Bill Mitchell — MMT and the MMT Project – Part 2

Important. Another must-read to stay abreast of developments in MMT and its promotion.

I would like to comment specifically on this paragraph.

I am thinking here of the way in which mainstream economics characterises humanity as rational, maximising units who pursue individual self-interest as their sole goal. Those assumptions are foreign to the way the other social sciences construct human decision-making.

This is key in understanding the issues. Conventional economists assume that economics "should" deal with economic subjects, and Bill agrees with that view insofar as he argues in part 1 of this two part series that "MMT is macroeconomics."

This begs the question, what does "economic" mean?

Economists assume that people have "economic interests" and there is "economic value" as part of the the broader categories of human interests and individual and social values. This means that people act "economically" as individuals and in aggregate without assuming that they have other interests and values that may be competing with the economic.

This is a simple case of abstracting to simplify a broad range of data into tractable form in order to pose specific questions about issues that can be categorized as "economic."

No problem so far. It must be noted, however, that his sharply delimits the scope of the inquiry to "the economic," and it also includes a difference of scale between individuals (micro) and aggregate social (macro).

Bill pointed out in part 1 that conflating the micro and macro scale results in fallacies of composition that infect the analysis if scale is not respected.

There is a similar issue involving the scope of the entire economic endeavor. The major challenge arises from abstracting the economic from the social when economic behavior is an integrated aspect of human behavior. Therefore, treating economic behavior as either equatable with human behavior or the dominant aspect of it risks category error and exceeding the scope of the inquiry as determined by the framework and assumptions.

Bill is quite aware of these issues and has pointed out in many places previously how many conventional economists fall victim to these mistakes, which are revealed when they use their expertise in economics to make economic forecasts or predict policy outcomes, for example. This was demonstrated, for example, when conventional economists missed the development of the global financial crisis, since the factors leading to it lay outside the scope the models they were using.

Because MMT has demonstrated its usefulness in this regard, many have become interested in MMT and some of these have attempted to adapt MMT insights to their own field or extend their expertise to the use of MMT as a policy science used in formulating policy. This has developed into what Bill calls "the MMT project" as distinct from MMT as a macroeconomic theory with a unique foundation.

This post furthers his discussion of this distinction.

Finally, my training is in philosophy (former philosophy professor) and I can attest that Bill Mitchell takes a highly sophisticated and well-informed stance philosophically about the foundations of these complex issues. He is well-read in many fields and has brought a range of knowledge to bear on the issues he analyzes. He has struck a balance between honed thought and wandering into the weeds and getting lost in irrelevance, which is easy to do in philosophical thinking. A job well-done.

Bill Mitchell – billy blog
MMT and the MMT Project – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia