...I am now going to dump on MMT. First, I agree with Noah that it is a policy proposal not a theory at all. The proposal seems to be “deficits should be increased”. In particular, MMTers insist that MMT is not functional finance and they do not agree with Abba Lerner, who argued that deficits should be increased unless and until inflation is undesirably high. Now the proposal “deficits should be increased” does not imply an optimal policy. If no matter how high the debt is, it should be higher, then there is no best policy. To be rude, this reminds me of supply siders who argue that taxes should be cut, evidently to zero. To be ruder, I don’t see any substantive point of disagreement between Kelton and Laffer. I am sure Kelton approves of taxation, but I don’t see how she gets there. As policy analysis MMT seems to me to be tugging on the Overton window, advocacy not analysis.
On the other hand, such tugging is needed right now, especially here in Europe. There is a powerful anti deficit orthodoxy (the ordo liberal ordodoxy). But it is not related to economic theory of any sort and it has been thoroughly rejected by mainstream new Keynsians and somewhat heterodox paleo Keynsians. The case against is weakened (somewhat) by pretending that it is the orthodoxy of academic economists.
I guess I ask Kelton how she disagrees with Krugman — her effort to explain this was spectacularly unsuccessful.
Maybe world views that are so different as to prevent fruitful debate, at which point the parties can only agree to disagree. This seems to characterize much of the conflict in the world today, internationally, domestically, within academia, etc. Interestingly, one aspect of the "debate" about the NY Times article on Stephanie Kelton seems to have devolved into woke and non-woke, like much of the rest of the discourse today.
Angry Bearcontra MMT Anopinion III
Robert Waldmann
A JG is a policy. Why not mention it?
ReplyDeleteAccording to MMT economists, all of them, the MMT JG is part of the theory as a caual explanation rather than policy. That is to say, it is necessary rather than discretionary.
ReplyDeleteOf course, but the debate seems to avoid elements that are of interest to the working class. Workers and the general public don't care about deficits.
ReplyDeleteI might have got a little too angry reading that this morning. Reflected in the comment I left there. I really don't understand this kind of criticism of MMT though, both from Waldman and Noah Smith. Seems like a refusal to try to understand something on its own merits and sour grapes combined. Oh well.
ReplyDeleteJerry, I am not sure that these people, including Krugman, are capable of understanding MMT. The institutional frame of reference, the method, the accounting, the finance, etc., are all alien to their way of thinking, that is, how they were trained to think as economists. They can't seem to think outside of that box. Even the terms don't have the same meaning.
ReplyDeleteMy impression was that Krugman actually tried to do it and couldn't, even when schooled by Jamie Galbraith. It's just beyond them. They would have to change their whole way of doing economics.
Simply put, they are not that bright.
ReplyDeleteCould be Tom. I remember Steve Keen schooled Krugman on banking pretty decisively. Krugman was smart enough to stop talking about banking after that even if he hasn't incorporated his lesson into his thinking much. It is a shame- the guy is very intelligent and has skills that I just don't possess. And a great pulpit to preach from.
ReplyDeleteMaybe because I just have a BA in economics and already had major issues with it by the time I graduated, I was able to 'unlearn' some of the crap I was taught more easily and actually consider the evidence that MMT provides. But either way, there is a clear path to discredit MMT for people like Waldman and Smith and Krugman. Just show that the descriptions that MMT provides are factually wrong. And they can't do it and so they carp about relatively minor things and try to portray it as some fringe ideology. Screw them.
“ Simply put, they are not that bright.”
ReplyDeleteCheckmate…. AGAIN!!!
Hey S, good to see you finally giving up on your fantasy “neoliberal conspiracy!” theories…
ReplyDeleteS, do you still watch the Alex Jones channel?
ReplyDeleteWhenever anybody says "JG is a policy", then you can tell they haven't understood MMT.
ReplyDeleteMMT says that inflation is controlled by labour buffer stocks, not by interest rates. What happens is when an economy runs hot, there is a process to dump people out of their high earning/high profit bubble jobs onto the buffer stock pool. They then have less money and can't buy as much.
The policy questions then is what is the process for dumping people onto the buffer stock, and what type of buffer stock should it be to have the best anchoring effect on expectations.
What we haven't done - as MMT people - is explained the buffer stock process or the dumping people onto it process. We've spent too much time talking about banks.
MMT people have spent too much time allowing their 'critics' to talk about banks.
ReplyDeleteAs far as the general public is concerned, a JG is a policy, or a welfare program.
Congratulations on losing the 'debate'.
Warren: “all prices are necessarily a function of what govt pays for things OR WHAT THEY LET THEIR BANKS LEND AGAINST THINGS”….
ReplyDeleteWhich is true… so we BETTER be talking about banks…
MMT doesn’t talk about banks enough imo…
ReplyDeleteMMT doesn’t fully understand bank regulation … they are not trained in applying regulatory mathematics… neither are the Fed people…
So you see prices going up and down and even the MMT people instead use the figure of speech “inflation “ and don’t look at actual bank regulatory functions…
If you’re a bank, there are 2 ways your regulator can destroy you and resultant crash asset prices…..
ReplyDelete1 is by adding bazillion reserves you don’t have capital for… sept 2008, March 2020…
and 2 is making you hold bazillions NPV of HQLA against Deposit liabilities and then gunning rate higher reducing NPV of your HQLA… again causing catastrophic collapse in asset prices… December 2018…
Banks are seemingly getting tired of being screwed by their monetarist moron regulators… for 1 they have come up with the RRP accounts so bank reserve assets don’t go up to catastrophic levels. … and maybe they also have come up with something to prevent 2 this time… might be simple as holding nothing in HQLA over 90 day maturity….
We’ll see when Fed starts to actually increase the risk free rate in March…
MMT people don’t understand any of this and how it destabilizes the general price level … instead we get figures of speech “inflation!” and “deflation!”..
ReplyDeleteEven though Warren says “all prices are necessarily a function of … what banks are allowed to lend …”
Well then What is the function?
Futures of speech are not functional relationships…
https://simple.wikipedia.org/wiki/Relation_(mathematics)
And functional relationships are not “models!”…
ReplyDeleteThis “models!” word being bandied about is another figurative Art Degree brain fart…
“Where’s your model?”
I have 4 year STEM degree and 1/2 MS and never “modeled!” anything…
Talk about price controls...
ReplyDeleteFirms are already implementing strict allocation supply policies…
ReplyDeleteSounds interesting. Would you have a link?
ReplyDelete