Phil Armstrong’s Can heterodox economics make a difference? is an exemplary case study for a wish long-held for heterodox economics.[2] Armstrong’s recent contributions have revolved around the idea that if only the disparate schools of heterodoxy could work together then it would be much easier to make the case that the inertia of the mainstream could be stopped (Armstrong, 2018). This dream of the heterodox scholar would require a meeting of minds, a common framework, and a set of goals that allowed for an increased pluralism in our economic space. It would be a requirement to build an academy that could learn from difference, produce in divergent ways, and always have at base an agreement on what exists (Armstrong, 2015). This dream is, however, a mirage of sorts, which is revealed to the reader as they begin the path through these interviews conducted by Armstrong.The Gower Initiative for Modern Money Studies
Armstrong’s text is the expression of this dream of the heterodox space. His own work in recent years has proposed a “heterodox paradigm” where differing schools, if only they would accept MMT’s position on money and government spending, could be brought together (Armstrong, 2018). From this position it would be possible, so argues Armstrong, to present a competing narrative to the mainstream with a wide variety of pluralistic positions on display. Thus, ending a hegemony by presenting a hegemony of MMT’s ontology. I wish to be clear that I am deeply sympathetic to this idea and am a proponent of a version of it myself, but I fear it is less than plausible....
Can Heterodox economics work together to make a difference? – a Review and Discussion of Phil Armstrong’s Interviews
Review by Hannes Ingo Torbohm
People have been pointing out for a few years now that there's a case for MMT and Positive Money (which advocates full reserve banking) to work together. Both claim that stimulus should simply take the form of government and central bank creating and spending more money into the economy (and/or cutting taxes).
ReplyDelete" Both claim that stimulus should simply take the form of government and central bank creating and spending more money into the economy (and/or cutting taxes)."
ReplyDeleteThey don't Ralph and you know they don't.
MMT proposes a Job Guarantee to replace interest rate targeting as the central inflation stabilisation mechanism and considers the 'full reserve banking' obsession to be a complete waste of time since it has no control function. It's a fallacy based upon a misunderstanding about how banks actually work.
Beyond that MMT is essentially tax and spend. You cannot spend unless there are resources to buy. And banks are just left to their devices. Once you remove them form the monetary injection path, normal competition and bankruptcy keeps them in line just like any other commercial firm. They are no longer 'special'.
“ if only the disparate schools of heterodoxy could work together ”
ReplyDeleteThey will synthesize but after the present people in the schools are dead… this guy thinks they can rush this … doesn’t work that way…
Thanks for the link as always, Tom. Made for very interesting reading.
ReplyDeleteNeilW, Fantastic as it might seem, I am actually aware that MMT advocates JG. The fact that I said that both MMT and Positive Money “Both claim that stimulus should simply take the form of government and central bank creating and spending more money into the economy (and/or cutting taxes)" does not mean I am claiming that MMT (or Positive Money for that matter) do not advocate other forms of stimulus. Elementary logic.
ReplyDeleteNext I am fascinated by your claim that “MMTconsiders the 'full reserve banking' obsession to be a complete waste of time since it has no control function.” First off, MMTers actually have VERY LITTLE to say on the full versus fractional reserve argument. Bill Mitchell has written approximately one article on the subject (out of a total of over a thousand articles) over the last ten years.
Second, your “control function” is just an impressive sounding, technical sounding phrase you made up on the spur of the moment which is meaningless unless you can explain what it means. I’ve read millions of words on the full versus fractional reserve argument and do not remember either advocates or opponents of full reserve mentioning a “control function.”
Re your claim that full reserve is a “…a fallacy based upon a misunderstanding about how banks actually work.” Perhaps you can explain exactly what the “fallacy” and “misunderstanding” are. Personally I’m not so dumb as to simply accuse the advocates of fractional reserve of being led astray by a “…fallacy based upon a misunderstanding…” and leaving it at that. I’ve actually set out in detailed REASONS for backing full reserve. My latest publication on that topic is here:
https://mpra.ub.uni-muenchen.de/108488/1/MPRA_paper_108488.pdf