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> A credentialed economist should put a stake through the heart of the heart of MMT.

MMT is, AFAICT, pretty soldily grounded recitations of facts about fiat money that are widely recognized.

It's been embraced by advocates of monetizing fiscal affairs because, well, it says that there is virtually unlimited short-term capacity to do that in a fiat-money system. But it's exactly that temptation in a fiat money system that motivated the strong separation we currently have between fiscal and monetary policy, which includes the whole structure of government financing operation g as if it were more like a normal participant in the economy.

OTOH, the entity charged with fiscal policy in the US has either been actively hostile to real needs or asleep at the switch for most of the last couple decades, and monetary policy alone, as currently structured, directs money initially into what is often the wrong place, though fiscal policy can help move it to the right place. The problem with the MMT driven “solution” is it involves concentrating both fiscal and monetary policy in the hands of Congress, and if Congress wasn't being completely worthless we wouldn't have the problem people are turning to MMT to fix.

If Congress were doing good work with fiscal policy but the Fed was screwing it up with poorly chosen or simply negligent monetary policy, then there would be a problem that the way MMT is being invoked would present a solution to.

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 then people might get strange ideas like, maybe we can afford universal health care, maybe we can have a system oriented towards their needs.

So Congress doesn't want the people to know they already control the economy, because otherwise, people might want them to do the job they elected them to do.

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.

I think this is also why you get certain peanut gallery members complaining - the way that MMT is being brought into the conversation is first at odds with a lot of ideology, so it is being misinterpreted for intention.

"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 economy as a whole. When it is balanced, the economy is neither growing nor contracting. When the government increases the public debt in a sustainable manner (i.e. people are willing to buy all the Treasury bonds being offered) the economy improves.

"This is merely a backdoor way of transferring assets in a deeply unaccountable way." It's not backdoor and it's not unaccountable; it's tax policy.

It's tax policy that is designed to be non-transparent. When the government collects $20 dollars from my income I know exactly what kind of value is being collected. When the government prints $20 it's not transparent what kind of value is being redirected to the government.

> 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.

This critique (and it is the by far the most common critique of MMT I've heard) boils down to this:

"MMT may very well be an accurate depiction of reality, but the problem is that if people start to see it as an accurate depiction of reality then inflation might go up."

That's definitely a problem for a certain class of people (creditors and investors).

MMT is controversial because, if true, it's undermining a lie that is supporting those interests ("keeping inflation as low as possible") over the interests of society as a whole.

This does not make sense as a rebuttal. The MMT'ers and the monetarists agree that runaway inflation is very bad. Essentially what you're doing here is confirming the misperception that MMT is just left-wing back-rationalized voodoo economics, which it is not.

^^ This is a straw man. I also agree that runaway inflation is bad. Almost everybody does.

What I wrote above cannot, under any serious interpretation, be considered as a defense of runaway inflation.

Help me understand where I went wrong reading this. I read, paraphrased: "The problem with MMT is that if everyone believes in it, they'll do things that cause inflation to rise", and "This is a problem primarily for the investing class".

That's accurate. Note that I did NOT say that it would cause runaway inflation.

Runaway inflation (or hyperinflation, if we're being terminologically precise) == Inflation > 50% per month == Zimbabwe destroying its farmland and industry and having nothing useful to export and thus not having an economy that can support the current level of spending.

Rising inflation == The US deciding, according to MMT principles, in the next decade that "fiscal responsibility" is not a reasonable justification for preventing medicare for all and maybe seeing a percentage bump in inflation as a result.

MMT economists don't support inflation at any level, do they? They support alternative means of controlling inflation. Put differently, it sounds like you're using "MMT" as an incantation to dismiss inflation, which would be unfair to the MMT'ers.

>MMT economists don't support inflation at any level, do they?

MMT does not make normative judgements on inflation. It does state that taxation and fiscal spending are more effective control knobs to target inflation than monetary policy, but that isn't a normative judgement either.

>it sounds like you're using "MMT" as an incantation to dismiss inflation

I'm giving context to why hyperinflation / inflation scaremongering surrounding MMT exists.

I'd do it for the same reason for why I'd reference oil company profits in reference to global warming skeptics - because it's the responsible thing to do to associate the motive for spreading bad science with the bad science.

Naturally this gets abuse slung at me - with phrases like "left-wing back-rationalized voodoo economics" slung around for instance.

