Some constructive remarks on Wray’s “Alternative paths to MMT” — Arturo Hermann

FYI.

Real-World Economics Review Blog
Some constructive remarks on Wray’s “Alternative paths to MMT”

Arturo Hermann

Bill Mitchell — On money printing and bond issuance – Part 1

There are continual Twitter type debates and Op Ed/Blog-type articles going on about whether MMT says this, or that, or something else. The critics are refining their attacks by hammering on about “printing money” and hyperinflation, and, more recently that MMT ignores ‘power’ (whatever that is). The latter leads them to conclude that MMT is thus a naive approach and is inapplicable to a political agenda aiming at changing things for the better. These debates (if you can call them that) are also a very American-centric sort of to and fro, which exemplifies the tendency of the US to think the world and all ideas stop at its borders. In this two-part series, I seek to clarify some of the points that are raised (not for the first time) (-:, which, in turn, demonstrates how poorly constructed these attacks. I know it is often said that attackers haven’t read the literature. But in these situations it is a fact. In part 2 tomorrow, I will also touch on why I think some MMTers are becoming defensive in the wake of these attacks. So, in Part 1 I consider the ‘money printing’ story. Specifically, is MMT just about ‘printing money’? The answer is obvious – profoundly no, but we need to understand where these types of allegations come from (which swamp!)....

Bill Mitchell – billy blog

On money printing and bond issuance – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell – Why the financial markets are seeking an MMT understanding – Part 2

There was an article in the Project Syndicate (July 1, 2019) – Does Japan Vindicate Modern Monetary Theory? – written by a Yale economics professor and advisor to Shinzo Abe, that reveals the extent to which the mainstream is becoming paranoid and is failing to understand what MMT is about.

I won’t deal with it in detail because it is not my brief today. But it aims to disabuse readers of the notion that “Japan … [is] … proof that the approach works.”
The approach he refers to is MMT.

Basic flaw. MMT is not an approach. These commentators haven’t even reached the first place in understanding what our work is about.

Mainstream economists have crudely characterised or framed MMT within their own conceptual structure (typically the so-called ‘government budget constraint’ (GBC) framework) and imputed their own language when discussing MMT.
The Project Syndicate author is no exception.

He thinks MMT is about “excessive deficit-financed spending” which “lacks any safeguard”.

He says:

Policymakers who recklessly implement MMT may find, like the sorcerer’s apprentice, that once the policies are set in motion, they will be difficult to stop.

One cannot “implement MMT” – recklessly or otherwise.

One can understand it and use its insights to craft policy interventions that accord with one’s value system (ideology).

MMT is not policy, or even about policy. It informs policy by putting the approach to policy on a correct monetary, financial, and economic foundation instead of an incorrect one, as is currently the case.

This is a longish post but not wonkish at all. It is one of Bill's most important posts for a basic understanding of the "MMT framework" (lens) versus the "flawed GBC framework" of the mainstream.

Note: "GBC" signfies "government budget constraint."

Bill Mitchell – billy blog
Why the financial markets are seeking an MMT understanding – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Nikkei Asian Review Growing — Modern Monetary Theory debate rattles Japan officials

MMT gone viral.

Untested economic model has big implication on country's planned tax hike and debt policy

Nikkei Asian Review
Growing Modern Monetary Theory debate rattles Japan officials

Staff

Bill Black — MMT Scholars’ Predictive and Policy Successes – Part A

The second article in this series deals with Modern Monetary Theory’s (MMT) predictive and policy successes. The article has three, separately published, parts. Part 2A deals explains why predictive ability and policy success are so critical – and notes that MMT’s critics have been conspicuously unable to provide a record of predictive failure by MMT scholars.

Part 2B deals with MMT successes in microeconomics. The MMT work on microeconomics constitutes a powerful refutation of the ‘microfoundations’ of ‘modern macroeconomics.’ The key characteristics that the MMT theorists have demonstrated dramatically superior predictive ability, particularly in the most important microfoundation issues of the last 70 years. In the microfoundations context, MMT scholars have also demonstrated exceptional policy success.

Part 2C deals with macroeconomics. Again, MMT scholars’ predictive success has been excellent. Equally important, MMT scholars have demonstrated their predictive successes in the most important macroeconomic issues of our lives....

