Dan Kervick: Why MMT is Not a Free Lunch

By Dan Kervick, who does research in decision theory and analytic metaphysics. Cross posted from New Economic Perspectives

A common criticism of Modern Monetary Theory is that it is a naïve doctrine of free lunches. The critics grant that a country like the United States, which issues its own freely floating fiat currency, can always make the policy choice to issue whatever quantity of that currency it deems appropriate. The US government can spend as many dollars into the private sector economy as it chooses, without obtaining those dollars from some other source first, and it can always pay any debts that have been incurred by borrowing dollars. But the critics will go on to charge that MMT mistakenly concludes from these few institutional and operational facts that there are no economic limits to the wealth-generating capacities of the government. They caricature MMT as a doctrine of manna from heaven, in which the power of issuing a generally accepted medium of exchange confers the power of conjuring real wealth into existence by prestidigitation. In short, they see MMT as a disordered syndrome characterizing people who are experiencing massive money illusion.

But this criticism misses the mark. MMT does focus a good deal of attention on the monetary system and the banking system, and on the operational mechanisms of public and private finance. But the whole point of analyzing and clarifying the monetary system is to help people see through the glare of the economy’s glittering monetary surface to the social and economic fundamentals that operate below that surface. The point is certainly not to deny real limits on our capacity for economic development and progress, but to correctly identify where those limits lie – and where they don’t. MMT’s criticism of some standard economic and public policy approaches is that the standard discourses sometimes incorrectly locate those limits, and as a result manufacture artificial barriers to progress where none exist.

Our real opportunities for economic progress are grounded in our ability to apply work, cooperative activity and creative ingenuity to the real resources we already possess. By the enterprising application of our industry and intelligence, we transform the things we have into different and better things, and exchange our work and the products of our work among ourselves to make our lives better. Our real limits, then, are the constraints imposed by our inherently finite nature: we only have so many resources; we can only work so hard; our cognitive capacities are only so great; we only live so long, etc.

But what we must try to avoid is the imposition of artificial barriers to progress that are only the psychological fallout of confusion about the complex social institutions we ourselves have constructed. When we possess resources that are not used to improve our lives in the ways they could be used, when there are unemployed people in our societies who are both able and willing to do the work needed to improve those resources and realize their potential to yield value, and when people are suffering needlessly or living under deprived conditions as a result of the underemployment of resources and people, then we are somehow failing as a society to seize our real opportunities, and have succumbed to artificially imposed limits.

The monetary system is best seen as a public utility that is employed by its users to finance the production and exchange of goods and services. It is a system of institutions created by human beings to help realize opportunity, and match opportunities for the creation and transfer of goods with the potential producers and recipients of these goods. It’s our monetary system, and we can do whatever we want with it to achieve our society’s full potential. We can create, destroy, transfer or manipulate the monetary medium of exchange as we see fit to advance the good of society and improve the condition of our people. Thus there can be no such thing as an economic limit due solely to our society as a whole being “out of money”. That’s like saying we can’t organize better schools, or write more and better books because we have run out of words.

Many of the key ideas of Modern Monetary Theory go back to the years during and immediately following the Great Depression and the Second World War, when great thinkers and public servants applied bold, creative thinking and practical problem solving to the daunting economic and organizational challenges of their times, and helped their societies overcome systemic failure, triumph over threats and adversity, and achieve renewed optimism and growing prosperity. One of those thinkers was Abba Lerner, who developed the concept of functional finance, which he described this way in his paper “Functional Finance and the Federal Debt”:

The central idea is that government fiscal policy, its spending and taxing, its borrowing and repayment of loans, its issue of new money and withdrawal of money, shall be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine what is sound and what is unsound.

Lerner then articulated two “laws of functional finance”, which I think still very well capture the spirit of the MMT approach to economic policy. The two laws are given as follows:

The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce.

The second law of functional finance is that the government should borrow money only if it is desirable that the public should have less money and more government bonds, for these are the effects of government borrowing.

These two simple rules of action yield immediate logical results that people still find surprising or counterintuitive, and sometimes even find impossible. Recall that taxation generally reduces the total rate of spending and government spending generally increases total spending. Thus, a combination of tax changes and government spending changes will tend to increase government spending if it increases the government deficit, and will tend to reduce total spending if it reduces the government deficit. So, suppose the country is running a deficit, but suppose the total rate of spending in the country on goods and services is less than that rate which at the current prices would buy all the goods that it is possible to produce. Then the first law says the government should increase its deficit. But suppose it is not desirable that the public should have less money and more government bonds. Then according to the second law, the government should not issue more bonds. It should not finance the increased deficit with more borrowing.

