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Sunday, March 21, 2021

MMs, MMTers, Larry Summers, young tweeters, and politicians — Scott Sumner

Scott Sumner still doesn't get MMT. It is a bit more nuanced than he thinks, it appears. This is not entirely his fault in that MMT economists present a simplified model for popular consumption and that is unlikely to satisfy economists. Similarly for the MMT-based macro textbook, which is aimed at undergraduates and beginning grad students. But this doesn't excuse conventional economists that have read the popularized MMT literature and blogs and still have questions, in that they need to dig deeper into the professional literature.

But for an economist to really grasp MMT, background in Keynes, Post Keynesianism, and institutional economics, finance, and accounting are needed, since MMT builds on this foundation. Conventional economists don't have this background and lacking it, they approach MMT on terms of conventional economics, which heterodox economists view as flawed. So it is unsurprising that MMT doesn't fit those models. In addition to "Chicago School economics," this affliction includes New Keynesianism. So it is unsurprising that neither Scott Sumner nor Paul Krugman get it yet. But I am rooting for them to do so.

The Money Illusion
MMs, MMTers, Larry Summers, young tweeters, and politicians
Scott Sumner | Ralph G. Hawtrey Chair of Monetary Policy at the Mercatus Center at George Mason University

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3 comments:

  1. Ryan HarrisMarch 21, 2021 at 10:30 PM

    We really need an inflation deduction on capital gains as MMT ramps up. Double taxation, inflate away the value with fiscal space then tax the theft too. So many of these dodgy green stocks were bought with promises of endless subsidies that never materialized, inflation is their only hope.
    AMaybe after the midterms we can couple green stock margin loan forgiveness with student loans.

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  2. Ralph MusgraveMarch 22, 2021 at 1:56 AM

    I've long regard Sumner as being basically clueless. One of the main ideas he has pushed over the last ten years is his pet "Monetary offset" idea: that's the idea that fiscal stimulus is useless because the Fed will just negate it with interest rate hikes. Well the blindingly obvious flaw in that idea is that the the Fed most certainly WILL NOT "negate" if it thinks stimulus is in order, i.e. that a particular bout of fiscal stimulus will not be inflationary..!!!! I did an article on that on my blog some time ago:

    https://ralphanomics.blogspot.com/2015/02/monetary-offset-is-joke.html

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  3. NeilWMarch 22, 2021 at 9:57 AM

    "One of the main ideas he has pushed over the last ten years is his pet "Monetary offset" idea:"

    US focussed again.

    Any central bank governor that tried that in the UK would be invited to pursue alternative employment elsewhere and replaced with a more compliant individual.

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