Wednesday , April 24 2019
Home / V. Ramanan: Concerted Action / Two Thomas Palley Papers On Neochartalism

Two Thomas Palley Papers On Neochartalism

Summary:
Thomas Palley has two papers critiquing Neochartalism aka “modern monetary theory” or “MMT” or “M.M.T.” 🥳:Macroeconomics vs. Modern Money Theory: Some Unpleasant Keynesian ArithmeticThe last decade has witnessed a significant revival of belief in the efficacy of fiscal policy and mainstream economics is now reverting to the standard positions of mid-1970s Keynesianism. On the coattails of that revival, increased attention is being given to the doctrine of Modern Money Theory (MMT) which makes exaggerated claims about the economic costs and capability of money-financed fiscal policy. MMT proponents are now asserting society can enjoy a range of large government spending programs for free via money financed deficits, which has made it very popular with progressive policy advocates. This

Topics:
V. Ramanan considers the following as important: , ,

This could be interesting, too:

Merijn T. Knibbe writes Putting the baby in the tub: unemployment in a neoclassical (?) macro model

Dan Crawford writes Open thread April 23, 2019

Lars Syll writes Is public debt — really — a burden on future generations?

V. Ramanan writes Anthony Thirlwall On Nicholas Kaldor On Joining The European Union

Thomas Palley has two papers critiquing Neochartalism aka “modern monetary theory” or “MMT” or “M.M.T.” 🥳:

  1. Macroeconomics vs. Modern Money Theory: Some Unpleasant Keynesian Arithmetic

    The last decade has witnessed a significant revival of belief in the efficacy of fiscal policy and mainstream economics is now reverting to the standard positions of mid-1970s Keynesianism. On the coattails of that revival, increased attention is being given to the doctrine of Modern Money Theory (MMT) which makes exaggerated claims about the economic costs and capability of money-financed fiscal policy. MMT proponents are now asserting society can enjoy a range of large government spending programs for free via money financed deficits, which has made it very popular with progressive policy advocates. This paper examines MMT’s assertion and rejects the claim that the US can enjoy a massive permanent free program spree that does not cause inflation. As has long been known by Keynesians, in a static economy money financed deficits can be used to finance programs when the economy is away from the full employment – inflation boundary. However, that window will be temporary to the extent that those deficits drive the economy to full employment. Since the programs are permanent they have to be paid for with taxes or they will generate inflation. That is the economic logic behind the unpleasant Keynesian arithmetic.

  2. What’s Wrong With Modern Money Theory (MMT): A Critical Primer

    Recently, there has been a burst of interest in modern money theory (MMT). The essential claim of MMT is sovereign currency issuing governments do not need taxes or bonds to finance government spending and are financially unconstrained. MMT rests on a triad of arguments concerning: (i) the macroeconomics of money financed budget deficits, (ii) the employer of last resort or job guarantee program, and (iii) the history of money. This primer analyzes that triad and shows each element involves suspect economic arguments. That leads MMT to underestimate the economic costs and exaggerate the capabilities of money financed fiscal policy. MMT’s analytic shortcomings render it poor economics. However, its simplistic printing press economics is proving a popular political polemic, countering the equally simplistic and wrong-headed household economics of neoliberal austerity polemic.

Leave a Reply

Your email address will not be published. Required fields are marked *