Can you source your claim that MMT doesn't make normative judgements on inflation? That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show. As I understand it --- once again --- MMT says inflation is bad, but that there are better ways to control it than monetarism and fiscal austerity.

The distinction between my understanding and yours is highly material, because in my understanding, an attempt to actually deploy MMT policies at the Fed in the service of (say) single-payer that resulted in rising inflation would be a problem and evidence of failure, and in your understanding it wouldn't. In my understanding, the MMT economists would say "here are a set of policy levers we should use to ensure inflation doesn't increase", and in yours MMT economists would say, essentially, "single payer is worth extra inflation".

The idea that inflation and deficits simply don't matter as much as conventional economists think it does is, as I understand it, a caricature of MMT that actually annoys MMT economists.

>Can you source your claim that MMT doesn't make normative judgements on inflation?

It's in the name - modern monetary theory. Much like the theory of gravitation does not posit that gravity is "bad" or "good", modern monetary theory does not posit that inflation is bad.

>That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show.

Much as your earlier posts massively misrepresented what I said, I strongly suspect you are misrepresenting what others said.

>In my understanding, the MMT economists would say "here are a set of policy levers we should use to ensure inflation doesn't increase", and in yours MMT economists would say, essentially, "single payer is worth extra inflation".

MMT economists might very well opine that extra inflation is worth medicare for all and at the same time set out a set of policy levers which can bring down inflation if desired. One is a normative statement; the other positive.

>The idea that inflation and deficits simply don't matter as much as conventional economists think it does is, as I understand it, a caricature of MMT that actually annoys MMT economists.

I think the personal feelings of many MMT economists is probably that a slightly elevated inflation doesn't matter that much. There are economists who are motivated by money and prestige who will naturally gravitate towards, for example, richly funded think tanks representing investor interests and there are economists who are interested in figuring out how the economy actually works.

These two groups will naturally have differing personal feelings about inflation precisely because the people who pay their bills do.

I think what pisses them off are the people who say that MMT is simply a theory that says governments can spend limitless amounts of money.

Thanks, I'm pretty comfortable with what this thread says about your argument and mine at this point.

"Rising inflation" != "runaway inflation".

The difference may be differing assumptions on how likely it is, if MMT were adopted, that we would stop with merely rising inflation.

MMT is both a description of the current system, a system that is already in place, and a set of policy proposals. So "believing" in MMT may simply mean understanding clearly the process already happening.

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.

I have Ctrl-F’d through the article for “inflation” and only see “excessive” inflation as being normatively judged. Which bit do you feel supports your assertion?

On the discussion with Kelton and Furman on the Ezra Klein show: I came away frustrated, because I felt that every time Kelton tried to delineate an ideological difference, Furman disagreed that it was in fact a difference. I found it a good discussion on economics, but no clear line-in-the-sand between MMT and orthodox economics.

But FTA: MMT rejects the modern consensus that economies should be steered primarily by the raising and lowering of interest rates. MMTers believe that the natural rate of interest in a world of fiat money is zero and that pegging it higher is a giveaway to the investor class.

So according to the article, MMT actually holds that interest rates are held too high under conventional monetary policy.

Scott Sumner, who is a leading monetary economist and very much credentialed, has a takedown on his blog: https://www.themoneyillusion.com

I have not formed an opinion on MMT, nor do I consider myself to have the right background trying to fully understand it or any other economic model, but even at my level of knowledge, the first four paragraphs of Sumner's rebuttal seem to be willful ignorance on his part. The views he cites as inconsistent easily fit into the MMT framework, which asserts that inflation is the only constraint that matters, and other factors (like large deficits) only matter if they affect inflation.

Later on he cites low overall GDP growth in Japan to counter Japan as an example of large deficits/low inflation. This: 1) Doesn't invalidate the point. 2) Totally discounts that Japan has had _some_ GDP growth even as an aging population has led to a _smaller_ workforce over that period.

> What happens when people realize transfer medium is being debased? They'll obviously try not to store value in that transfer medium.

Arguably, to some proponents of MMT/in some versions of MMT, this is a feature and not a bug. Economically speaking, stored value at rest isn't "interesting", it's a potential indicator of waste or inefficiency of resource utilization in current flows. I've heard the argument that the real "bug" here is the human psychological need to "hoard" stationary value/"keep score", which admittedly is a very hard problem to solve, but having hard problems to solve isn't necessarily a disproof of a hypothesis such as MMT.

