by Summary:
...I am now going to dump on MMT. First, I agree with Noah that it is a policy proposal not a theory at all. The proposal seems to be “deficits should be increased”. In particular, MMTers insist that MMT is not functional finance and they do not agree with Abba Lerner, who argued that deficits should be increased unless and until inflation is undesirably high. Now the proposal “deficits should be increased” does not imply an optimal policy. If no matter how high the debt is, it should be higher, then there is no best policy. To be rude, this reminds me of supply siders who argue that taxes should be cut, evidently to zero. To be ruder, I don’t see any substantive point of disagreement between Kelton and Laffer. I am sure Kelton approves of taxation, but I don’t see how she gets there. As
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Mike Norman considers the following as important:
This could be interesting, too:
...I am now going to dump on MMT. First, I agree with Noah that it is a policy proposal not a theory at all. The proposal seems to be “deficits should be increased”. In particular, MMTers insist that MMT is not functional finance and they do not agree with Abba Lerner, who argued that deficits should be increased unless and until inflation is undesirably high. Now the proposal “deficits should be increased” does not imply an optimal policy. If no matter how high the debt is, it should be higher, then there is no best policy. To be rude, this reminds me of supply siders who argue that taxes should be cut, evidently to zero. To be ruder, I don’t see any substantive point of disagreement between Kelton and Laffer. I am sure Kelton approves of taxation, but I don’t see how she gets there. As
Topics:
Mike Norman considers the following as important:
This could be interesting, too:
Mike Norman writes Trade deficit
Mike Norman writes Bond market now pricing in one 25 bps rate cut by Fed in 2025
New Economics Foundation writes What are we getting wrong about tax
Sandwichman writes The more this contradiction develops…
...I am now going to dump on MMT. First, I agree with Noah that it is a policy proposal not a theory at all. The proposal seems to be “deficits should be increased”. In particular, MMTers insist that MMT is not functional finance and they do not agree with Abba Lerner, who argued that deficits should be increased unless and until inflation is undesirably high. Now the proposal “deficits should be increased” does not imply an optimal policy. If no matter how high the debt is, it should be higher, then there is no best policy. To be rude, this reminds me of supply siders who argue that taxes should be cut, evidently to zero. To be ruder, I don’t see any substantive point of disagreement between Kelton and Laffer. I am sure Kelton approves of taxation, but I don’t see how she gets there. As policy analysis MMT seems to me to be tugging on the Overton window, advocacy not analysis.
On the other hand, such tugging is needed right now, especially here in Europe. There is a powerful anti deficit orthodoxy (the ordo liberal ordodoxy). But it is not related to economic theory of any sort and it has been thoroughly rejected by mainstream new Keynsians and somewhat heterodox paleo Keynsians. The case against is weakened (somewhat) by pretending that it is the orthodoxy of academic economists.
I guess I ask Kelton how she disagrees with Krugman — her effort to explain this was spectacularly unsuccessful.
Maybe world views that are so different as to prevent fruitful debate, at which point the parties can only agree to disagree. This seems to characterize much of the conflict in the world today, internationally, domestically, within academia, etc. Interestingly, one aspect of the "debate" about the NY Times article on Stephanie Kelton seems to have devolved into woke and non-woke, like much of the rest of the discourse today.
Angry Bearcontra MMT Anopinion III
Robert Waldmann