New Economic Perspectives
MMT Scholars’ Predictive and Policy Successes – Part A
William K. Black | Associate Professor of Economics and Law, UMKC

“What You Need To Know About The $22 Trillion National Debt”: The Alternative Interview

Steven Rattner’s opinion piece in the New York Times and [Jason] Furman’s interview on National Public Radio are perfect examples of the ideas that MMT wants to debunk:  Deficits are not normal; deficits crowd out private investment; the public debt is a burden on our grandchildren; our ability to respond to societal problems is limited by the fact that the US government does not have enough money to confront them.

Below is an alternative interview to the Furman’s interview that reviews these points. This blog will run like a traditional interview and all the evidence for the points made are in appendices at the end...

New Economic Perspectives
What You Need To Know About The $22 Trillion National Debt”: The Alternative Interview
Eric Tymoigne | Associate Professor of Economics at Lewis and Clark College, Portland, Oregon; and Research Associate at the Levy Economics Institute of Bard College

Martin Armstrong — New Monetary Theory is Like Sleepwalking

Matin Armstrong shoots from the hip at MMT — and hits himself in the foot.

Yes, you can just create money to fund the government and it is confined by inflation. That is a true statement if taken by itself. However, you cannot then borrow with no intention of paying down the debt because the accumulative interest payments will end up representing 100% of the debt. This theory fails for it ignores dealing with the debt.

A currency sovereign can always service its debt — principal and interest — by issuance. The constraint is still inflation and that is a consequence of availability of real resources to meet effective demand.

Armstrong Economics
New Monetary Theory is Like Sleepwalking
Martin Armstrong

Bill Mitchell – billy blog MMT is sending us crazy – the end is near … hold on, not quite near

Even if you don't read Bill regularly, you probably want to read this one in which Bill answers critics on specific points of misunderstanding.

Bill Mitchell – billy blog
MMT is sending us crazy – the end is near … hold on, not quite near
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Brian Romanchuk — Why Are MMT Critiques Generally Terrible?

The deluge of bad Modern Monetary Theory (MMT) critiques continues. Although it is possible that there are some diamonds in the rough, all the articles I read were downright stinkers. They were so bad that I refuse to dignify their existence by even citing them. However, as someone in the MMT camp, I just want to give a few pointers for my readers as to why those critiques stink.

There certainly are legitimate critiques of MMT, but they are hard to find. Even academics end up citing poor critiques written by non-MMTers; nobody can be apparently bothered to read the MMT academic literature. Which is a rather troubling commentary on the diseased state of modern academia (speaking as a hardline old school ex-academic). In this article, I just cover the ludicrous arguments; I will let the reader try to find some reasonable ones elsewhere. I am in the middle of developing an investment accelerator model within my Python SFC model framework, and I do not want to waste my time beating up on clowns....

Bond Economics
Why Are MMT Critiques Generally Terrible?
Brian Romanchuk

William K. Black — AOC# and MMT Spook the AEI

Strain and Veuger never try to meet the burden they set for themselves with their frenzied rhetoric. The key test of a theory’s validity is its predictive ability. A theory that is so weak that it is a “joke” made by “luna[tics]” should collapse as soon as its predictive ability is tested. What predictive failures do Strain and Veuger demonstrate MMT scholars have made? None. What predictive failures do they attempt to show MMT scholars have made? None. That failure even to attempt to show MMT scholars’ predictive errors is extraordinarily telling. First, you know they would have attacked even a minor predictive error by MMT scholars – if they could find such an example. Second, that means they could not find even a minor predictive failure by MMT scholars. Third, the AEI’s failure to find any predictive failure by MMT scholars is fatal to their assertion that the MMT – the basis for MMT scholars’ macroeconomics predictions – is such a “joke” that it invariably produces “lunacy.”...

New Economic Perspectives
AOC# and MMT Spook the AEI
William K. Black | Associate Professor of Economics and Law, UMKC

Bill Mitchell — Operationalising core MMT principles – Part 1

Things seem to come in cycles. We have been at this for some years now – trying to articulate the principles of Modern Monetary Theory (MMT) in various ways in various fora. There is now a solid academic literature – peer-reviewed journal articles, book chapters in collections, and monographs (books) published by the core MMT group and, more recently, by the next generation MMT academics. That literature spans around 25 years. For the last 15 odd years (give or take) there has been a growing on-line presence in the form of blog posts, Op Ed articles etc. More than enough, perhaps too much for people to wade through. 

