Bill Mitchell — MMT and Power – Part 2

This is Part 2 of a series that is developing here on the topic of Modern Monetary Theory (MMT) and power. I often read that Modern Monetary Theory (MMT) is defective because it has no theory of power relations. Some critics link this in their narrative to their claim that MMT also has no theory of inflation. They then proceed to attack concepts such as employment buffers, on the grounds, that MMT cannot propose a solution to inflation if it has no understanding of how power relations cause inflation. These criticisms don’t come from the conservative side of the policy debate but rather from the so-called Left, although I wonder just how ‘left’ some of the commentators who cast these aspersions actually are. The problem with these criticisms is that they have clearly adopted a partial approach to their understanding of what MMT is, presumably through not reading the literature widely enough, but also because of the way, some MMT proponents choose to represent our work. In Part 1, I examined how the economics discipline evolved from political economy to a narrow focus on the ‘economy’ as if it existed in a void of power. I also disabused readers of the notion that MMT ignores the link between money and the real economy, which is a regular claim offered by critics from the Left. I also questioned critics who seem to want MMT to be a theory of everything. As I regularly point out MMT cannot predict who wins the football this week, but that isn’t a criticism. In Part 2, I am going to complicate things a little by expanding on the MMT is the MMT is a lens narrative as if we can neatly separate values from facts. I will also explain how power enters into the dominant theory of inflation in MMT....

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

Part 1 is here.

I hope Bill will  continue this series and perhaps write an article and then a book on it. 

Power relationships are foundation to the social, political, and economic asymmetry endemic in modern "capitalistic" societies in a way that resembles the role of land ownership the previous agricultural age. Political economy, which is what classical economics was called, acknowledge this role. Laissez-faire was about limiting the power of the state, however, in the historical period in which liberalism was challenging the power of church in imposing dogma and the state, dictates. 

Marx based his work on the role of power in economics, focusing on the power inherent in property relations instead. As result, Marx became anathema in economics and politics — but not sociology, which was left to study power. (See C. Wright Mills, The Power Elite.) Presently, the role of power in economics is chiefly pursued in economic sociology and political science rather than economics, and most conventional economists simply ignore it, as they do money, since wealth is one of the pillars of power relationships. This is rather incredible considering that asymmetrical power undermines key assumptions of neoclassical economics regarding the operation of market forces in ways that vitiate conventional modeling as representative of real-world systems and events.