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A Beginner’s Guide to MMT

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Re: A Beginner’s Guide to MMT

#151

Post by roenxi »

dsr_ wrote: post #66
the_optimist wrote: post #48

A credentialed economist should put a stake through the heart of the heart of MMT. Two simple critiques: 1) Relative to a financial statement (i.e. budget), it is difficult to predict and measure inflation. This difficulty lowers the likelihood of government fiscal responsibility and increases the likelihood of devestating inflation. 2) A basic second-order effect: What happens when people realize transfer medium is…

"A credentialed economist should put a stake through the heart of the heart of MMT" -- yet somehow all the critiques made by credentialed economists have been based on misunderstanding MMT. "The financial statement of the economy has to balance." The heart of MMT is that the imbalance between money coming in to a powerful central government and money going out is the primary contributor to growth (or contraction) of…

> The heart of MMT is that the imbalance between money coming in to a powerful central government and money going out is the primary contributor to growth (or contraction) of the economy as a whole.

Only if our measures of economic strength are fundamentally measuring how much money is in it. If what is important is prudent use of resources then there is scant evidence that that is a good idea. And the reason we have an economy is to work out what 'prudent use of resources' means in practice. Governments have no advantage over private individuals in husbanding resources over the generations (look at how many governments make a pigs ear out of setting up pension, retirement systems and infrastructure spending).

Strategically, MMT theories that I've read seem to say that government is a positive, but if we can't be sure who is paying for it maybe nobody is, so the net impact is probably also positive.

That is clearly crazy, but also looks uncomfortably like an honest take on what a lot of governments do in practice. When the government takes on debt, it isn't obvious who is paying for it - the lender thinks they have an asset, so it isn't them. Identifying which taxpayers will pay the money back is as hard as unwinding who money printing is actually hurting.

Re: A Beginner’s Guide to MMT

#152

Post by tptacek »

peteretep wrote: post #148
tptacek wrote: post #144

Earlier quoted context omitted.

I think the argument that MMT is non-normative with respect to inflation is simply false. I'm not an expert, but, like, I've read things other than this article, and in all of them (along with this article) MMT proponents are at pains to point out that "inflation doesn't matter" is a misconception.

As a neutral observer, it feels like if you’re right you could easily show it by literally finding 3 normative judgements on inflation by prominent MMT proponents, and pasting them here, rather than referring to “I’ve read things”

Well, your first would be this article, as I said.

Your second would be the debate between Furman and Kelton on the Ezra Klein podcast, as I said.

I'll dig up a third cite. Like, one of the things in my head is the Kelton vs. Krugman argument, which I read on Krugman's blog, but that's not the best cite, since you're getting Kelton secondhand through Krugman there.

Happy to help. If you'd like to help too, you could cite a source that says MMT'ers feel like inflation doesn't matter.

Re: A Beginner’s Guide to MMT

#154

Post by WillPostForFood »

mempko wrote: post #145
AnimalMuppet wrote: post #117

Earlier quoted context omitted.

This, a thousand times. MMT advocates want Congress to run the economy? Are you out of your freaking minds? They haven't even managed to pass an actual budget in the better part of a decade!

Let me tell you a secret, Congress ALREADY runs the economy. They just ACT like they don't. Notice they had no issue implementing tax cuts (increasing money supply) AND increasing military spending (increasing money supply). They act like they don't because otherwise, people might wonder "Hmm, if they can do that for the rich, and they can do that for the military, maybe, just maybe they can do that for me!". And the…

There is a good case for the exact opposite of what you suggest. Congress pretends like they have power over the economy, but at best they have minimal or random effects. They promised economic growth with tax cuts, but what are the real effects? hard to even tell.

Re: A Beginner’s Guide to MMT

#155

Post by WillPostForFood »

pytester wrote: post #72
ergothus wrote: post #52

Earlier quoted context omitted.

> It’s immediately obvious that increasing the money supply and spending the money will result in inflation. I'm not criticizing your logic, but I feel like my entire adult life (I'm 42) I've been bombarded with tales of EVERY proposal will "obviously result in inflation". During this time gold has also been upheld as the only safe investment, doom is always around the corner, Europe has been on the brink of financia…

It will result in inflation, but that's not necessarily a bad thing. At its heart inflation is just a wealth transfer from creditor to debtor (god forbid, right? creditors are king ). The real issues are that: * Inflation is treated as a bogeyman in the investor managed media rather than an integral and necessary part of a monetary system (you want real pain? try DEflation). * Complete misrepresentation of the risks…

At its heart inflation is just a wealth transfer from creditor > to debtor

That is one way to put it, but you could also say inflation punishes responsible people who work and save money, and rewards less responsible people who spend beyond their means.

Re: A Beginner’s Guide to MMT

#158

Post by dimitar »

MMT is neither modern (its basically Abba Lerner's "functional finance" from the 40s), nor it's even a coherent theory. MMT fans don't like to draw up models that can be understood by other economists. With functional finance you knew exactly where Lerner stood and his claims were challenged with real-world data and the theory faded with relevance. With MMT if you try to challenge them in any way they will claim that they are misunderstood - the "not a true Scotsman fallacy".

This is why MMT is ignored in most academic circles - it doesn't bring anything new, and neither it does in a scientific way and understandable way.

There is also the question of politics - there is a perception that mainstream economists are right wing that is why somw turn to "heterodox" economics. Of course this is non-sense, and mirrors libertarian obsessions with Austrian school economists. Mainstream economics can inform both left-wing and right-wing policy making, just fine.

Re: A Beginner’s Guide to MMT

#159

Post by morningmoon »

kaycebasques wrote: post #143
holymacaral wrote: post #38

MMT is a rationalization for unlimited spending & economic control. Do you really think AOC, Warren, Sanders actually understand the theory of MMT which they advocate (if not by name)? The MMT theorists began with the conclusion they wanted and concocted a theory to get there. This is policy shaping theory at its finest.

Based on the names that you supplied, I'm guessing that you assume that MMT is a left-wing idea. I think the bigger reason to pay attention to it is because it has support on both sides of the American political spectrum. Read The Macro Tourist's post [1] for a pragmatic trader's take on the matter. He also suggests that Trump is already an implicit proponent of MMT, what with his increased spending and decreased tax…

"implicit proponent" is an oxymoron.

Re: A Beginner’s Guide to MMT

#160

Post by jonny_eh »

vasilipupkin wrote: post #32

Macroeconomics is a sufficiently complex topic that trying to understand it or discuss it at a "beginner level" is almost pointless. At that level, all you need to know is that any theory that promises some certain knowledge of what's going to happen if this or that happens and that it's all very simple, is almost certainly wrong.

It doesn't promise certainty, it just points out that certain levers may be connected in ways we didn't realize.
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