Tag Archives: Functional Finance

So Olivier Blanchard gave the AEA presidential address at the Atlanta meetings earlier this year. If you missed it you can watch it here. The paper is also here. In all fairness, there is nothing new there. He notes the famous rule by Evsey Domar about sustainability of public debt, meaning that if the rate of interest on debt is lower than the rate of growth, debt-to-GDP ratios tend to be stable and you are in no danger in pursuing active fiscal policies.Note that functional finance is in...

Progressives for balanced budgets and free trade It was the best of times; it was the worst of times. Or that is what you would think if you follow the economics press lately. Sebastian Mallaby has a column on Trumponomics a while ago, suggesting Trumponomics is not working. I wouldn't disagree with the verdict, but the explanation is far from correct, and that is a common feature of discussions of Trumponomics in the media, and frankly by many progressive (not just liberal, in the US...

Abstract An increasingly visible school of heterodox macroeconomics, Modern Monetary Theory (MMT), makes the case for functional finance – the view that governments should set their fiscal position at whatever level is consistent with price stability and full employment, regardless of current debt or deficits. Functional finance is widely understood, by both supporters and opponents, as a departure from orthodox macroeconomics. We argue that this perception is mistaken: While MMT’s policy...

MMT. Claire Connelly — Medium What are taxes actually for? Claire Connelly | Lead writer @ Renegade Inc. Founder of Hello Humans

Abba Lerner versus Robert Barro.Lars P. Syll’s BlogAbba Lerner and the nonsense called ‘Ricardian equivalence’Lars P. Syll | Professor, Malmo University

This is a good Twitter thread and I suggest reading it. I am sure MMT economists will jump in.Here's an excerpt. ...  Brad DeLong: MMT is Abba Lerner's Functional Finance with bells & whistles & some confusions. Manipulate G to stabilize Y & π, manipulate M to get an i to make debt finance sustainable, and rely on π to tell you if your policies are sustainable... If π↑ need G↓  Suresh Naidu: Clearest exposition of MMT in a tweet. Fight me deficit owls!  ... BDL has thought...

Don't be put off by the title. The post is chiefly about MMT's interpretation of functional finance rather than Australia. While the post is longish and wonkish (but no equations to slow you down), it is worth a careful read. Brian explains functional finance from the POV of an applied mathematician with experience in both control systems and finance. It's a bit of a different perspective so there is a lot in there that MMT economists generally don't touch on.Bond Economics Australian...

There are some people who like to suggest that modern monetary theory (MMT) suggests that a government can create money without limit. They go on to say that this has always resulted in economic disaster. The words Zimbabwe and Weimar Republic are never far from their lips. The reality is, however, that MMT does not say that governments can create any amount of money they like without limit. What it does say are two things. The first is that as a matter of fact all government spending is...

Everyone knows governments need to tax before they can spend. What Modern Monetary Theory presupposes is, maybe they don't. Surprisingly decent article on MMT considering the dismissive headline. Covers most of the bases.ViceThe Radical Left-Wing Theory That the Government Has Unlimited Money Tom Streithorstht Ralph Musgrave

Mike Beggs wrote an interesting Review of the book In the Long Run We Are All Dead (which I started, but have not finished yet). Beggs argues that: "Marx lived long enough to declare himself 'not a Marxist.' Keynes was not so lucky. Followers would make the distinction between 'Keynesian economics' and 'the economics of Keynes.' But by then the word had well and truly transcended the man." That's not altogether correct. Dave Colander retells the Abba Lerner story of Keynes' famous...