What do you think of MMT?

[Remarkableriots]

https://www.npr.org/2019/07/17/742255158/this-economic-theory-could-be-used-to-pay-for-the-green-new-deal

Quote

When Rep. Alexandria Ocasio-Cortez rolled out her "Green New Deal," calling for clean energy and guaranteed jobs, one of the first questions she got was: How do you plan to pay for it?

 

"I think the first thing that we need to do is kind of break the mistaken idea that taxes pay for 100% of government expenditure," Ocasio-Cortez told NPR's Morning Editionin February.

In doing so, she shined a spotlight on a once-obscure brand of economics known as "Modern Monetary Theory," or MMT.

 

Run that Google search and you'll quickly find Kelton herself. The economist, who advised Bernie Sanders' 2016 campaign, is one of the best-known evangelists for the theory. Kelton says paying for big government programs is the easy part. If Congress has the will, the Federal Reserve can effectively print the money.

"If Congress authorizes a few billion dollars of additional spending, or a few hundred billion dollars, then the Fed's job is to make sure that those checks don't bounce," Kelton told NPR.

 

"Too often, people get a whiff of MMT, they don't read the literature, and they somehow arrive at the takeaway that MMT is about printing prosperity," Kelton said. "And of course when people hear printing money, they go straight to Zimbabwe or Weimar Germany."

Those are notorious cases of hyperinflation. But Kelton argues that runaway prices are only a danger when demand outstrips the real resources in an economy — the people, machines and raw materials. If there's idle capacity, MMT maintains that additional government spending does not trigger inflation.

 

Tax historian Bruce Bartlett also blasts MMT as little more than a fig leaf, giving license for big spending in the same way Art Laffer gave Republicans cover to cut taxes with the dubious claim they'd pay for themselves. "MMT is sort of the Laffer Curve for the left," Bartlett said.

 

[Commissar SFLUFAN]

I don't see what advantages MMT has over standard Keynesian economics. 

[Anathema-]

8 hours ago, SFLUFAN said:

I don't see what advantages MMT has over standard Keynesian economics. 

 

Rhetorical, perhaps? Just spitballing.

[Commissar SFLUFAN]

9 minutes ago, Anathema- said:

 

Rhetorical, perhaps? Just spitballing.

Perhaps @Signifyin(g)Monkey can elucidate further?

 

I know @Massdriver can't stand MMT

[Massdriver]

MMT is like the “science” behind supernatural orbs.  

 

Let’s see what economists think about it: http://www.igmchicago.org/surveys/modern-monetary-theory

[Signifyin(g)Monkey]

On 7/17/2019 at 8:52 AM, SFLUFAN said:

I don't see what advantages MMT has over standard Keynesian economics. 

Proponents would argue it does a better job than the New Keynesian variety of Keynesian economics in describing the behavior of economies under conditions of monetary sovereignty, i.e., wherein a nation borrows in its own currency, and is the sole issuer of that currency.  They would also argue the resultant economic prescriptions are superior to the New Keynesian ones, as the New Keynesian ones are beholden to monetarism and the assumptions of neoclassical economics, and both monetarism and neoclassical economics have all sorts of problems.

 

Like a lot of schools of thought, it's not totally homogenous.  I think its biggest issue is that the people who are currently bringing it into the popular discourse, like AOC, only have a vulgar understanding of it, and basically reduce it to "the government can print any amount of money and fund any kind of government program and it won't cause inflation", which is false, and a distortion of MMT.

[Massdriver]

https://www.econlib.org/library/Columns/y2019/Hummelmonetarytheory.html

Thoughts on this column?

[Signifyin(g)Monkey]

2 hours ago, Massdriver said:

https://www.econlib.org/library/Columns/y2019/Hummelmonetarytheory.html

Thoughts on this column?

A thoughtful critique on some aspects of MMT--I think the school of thought could strengthen its policy proposals by more directly addressing issues of public choice, which seems to be one of the column's bigger beefs.

 

However, it doesn't really challenge what I think are the most empirically-grounded aspects of it, which seem to be what the article refers to as its 'Post-Keynesian trappings'.  There really is good empirical evidence in support of, for example, a view of the money supply as primarily endogenous.  Which poses some issues for conventional monetarist thought, including monetarist-inflected Keynesianism.

 

But the column also agrees with what I was saying above:

Quote

 Although some progressives invoking MMT seem unaware of this, Wray readily acknowledges that “just because the government can afford to spend does not mean government ought to spend more.” Government “must weigh the consequences in terms of withdrawing resources from other (perhaps more desirable) uses, as well as possible impacts on prices and exchange rates.”

It strikes me that politicians like AOC, when discussing MMT, have not really understood it rigorously enough to be aware of these kinds of distinctions.  They are pushing an overly simplistic version of it.