Ezra Klein on MMT

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Robert Waldmann
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I find myself disagreeing completely with Ezra Klein. This is very unusual and I feel compelled to blog about it (note you should not feel at all compelled to read this post which is self therapy).

I am commenting on a twitter thread here.

I am going to cut and paste a lot (because I hate Twitter and don’t want you to go there (as I do many times a day)).

It began with Larry Summers who wrote

“There are things MMT says that are true and things it says that are new but unfortunately there is no overlap.”

(I know of no things that MMT says which are new and true, but that may just be because I am ignorant).

Klein wrote

“So I’m not enough of a macroeconomist to know if it’s true that what MMT says that’s new isn’t true, and what it says that’s true isn’t new.

But I’ll say that MMT has absolutely changed the things that MMT’s critics will say are true.”

(I am believe that he is absolutely wrong about the cuase of the change of the things that MMT’s critics will say are true. More importantly, he and I are speculating about the causes of other peoples’ statements and we could just ask them. I proposed he do so and I will right now. I just asked Larry Summers (odd I haven’t dared to bother him for years and now over this ?) OK now I just asked Paul Krugman (also someone I do not lightly ask for attention)).

Klein goes on

I’ll give an example: MMTers really like the Keynes quote “anything we can actually do, we can afford.” Their critics say: It’s a Keynes quote! So it’s something the Keynesians knew. But in years of reporting with Keynesian economists, it is definitely not how they talked.

Klein reported on Krugman. He has talked with him (I realize that I never have). I do however, read pretty much everything he wrote (until the NYT paywalled it). It is definitely how he wrote from 2008 on. I do not at all understand Klein’s claim.

“There was *far* more discussion in the 2010s of debt-to-GDP ratios and Reinhart/Rogoff than of the real productive limits of the economy, and where we were in relation to them.”

I note a sudden shift. Klein was writing about “Keynesian economists” then he wrote about “discussion in the 2010s”. My sense is that Keynesian critics of MMT (DeLong, Krugman, and Noah Smith spent a lot of time back then talking abuot how Reinhart and Rogoff were totally wrong). This is getting close to my point (if I have one). There was a huge gap between the discussion among policy makers and the discussion among academic Keynesian economists. There was a consensus in official Washington that the national debt was a huge problem — a news article described it as the nation’s biggest problem stated as a simple fact in the journalists voice. Some academic Keynesians agreed — Rogoff for example and, I think, Greg Mankiw for another. But many argued that concern about debt was nonsense given the facts that the US borrowed in its own currency and also that interest rates were at historic lows. EIther people said completely different things to Klein in private than they wrote in public or he is confused.

I google krugman debt currency -euro -deleveraging in the 2010s. He is undoubtably a harsh critic of MMT. Clearly, if he was influenced by MMT, then he was already influence by the 2010s.

Similarly Larry Summers was advocating increased fiscal stimulus pretty much as soon as he left the Obama administration, writing about secular stagnation, and arguing that there is a Keynesian Laffer curve. in the 2010s he absolutely didn’t agree with Obama, Reinhart or Rogoff. I google 2012-2018 (there are too many “whose afraid of deficits” hits in 2019 and Klein might mean he meant before then and 2010 and 2011 Summers was part of a team. I google (I see he argued in 2013 that the deficit should be reduced — I didn’t know about that.

googling to find proof that Krugman is a harsh critic of MMT I find this rather relevant tweet

“To be told now that it was only after MMT that we realized that deficits could be OK is annoying; and if the only way to make that argument is to dredge through decades of writing to find something wrong I once said, that’s a de facto confession of intellectual bankruptcy 3/”

back to Klein (who has I think been subtweeted)

So one debate about MMT is whether it should be understood as an economic framework or a theory of political economy. I deal with it more in its latter incarnation, and at least in that guise, it’s definitely forced the, let’s say, rediscovery of certain truths.

Now “definitely” to go with the “absolutely”. I definitely know of absolutely no evidence that these claims are true.

“Back at Vox, I hosted a discussion between @jasonfurman and @StephanieKelton that I think makes for very interesting listening now, on all sides.

What interests me about MMT right now is that they always warned inflation was the danger, real resources the constraint, but they did so when inflation was an abstraction. Now that it’s not an abstraction, I think they’re having as much trouble as everyone else responding.

And generally, the people I trust most are pretty critical of their macroeconomic models, so I’m skeptical there, too.”

(in fact, the people he demonstrably trusts do not criticize MMT macroeconomic models — they assert that there are no such things and that MMTheorists do not use models and, in fact, carefully avoid writing anything clear enough to test or clear enough that they can’t claim that their critics are ignorant about MMT. It simply isn’t true that it is agreed that there are any MMT models.

“But also: those same people will eventually admit to you that most macroeconomic models are pretty bad. If you can really figure out macroeconomic modeling, I want to invest in your hedge fund.”

Pretty bad is not the same as nonexistent (although I do think that standard DSGE models are bad enough that they should be abandoned and we should start over). It is also true that Krugman has a remarkable record of accurate predictions.

“But I’m annoyed at the gatekeeping response to my colleague @jeannasmialek‘s interesting piece, and the lack of self-reflection on why the MMT critique found traction, and what in it proved important. So I think you should read the piece.”

Reading that, I was convinced that I had guessed that Klein’s thread was an act of New York Times solidarity. I have to admit that I didn’t say this to anyone.

I have some thoughts

First I think Klein tends to conflate two groups of people. One is the set of “MMT’s critics”, “Keynesian economists” who Klein knows from “years of reporting” : I think I can name names. This groups includes Larry Summers (the thread is a reply to a tweet by Summers), Paul Krugman (who finds something he recently read “annoying”, Brad DeLong, Noah Smith, Christine Romer, Larry Mishel, OJ Blanchard, and (OK) Kenneth Rogoff and Greg Mankiw. Of thse the first seven definitely were talking in the 2010s about how one should not be alarmed at all by deficits.

The other group is the group of Democratic politicians and top appointees. I will name a name: Barack Obama. He definitely talked about reducing deficts through a grand compromise. He argued that the US federal government should tighten its belt. He definitely could have learned something from say Paul Krugman, Larry Summers, Brad DeLong, Noah Smith, Christine Romer, Larrry Mishel and even from Stephanie Kelton. But the mainstream view of left of center policiticans was completely different from the mainstream view of prominent Keynsian academics who are covered by Ezra Klein and who are now harshly critical of MMT.

My second list has only one name. I guess that other important people on that list include economic advisors (who in fact tell journalists what the policy makers tell them to tell journalists whatever they say to the politicians) and bankers. The view in official Washington was that the national debt was a terrible problem. The view in official Washington was also that this was the view of mainstream economists. Official Washington was wrong (macroeconomists are so divided that there really isn’t a mainstream).

The second thought is about “gatekeeping”. Klein explains in the end that he doesn’t like the recent gatekeeping. I understand that this has become a pejorative term (evidently related to gamergate even). However, gatekeeping is necessary. I’d ask about say failing to close the gate on Mehmet Oz. There can’t be a rule that anyone who thinks that he has something useful to contribute to the discussion gets covered in a full article in the New York Times. The question which Klein answers differently that “the people I trust most ” is whether MMTheorists have anything useful to contribute to the discussion. They all say no. He doesn’t claim that he can evaluate their claim. And he condemns it.