Each period seems to raise the same questions as newcomers stumble on our work – usually via social media. The questions come in cycles but there is never anything raised in each cycle that we have neglected to consider earlier – usually much earlier. When we set out on this project we tried to be our own critics because our work (in this area) was largely ignored. So we had to contest each of the ideas – play devil’s advocate – to stress test the framework we were developing (putting together pieces of knowledge from past theorists, adding new bits or new ways of thinking about them and binding it all together with interesting and novel connections and implications). So it is continually testing one’s patience to read the same criticism over and over again. 

Please do not get me wrong. When these queries are part of the learning process from a reader who is genuinely trying to work out what it is all about there is no issue. Our role as teachers is to see each generation safely through their educative phase in as interesting a manner as we can. But when characters get on the Internet, some with just a year, say of postgraduate mainstream study and start making claims about what we have ignored or left out or got wrong then it can be trying. Ignoring them is the best strategy. But then the genuine learners get confused. So this blog post is Part 1 of a two-part series seeking to help answer two major issues that we keep being asked about – (a) Does MMT only advocate tax increases to fight inflation?; and (b) How can any meaningful jobs be offered in a Job Guarantee if the workforce is ephemeral by construction? Part 2 will come tomorrow....

Bill Mitchell – billy blog
Operationalising core MMT principles – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Robert Vienneau — Elsewhere: Popular Writing On Modern Monetary Theory

Robert Vienneau links to the "popular" trolls, followed by a short summary of MMT as essentially correct as descriptive of the monetary system.

Thoughts On Economics
Elsewhere: Popular Writing On Modern Monetary Theory
Robert Vienneau

Brian Romanchuk — MMT Versus "Structural Keynesianism"?

Professor Thomas Palley has once again launched a critique of Modern Monetary Theory (MMT) in "Modern Money Theory (MMT) vs. Structural Keynesianism." One could argue that there are some useful nuggets in his argument, but they are arguably behind the times. His critique is of how he perceives MMT -- which has only a limited relationship to MMT as it exists now.

I probably should have ignored his article, but too many people have discussed it, and so I do not want to leave the impression that his arguments actually represent weak points of MMT....

Bond Economics
MMT Versus "Structural Keynesianism"?
Brian Romanchuk

The Tradeoff between MMT and Government

Robin Koerner, publisher of WatchingAmerica.com, addresses the balance budget amendment in light of MMT's warning about what it would entail economically.

The Huffington Post: A Balanced Budget Amendment Would Change Everything

It seems to me that Koerner presents the tradeoff pretty well. What he is saying is that most people calling for a balanced budget amendment don't realize that everything has consequences and they don't understand the political benefit that is supposed to result has an economic cost, even a serious one, in the tradeoff. He piece is about the political/economic tradeoff, and he things that the decision criteria should be normative. He sees it as a tradeoff between prosperity and tyranny and comes down against tyranny. That appeals to a lot of people both on the right and left in this culture of crony capitalism and corruption, in which the state is seen increasingly as predator.

He understands the basic points of MMT about the fiscal balance and then considers the tradeoff in terms of government power. This and his previous post show that he has at least taken the trouble to investigate MMT. That's a plus, since we are at least engaging on a playing field where our existence is being acknowledged. Moreover, he is objecting to MMT not on positive grounds, which he seems to have conceded, but on normative preference. That seems like an advance for MMT to me, rather than having to confront ill-informed blather.

The main objection of both left and right to MMT policy is that it gives politicians too much power in its attempt to offset saving desire with fiscal policy through the sectoral balance approach and functional finance. The right is concerned with politicians using fiscal power to bribe the rabble for votes, and the left is concerned with state capture as the wealthy and influential bribe politicians with contributions needed in increasingly expensive campaigns. Koerner makes clear that his concern is not economic as much as political. He cautions that there is a tradeoff between economic concerns and political concerns, and that a balanced budget amendment would have consequences that MMT warns about.

I don't that this can be shrugged off politically. This is why the work that Bill Black and Randy have been doing on the blogs is addressing corruption is so important, and why proposals for reform like Warren has put out are key to putting the MMT position across politically as well as economically. I have also brought up the input of Michael Hudson on economic rent, which MMT hasn't dealt with specifically as far as I can tell. But this is a good argument for progressive taxation that distinguishes productive and unproductive gains and taxes the unproductive. MMT does talk about targeted taxation, and this is what progressives are looking for to address inequality.

What do you think?