William K. Black March 13, 2019 Bloomington, MN Third article in a series on MMT I urge readers to review Scott Fullwiler’s brief paper on the theoretical and predictive successes of MMT scholars on a topic of enormous theoretical and practical importance. You do not need economics training to understand it. Fullwiler reports the results of two “natural experiments.” In this context, this means an unplanned experiment. The twin experiments were: What would happen if orthodox scholars tested the predictive strength of MMT? How would Paul Krugman react to an orthodox scholar’s demonstration of the predictive accuracy of key MMT insights – if Krugman did not know that the orthodox scholar’s work was verifying key MMT predictions? Fullwiler’s paper answers both questions. The
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William K. Black
March 13, 2019 Bloomington, MN
Third article in a series on MMT
I urge readers to review Scott Fullwiler’s brief paper on the theoretical and predictive successes of MMT scholars on a topic of enormous theoretical and practical importance. You do not need economics training to understand it. Fullwiler reports the results of two “natural experiments.” In this context, this means an unplanned experiment. The twin experiments were:
- What would happen if orthodox scholars tested the predictive strength of MMT?
- How would Paul Krugman react to an orthodox scholar’s demonstration of the predictive accuracy of key MMT insights – if Krugman did not know that the orthodox scholar’s work was verifying key MMT predictions?
Fullwiler’s paper answers both questions. The orthodox scholar, unknowingly, confirmed the predictive strength of many of MMT’s most important insights. Krugman praised De Grauwe’s findings as “seminal.” Krugman had no idea he was praising the predictive successes of MMT scholars because Krugman had never read MMT scholars’ work. Fullwiler’s paper shows that a series of MMT scholars made De Grauwe’s point more than a decade before De Grauwe published his “seminal” contribution in an orthodox journal. Stephanie Kelton was one of the MMT scholars who demonstrated precedence, making Krugman’s use of the word “seminal” as a descriptor even more unintentionally humorous.
The natural experiment helps explain the timing, cause, and tactics of the sudden, coordinated effort to demean MMT scholars and the newly elected progressives that terrify orthodox economists. First, the truth that everyone in economics knows is heterodox economics scholars overwhelmingly read the orthodox economics literature (and often other fields) and the heterodox economics literature. Orthodox economic scholars virtually never read heterodox economic scholars’ work and generally claim that they are proud that they refuse to read it. The orthodox scholar that wrote the supposedly “seminal” piece almost certainly did not read the heterodox scholars who actually had developed the insight. The outside reviewers the orthodox economics journal used did not read the heterodox scholars’ work so they did not call the De Grauwe’s attention to the work by MMT scholars. I believe that Krugman will confirm that when he wrote to praise De Grauwe, he had never read any of the MMT scholars’ publications listed in Fullwiler’s paper. I believe that Krugman will confirm that even today he has not read any of those papers.
We are not claiming De Grauwe “stole our ideas” or “stole our ideas and refused to give us credit for our insight.” We would be startled to discover De Grauwe read the work of MMT scholars prior to writing his paper. I would be surprised if he read Fullwiler’s paper.
This pattern of deliberate, asymmetrical ignorance and orthodox arrogance is not some secret conspiracy. The typical professor in an orthodox economics doctoral program assigns zero heterodox scholarship. If an orthodox professors refers to MMT it will typically be a snide dismissal based on a claim that MMT says “X” when MMT actually says the opposite. Those orthodox sneers at MMT by orthodox professors in class were vanishingly rare. The overwhelming orthodox norm is never to inform students that MMT exists. At UMKC, we assign our economics doctoral students hundreds of orthodox readings. Our doctoral candidates cannot pass their comps unless they demonstrate mastery of a canon of over 100 orthodox scholarly papers. We require doctoral students to engage in multi-disciplinary research in other disciplines as well. We also, of course, assign them to read hundreds of papers by heterodox scholars.
We are not claiming that only MMT scholars promptly recognized the dangers of the euro. Warning about the euro’s dangers was a repeated focus of MMT scholars at a very early date that does great credit to them. Conversely, only a very small percentage of orthodox scholars published similar warnings. We agree that those orthodox scholars’ early warnings do great credit to them.
This asymmetry is indefensible, and we welcome Krugman’s interest in MMT as a means of beginning to end orthodoxy’s celebration of ignorance. Krugman and MMT scholars share a broad overlap in economic theory and policy. Fullwiler’s article exemplifies the point – when Krugman did not know he was evaluating an MMT original insight he was lavish in his praise of our ideas. Fullwiler’s article also begins to demonstrate that Krugman is actually aware of far more MMT scholarly literature than he knows – he simply does not know of the very large overlap between his views and the views of many MMT scholars. On a broad range of issues, including microfoundations, Krugman will find that MMT views make us natural allies.
The Third Natural Experiment: Krugman’s Non-Debate with a Non-MMT Non-Scholar
We know the extent to which Krugman kept himself willfully ignorant of the MMT scholarship because Krugman reported the results of a natural experiment he unknowingly conducted in August 2011. The remarkable thing about this third natural experiment is that Krugman did not know he had conducted a natural experiment even after he unknowingly reported the results of the experiment he unknowingly conducted. I hope that sounds bizarre, for Krugman acted bizarrely on multiple dimensions. He also demonstrated an eagerness to demean MMT scholarship and scholars he had never read and a degree of errant arrogance that reached ten on the Krugman scale.
