Tuesday, July 21, 2020

Bill Mitchell — An old central banker trying to come to terms with MMT – not quite getting there

Last week (July 14, 2020), a former deputy governor of the Reserve Bank of Australia (RBA), Stephen Grenville wrote an article – Modern Monetary Theory and mainstream economics converging. The title suggests a gathering of minds between two paradigms – the degenerative mainstream macroeconomics and the emerging Modern Monetary Theory (MMT). I wouldn’t represent what is happening in that way. Convergence implies a harmonious process. The reality is that some of the mainstream economists have realised that their approach is deeply flawed and events over many years have demonstrated those flaws, while ratifying the empirical content of central MMT propositions. Our position has been consistent over 25 years. Now, the mainstream is fracturing and economists are trying to save face and remain relevant by suggesting, in various ways, that they knew all of the MMT insights all along, or variants on that theme. They didn’t. They were deeply opposed and hostile to key MMT insights that are now becoming widely acknowledged as correct. In trying to maintain this image of convergence, Stephen Grenville’s article, while quite insightful in many ways, misleads his readership and mispresents key MMT elements....
 Bill outlines the coming conflict between conventional economist and MMT based no longer on their riducule of MMT but rather claiming that they knew it all along, except their framing of MMT is in conventioanl terms and remains wrong, wrong, wrong. Their approach is a priori through and through, while MMT is based on empirics, otherwise known as description of reality in terms of how things actually work. The different is between a hypothetical-deductive aproach based on a priori assumptions and a descriptive approach based on institutional analysis and accounting rules (stock-flow consistency).

Bill provides a short list of the key differences, the MMT approaching true and the conventional approach being false, based fact.

Bill Mitchell – billy blog
An old central banker trying to come to terms with MMT – not quite getting there
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

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