "institutional bias" and imports. Bill Mitchell's theory doesn't cover that. Warren Mosler theory seems to cover, but he doesn't write much (or not much in an understandable way). Wray seemed lost, but 2 years have passed and maybe something may have changed.
DeleteMMT seems incomplete in that regard. And this stuff is extremely relevant for good policy proposals, and more so in developing countries.
So what's a more coherent theory of inflation Andre? MMT's theory is better than any I already know but if it could be improved I want to know.
ReplyDeleteThe fact that MMT is the better theory around doesn't make it necessarily good. It's still lacking.
DeleteI don't know how it could be improved.
I'm like a patient who knows that my doctor is wrong because I'm still sick. Maybe he is the best doctor there is, but he told me I would be cured in a couple of days but it didn't work and I'm still sick. I cannot understand what is the correct diagnosis or treatment, but I know he is wrong because I'm sick. Evidence is evidence.
Maybe Warren Mosler already have a superior inflation theory (and maybe not).
I'm pretty sure that evidence makes it clear that an economic can get high inflation rates because of government spending even if resources are underutilized, and it has nothing to do with importants or "institutional bias"...
Two typos there. It should be "best" instead of "better" and "economy" instead of "economics". I'm writing from a smartphone
DeleteBill Mitchell says he can’t work out why lefties spend so much time quarrelling with each other. The answer is that lefties tend to disagree for the sake of disagreeing: i.e. they quarrel just to attract attention to themselves.
ReplyDeletePerhaps the most absurd instance of this is the tendency of lefties to support the far right movement, Islam, simply because Islam is anti the Western establishment. I say Islam is far right because it promotes far right policies like female genital mutilation, wife beating, homophobia, etc.
Calgacus
ReplyDeleteFact is that the foundational MMT sectoral balances equation (I−S)+(G−T)+(X−M)=0 is provably false. Therefore, the whole analytical superstructure is false. Therefore, MMT inflation theory is false by implication.#1-#6 Historical examples are NO substitute for the true theory. Conversely, the true theory is the precondition for understanding history.
Egmont Kakarot-Handtke
#1 MMT was right all along: Gov-Deficits do NOT cause inflation
https://axecorg.blogspot.com/2017/10/mmt-was-always-right-gov-deficits-do.html
#2 Attention: there are THREE types of inflation
https://axecorg.blogspot.com/2017/06/attention-there-are-three-types-of.html
#3 Settling the MMT―Inflation issue for good
https://axecorg.blogspot.com/2019/05/settling-mmtinflation-issue-for-good.html
#4 MMT, money, value, and transcendental Capitalism
https://axecorg.blogspot.com/2019/05/mmt-money-value-and-transcendental.html
#5 Dear idiots, government deficits do NOT cause inflation
https://axecorg.blogspot.com/2019/02/dear-idiots-government-deficits-do-not.html
#6 Economics as tireless production of proto-scientific toilet paper: inflation theory as an example
https://axecorg.blogspot.com/2018/09/economics-as-tireless-production-of.html