Thursday, March 30, 2023

William Mitchell — When mainstream economists arrive at ideas 50 or so years late and pretend to be contributing to knowledge

I regularly encounter mainstream economists who are confounded by the dissonance that the body of theory they have been working in introduces and then seem to think they have come up with new ideas that restores their credibility. The more extreme version of this tendency is called plagiarism in academic circles. But the less extreme version is to produce some work in which you conveniently ignore the main contributors in history but hold out implicitly that the ideas are somehow your own. As mainstream economics fumbles through this period where the fictional world they operate in and push onto students is increasingly being revealed as a fraud, several economists are trying to distance themselves from the train wreck by resorting to restating ideas that in a period past they would have criticised a ‘pop science’. This syndrome is an accompaniment to the well established ‘we knew it all along’ or ‘there is nothing new here’ defenses that are often used when new ideas make the mainstream uncomfortable. I saw this again in a recent article from the British-based Centre for Economic Policy Research (CEPR) which discusses the way modern banks work – How monetary policy affects bank lending and financial stability: A ‘credit creation theory of banking’ explanation (March 20, 2023). The problem is that heterodox economists knew this from years ago including with the seminal work in the early 1970s of Canadian economist – Basil Moore. The other problem is that the CEPR authors choose not to credit the seminal authors in the reference list, which I think is poor form....
I suspect that this behavior, serious as it is, may be owing to lack of knowledge of the field rather than intent. Most convention economists seems to be ignorant of anything that is not included in the domain of conventional economics, treating it a irrelevant. This is unprofessional, needless to say, and it goes beyond "poor form." It is amateurish.

William Mitchell — Modern Monetary Theory
When mainstream economists arrive at ideas 50 or so years late and pretend to be contributing to knowledge
Bill Mitchell |rofessor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

2 comments:

Matt Franko said...

“ Of course, it didn’t and the reason it didn’t was because bank lending is not reserve constrained.”

Yes it is…. reserves and loans are BOTH assets…

CB adding reserves constrains the ability of banks to make loans…



Matt Franko said...

https://www.federalreserve.gov/newsevents/pressreleases/bcreg20210319a.htm

“ to promote lending to households and businesses, the Board temporarily modified the SLR last year to exclude U.S. Treasury securities and central bank reserves.”

Here: “to promote lending …. the Board …excluded…. central bank reserves.”

ie less reserves more lending … more reserves less lending…

ie lending …. IS… RESERVE…. CONSTRAINED….