by There was an article in the Project Syndicate (July 1, 2019) – Does Japan Vindicate Modern Monetary Theory? – written by a Yale economics professor and advisor to Shinzo Abe, that reveals the extent to which the mainstream is becoming paranoid and is failing to understand what MMT is about. I won’t deal with it in detail because it is not my brief today. But it aims to disabuse readers of the notion that “Japan … [is] … proof that the approach works.”The approach he refers to is MMT. Basic flaw. MMT is not an approach. These commentators haven’t even reached the first place in understanding what our work is about. Mainstream economists have crudely characterised or framed MMT within their own conceptual structure (typically the so-called ‘government budget constraint’ (GBC) framework)
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Mike Norman considers the following as important: critics, MMT, MMT and policy, MMT and politics, MMT criticism
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There was an article in the Project Syndicate (July 1, 2019) – Does Japan Vindicate Modern Monetary Theory? – written by a Yale economics professor and advisor to Shinzo Abe, that reveals the extent to which the mainstream is becoming paranoid and is failing to understand what MMT is about.
I won’t deal with it in detail because it is not my brief today. But it aims to disabuse readers of the notion that “Japan … [is] … proof that the approach works.”
The approach he refers to is MMT.
Basic flaw. MMT is not an approach. These commentators haven’t even reached the first place in understanding what our work is about.
Mainstream economists have crudely characterised or framed MMT within their own conceptual structure (typically the so-called ‘government budget constraint’ (GBC) framework) and imputed their own language when discussing MMT.
The Project Syndicate author is no exception.
He thinks MMT is about “excessive deficit-financed spending” which “lacks any safeguard”.
He says:
Policymakers who recklessly implement MMT may find, like the sorcerer’s apprentice, that once the policies are set in motion, they will be difficult to stop.
One cannot “implement MMT” – recklessly or otherwise.
One can understand it and use its insights to craft policy interventions that accord with one’s value system (ideology).MMT is not policy, or even about policy. It informs policy by putting the approach to policy on a correct monetary, financial, and economic foundation instead of an incorrect one, as is currently the case.
This is a longish post but not wonkish at all. It is one of Bill's most important posts for a basic understanding of the "MMT framework" (lens) versus the "flawed GBC framework" of the mainstream.
Note: "GBC" signfies "government budget constraint."
Bill Mitchell – billy blog
Why the financial markets are seeking an MMT understanding – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia