by Noah Smith’s MMT ‘critique’ — nonsense on stilts What is MMT, the heterodox economic theory … What does it say? How can we tell if it’s a good theory or a bad one? These are incredibly important questions … These days, most economic theories are collections of mathematical models. If you want to know what the theory says, you can parse out the models and see for yourself … You can go read a New Keynesian model or a Real Business Cycle model and figure it out on your own. MMT is different. There are many wordy explainers and videos that will explain some of the concepts behind MMT, or tell you some of MMT’s policy recommendations. But that’s different than having a formal model of the economy … Formal models have important advantages. For one thing, a
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Lars Pålsson Syll considers the following as important: Economics
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Noah Smith’s MMT ‘critique’ — nonsense on stilts
What is MMT, the heterodox economic theory … What does it say? How can we tell if it’s a good theory or a bad one?
These are incredibly important questions …
These days, most economic theories are collections of mathematical models. If you want to know what the theory says, you can parse out the models and see for yourself … You can go read a New Keynesian model or a Real Business Cycle model and figure it out on your own.
MMT is different. There are many wordy explainers and videos that will explain some of the concepts behind MMT, or tell you some of MMT’s policy recommendations. But that’s different than having a formal model of the economy …
Formal models have important advantages. For one thing, a good formal model can be compared with quantitative data, to see whether it works or whether it fails. Formal models can make testable predictions.
A second advantage of formal models is that you can figure them out for yourself, without having to ask any gurus. If you have to run to the gurus to ask them what the theory says any time you think you’ve found a flaw, it becomes almost impossible to skeptics or outsiders to evaluate the theory objectively.
Oh dear, oh dear. This is almost comical. Who can — really — take this ‘critique’ seriously? It is beyond disappointment!
Thankfully, Pavlina Tcherneva has taken her time and responded with a must-read full of reading suggestions for those who want to inform themselves of empirical MMT work. It is always so much more interesting to read people when they know what they are talking about …