In August 2011, Krugman announced that he was “debating the Modern Monetary Theory guys.” That phrase was already a warning that Krugman was lost. Female MMT scholars are particularly well known. Krugman then assured his readers that “I have read various MMT manifestos — this one is fairly clear as they go.” That phrase represented the second, third, and fourth warning signals that Krugman had gone off the rails. Why would a scholar read “manifestos” to learn of the work of other scholars?
Why would Krugman read “manifestos” by non-scholars? Even more fundamentally, why would he read a non-scholarly “manifesto” by Cullen Roche, a non-MMT, non-scholar – and claim that it demonstrates his familiarity with MMT scholarship and competence to criticize MMT?
It gets better. Krugman found reading Roche’s manifesto to be a painful exercise due to the writing style.
I do dislike the style — the claims that fundamental principles of logic lead to a worldview that only fools would fail to understand has a sort of eerie resemblance to John Galt’s speech in Atlas Shrugged….
For Krugman, comparing the pain of reading Roche’s rant to pain of reading the world’s most infamous Ayn Rand rant – John Galt’s turgid 60-page ode to narcissism – is the ultimate insult. It also raises a question that would be obvious to any scholar trying to learn about a scholastic field he or she had never studied. No one had a gun to Krugman’s head demanding that he subject himself to the masochistic horror of reading a manifesto he considered an “eerie resemblance” to Galt’s execrable manifesto. For Krugman, having to read an “eerie resemblance” to Galt’s endless rant must closely approximate his working definition of hell.
Why did Krugman choose to read Roche, and why did he continue to read Roche’s rant when he found the process excruciating? Reading Wray would be the obvious way an American economist would begin to learn about MMT. There are many advantages of reading Wray instead of an “eerie resemblance” to Galt if one wishes to learn about MMT. First, reading a top academic in a field is a great way to learn both the general theory and the nuances. Second, it is quicker. Third, academic works have copious citations that allow academic readers to understand how the author researches and provides the academic reader with resources to research particular topics in greater depth.
Krugman can draw on the New York Times’ researchers and university librarians. Consider the other obvious alternative – combining those resources with the telephone. Find the contact information for a prominent MMT scholar, call the scholar, explain you would like to learn about key MMT precepts, ask for suggestions on several concise scholarly articles that he or she could email you. That would be the collegial approach – scholar to scholar. That would be the approach based on developing and signaling mutual respect. Krugman appears never to have followed this approach. We call it “revealed preferences.” His preference is to treat MMT scholars as non-colleagues and non-equals.
Krugman, without reading any MMT scholarship assumed there would be no meaningful difference between the work of experienced MMT scholars and a rant by a non-scholar that Krugman found to be torture to read. That is every bit as absurd, arrogant, biased, un-collegial, and insulting as it sounds.
The third natural experiment, of course, demonstrates that Krugman did not understand MMT scholarship because he never could be troubled to take the obvious steps essential to learn about MMT scholarship. He was so ignorant of MMT that even after assuring his readers that he had read several non-scholarly MMT “manifestoes” he could not tell that Roche’s rant was not MMT scholarship. Roche runs an investment firm. In fairness to Krugman, at the time that Roche first wrote his manifesto he did describe himself as favorably influenced by MMT scholars on a subset of MMT. Roche now considers himself an MMT critic. Roche later made this explicit to Krugman. Clicking on Krugman’s hyperlink to Roche’s rant brings up this message from Roche (emphasis in the original).
My View on MMT
Updated – 2018:
In 2011 I was briefly associated with a group of economists who advocate for a theory called “Modern Monetary Theory”. Paul Krugman even cited an early draft version of a popular paper of mine as a MMT paper. This paper is not a MMT paper although an early draft cited aspects that were consistent with MMT. The paper is not a representation of MMT’s views and I have never fully endorsed MMT.
That said, I am sympathetic to some MMT ideas (like endogenous money theory), but I’ve never fully agreed with MMT as a whole and in fact believe there are elements of MMT that are wrong. In fairness, there are also elements I think are useful. I’ve outlined those views in a post here. I’ve also written an extensive critique of MMT here. On the whole I find MMT to be an eye opening and useful theory to understand, but I do worry that some of their ideas are a bit extremist and twist the operational realities of our monetary system in an effort to promote progressive policy ideas.
I hope you find the attached material helpful.
The good news for Krugman is that while he falsely represented to his readers that Roche’s rant represented the views of lead MMT scholars, Krugman did so unknowingly and unintentionally. The bad news is that in this case even after he read Roche’s rant he knew so little about the MMT scholarly literature that he represented to his readers that it exemplified MMT. The even worse news is that even after he read, and hated, Roche’s rant, Krugman knew so little about the MMT literature that he decided to provide his readers with a link to the rant – and only the rant – as supposedly representative of the MMT scholarly canon. To sum it up, Krugman’s attempt to assure his readers that he had “listened to the gentiles” (his phrase, not mine) before attacking them proved he had failed to do so. Krugman was so eager to reject and demean MMT scholars that his subconscious transformed Roche’s rant into the mother of all strawman arguments to aid his assault on MMT scholars.
The fourth article in this series explains the four “tells” that demonstrate that Krugman knows he cannot win an honest debate against MMT.
 I have numbered the articles in this series in what I consider their logical progression, but I have completed the closely related third and fourth articles prior to the second, so we will publish them prior to the second article.