So you do not want to store value for things like retirement or risky times?

Runaway inflation can make even intra-year saving impossible.

If this is a feature of MMT, it seems they'd be willing to give up on a lot of civilization since be began farming.

Many MMT proponents argue heavily for raising strong "floors" such as minimum current flows to/through individuals. The general goals are often to eliminate "risky times" as a category altogether as a general safety net for everyone. Then things like retirement and disability and sabbaticals are merely "special cases" of the general goal of eliminating "risky times".

Yes, it's a very different view of economics from a lot of traditional approaches. It's not a fundamental "give up on a lot of civilization", even where it is a general rethink of "what does it mean to be a member of a civilization", including such things as what should be an individual's guaranteed safety floor, it's still mostly just civilization as we know it today swapping what we today think of as edge cases (social security, medicare, et al) for more generalized principles (in theory at least).

I find the idea that private firms over-save and the way fix that is to print money to be disagreeable, and not an application of scientific or economical mindset, but the mere psychology of wanting to get results today at the cost of results tomorrow.

Some proponents of MMT strongly believe that we already live in a world where we fix private firm lending/saving problems by printing money, in the ways that for instance the US Federal Reserve makes 0-interest loans to banks. That certainly has economics and science studying that today.

A lot of MMT talks only about exploring better options for how that existing effort/flows is redirected, and if we would get testably better results from other more interesting configurations, not about creating some new tools out of thin air simply because they "want" to.

In my amateur economist models, I adjudicate over-saving as a symptom not the disease. It is clear that money issuing does not have a neutral effect (not the same as private firms investing, or private firms being taxed to fund a government project). In the end it comes back to the utilitarian-keynesian view that the government will be more efficient spending that money, or that such a thing would not have long-term effects on the exchange rate, savings, etc.

In my amateur economist models, I explore economic systems with modified electrical engineering diagrams. Money as we define it and subsequently many forms of savings/over-saving are nearly as useless as Instantaneous Voltage (in Joules) or ultimately as abstractly uninteresting as Ground in a working system. It is current flows and movement that are actually interesting/useful, and the not very well defined equivalents for money to its first and second derivative metrics (electricity's Amperes and Coloumbs, for instance).

I have no idea how many proponents of MMT find interest in such similar engineering-oriented views of economics, but general economic theories of inflation/deflation from that point of view seem so primitively useless versus what we know of, say, electric resistance, inductance, capacitance, conductivity, etc.

I cannot tell you if my armchair theories are any better in the long term than the status quo or your preferred models, but only that MMT at least seems to be one of the few areas of economic study currently attempting to address them (albeit indirectly in many cases). That is also not necessarily proof that MMT is correct, just as my models don't ipso facto disprove status quo "wisdom".

Here are some: http://www.igmchicago.org/surveys/modern-monetary-theory

The thing is, economists disagree with each other all the time, including the most erudite ones. Expert opinion is nearly always conflicted.

Obligatory post from 2009: https://gregmankiw.blogspot.com/2009/02/news-flash-economist...

Seems you incited someone to submit it [0]. I don't think it's unfair to say there wasn't any meaningful disagreement across the respondents at all. They only differed in how much confidence they had in disagreeing with the answer-begging question.

[0] https://news.ycombinator.com/item?id=19456616

Right, it seems like the problem is more political than economic. Point 2 obviously flows from point 1, so the argument is whether point 1 is valid or not.

In theory there might be viable ways to control inflation via taxes and other ways of soaking up extra money supply that's created by printing/spending. The implementation will be difficult though, especially if it's driven by a political process. Even if you initially start with something that has all the correct automatic adjustments built in (assume this is possible), there's always the risk that a new gov't breaks it.

I think that for a change in paradigm like this to be successful you'd need stronger guarantees that things would stay in place long term (similar to UBI actually).

1. Inflate 2. Tax to reduce inflation

WAT

No, (2) would simply add to inflation, adding insult to injury.

https://www.nytimes.com/2019/02/12/opinion/whats-wrong-with-...

https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wo...

> This difficulty lowers the likelihood of government fiscal responsibility and increases the likelihood of devestating inflation.

I share this worry too, but it's not like there's currently any political appetite for fiscal responsibility. I wonder if the threat of inflation and currency volatility would actually serve as better stick, than what we currently have which is continuing to run up a massive debt which will be terrible for our children?

Krueger, Summers have very publicly vouched against it.

Im surprised MMT is a thing at all.