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Reading about MMT from devotees is great, just like it is when you're with your friends who all hold similar political views to you. But what about someone who once thought MMT was ludicrous but has now come largely onboard, and yet still holds some criticism. Well, that's going to make for some interesting reading, don't you think? If he's right, then we have some work to do to improve MMT - and improving anything is a good idea - and if he's wrong then we can strengthen and clarify our arguments. In the last few weeks, I've been seeing a lot of buzz about Modern Monetary Theory aka MMT. And most of what I'm seeing is reductionist to the point of absurdity. When I see critics of MMT talking about it, they're mostly using MMT as a shorthand for saying 'unbridled fiscal expansion without
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Reading about MMT from devotees is great, just like it is when you're with your friends who all hold similar political views to you. But what about someone who once thought MMT was ludicrous but has now come largely onboard, and yet still holds some criticism. Well, that's going to make for some interesting reading, don't you think? If he's right, then we have some work to do to improve MMT - and improving anything is a good idea - and if he's wrong then we can strengthen and clarify our arguments.Reading about MMT from devotees is great, just like it is when you're with your friends who all hold similar political views to you. But what about someone who once thought MMT was ludicrous but has now come largely onboard, and yet still holds some criticism. Well, that's going to make for some interesting reading, don't you think? If he's right, then we have some work to do to improve MMT - and improving anything is a good idea - and if he's wrong then we can strengthen and clarify our arguments. In the last few weeks, I've been seeing a lot of buzz about Modern Monetary Theory aka MMT. And most of what I'm seeing is reductionist to the point of absurdity. When I see critics of MMT talking about it, they're mostly using MMT as a shorthand for saying 'unbridled fiscal expansion without
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Mike Norman considers the following as important:
This could be interesting, too:
Lars Pålsson Syll writes DSGE models — a total waste of time
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In the last few weeks, I've been seeing a lot of buzz about Modern Monetary Theory aka MMT. And most of what I'm seeing is reductionist to the point of absurdity. When I see critics of MMT talking about it, they're mostly using MMT as a shorthand for saying 'unbridled fiscal expansion without any concern for deficits'. I think this has been a very poor and uninformed debate. My guess is that it's been sparked by the public policy views of people like Alexandria Ocasio-Cortez, given the objections some people have to her as a political figure. I could be wrong. But, as someone who's been following this evolving conversation for several years, I thought I'd tell you how I see it.
My introduction to MMT
Before I start in, let me tell you where I'm coming at this from. I have a lot of friends in the MMT community. And I have great respect for the leading economists. But, I am on the outside looking in.
About a decade ago, my friend Marshall Auerback introduced me to the MMT crowd. The first economist he introduced me to was Randy Wray. And the way I remember it, I was pretty rude to Randy about what he was saying. I've told Randy this subsequently. And he's told me he didn't think I was rude at all, which I appreciate. But, in my mind, what he was saying was a shock. And I was rude. It's only when I looked at what he was saying with an open mind that I began to process it and critique it objectively.
And I ended up liking a lot of what I heard. While I would never call myself an MMT adherent, I do think MMT does a pretty good job of outlining the various pieces of the macroeconomy and the constraints on fiat currency issuing governments.
My biggest criticisms of MMT are three-fold:
- I don't think MMT takes enough into account the political and legislative realities of using fiscal policy to control inflation. I know the trauma of the 1970s is long gone. But 15, 8, or even 5% inflation can really hurt people, especially if wages lag.
- MMT's adherents often sell MMT as a prescriptive school of thought rather than a descriptive one. They come out of the gate with all sorts of big spending policy proposals they say are based on MMT. Well, that loses half of the audience right from the start - even me! People need to understand how the economics fits together first. Then they can buy into the prescriptions. And even then, they may not buy the policy prescriptions MMT adherents hawk. For me, MMT is not about policy prescriptions, it's about a description of how an advanced economy works for a fiat currency issuer.
- Finally, its acolytes can be pretty 'rabid' in an almost cult-like way. It's disconcerting because, if you criticize MMT, a whole swarm of what almost seem like MMT groupies comes and attacks you. New Keynesians say they hate engaging with MMT economists, even though they share a Keynesian kinship, because the economists' online followers are often aggressive and mean-spirited.
So that's my beef. Here's my dummies guide.
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