But how is this possible? If a government wishes to increase its deficit, doesn’t it necessarily have to borrow to cover the larger gap between revenues and spending? No, it does not. A government that is the issuer of its own currency has the option of increasing its deficit without increasing bond sales. It can issue new money in the very act of spending it. And that is what the two laws of functional finance recommend in the hypothesized circumstances.

Unfortunately we have not made full use of this inherent governmental option, and have not implemented the laws of functional finance. Congress has legislatively implemented a system in which deficit spending automatically triggers bond sales, without regard to any calculations as to whether it is in fact desirable that the public have more government bonds and fewer dollars. And we have divided up the two important functions of issuing money and issuing government bonds between two different operational branches of the government – the Treasury and the Fed. Happily, there is some degree of a workaround available for those who might want to apply functional finance within our current legislatively determined framework, so long as these two branches of the government are able to work cooperatively. The Treasury can issue bonds and sell them for dollars, while the Fed is at the same issuing dollars and using them to purchase government bonds. But the system is probably not as efficient as it should be, and its functioning can be hampered by institutional jealousy over policy turf, and by the neoliberal preoccupation with central bank independence that characterizes the thinking of the most powerful members of the global financial class, a preoccupation which imposes a pressure for the Fed not to be seen as not cooperating too closely with the Treasury. So to fully implement functional finance, we might want to think about changing the current system.

Now note what the first law of functional finance says about a situation in which the total rate of spending in the country on goods and services is likely to be greater than that rate which at the current prices would buy all the goods that it is possible for the economy to produce. The result is that prices would then rise until spending and production at the new price level are in balance, and Lerner’s first law thus entails that the government’s responsibility in such a situation is to decrease spending so as to prevent or curtail such price increases. So here is where functional finance takes account of the real limits of our economy, the ones built into our limited resources and limited capacity to produce.

Now, to be frank, Lerner’s first law of functional finance is perhaps overly austere. It views the economy as analogous to a factory or business enterprise, and views the government as a sort of demanding manager whose chief job responsibility is to assure production up to the level of full capacity. But our economy is not a wartime factory; it is a democratic society. And whether or not we produce everything that it falls within our capacity to produce should be a matter of public choice, not iron policy law. We might choose a somewhat more leisured and relaxing life than the one we would have if we were producing up to our full capacity.

But I believe the spirit of Lerner’s recommendations is still valid. If we are faced with a society in which there are many people who want to be working and contributing and producing, and earning incomes as a result, but who are not provided with the opportunity to do that work; and if we are presented with a society in which there is a general sense of stagnation and a general dissatisfaction with the levels of output, innovation and improvement, then surely it is our responsibility to act through our government to boost employment and the pace of economic development.

We owe all of our fellow citizens an opportunity to participate fully in the common work of building a prosperous life for ourselves, and we also owe them a fair share of the economic goods that all of that work produces. And when we finally do right by them, perhaps they will at least be able to buy a well-earned lunch.

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  1. Simon

    I stopped reading at …. (actually I did read the rest)
    “It’s our monetary system, and we can do whatever we want with it to achieve our society’s full potential

    “Let me issue and control a Nation’s money and I care not who makes its laws”. Rothschild.

    To see it as a system used by the collective for the collective good just seems incredibly naive. Just who are the “our” in this sentence? There is an explicit assumption, which is not articulated, which is founded on the idea the economic participants are working for some common good. Cynically I know, I would argue that those who control the money control the power and have shown themselves quite capable of acting in ways which serve themselves at the expense of others.

    1. Andrew Watts

      Agreed. Not only does the author underestimate the power of self-interest. He doesn’t even consider the role it plays in society in the first place.

      1. JTFaraday

        Well, but you’re looking for an analysis whereas Dan Kervick is a propagandist. As such, and despite his pretentious byline, there is nothing analytical about his writing, something he demonstrates week after week.

        When you’ve already decided to be a propagandist because you know better than your audience, it’s far better to shut down your audience’s thought process by stuffing them full of platitudes, like “the common good,” to which they would be inhuman to object. Surely, we all believe in the common good.

        This is similar to the way “human rights” is functioning in our current (bottomless pit MMT-money funded) military adventurism in the mid-east. Surely, we all believe in human rights and want to kill religious fundamentalist terrorists who hate our freedoms.

        More specifically in this case, you can’t expect a propagandist for a group of would-be technocrats to come with anything that might look like an analysis of particular interests, or a class analysis, because that’s something to which too many people would be inclined to subject them themselves, as our new rulers.

        For example, last week Kervick informs us that his son is graduating soon, implying that we are all in the same boat together and we can thus trust him to have our interests at heart, because his interests and our interests are one and the same. An instance of a concern for our “common good.”

        But we have to know that when Kervick promotes that nasty, neoliberal austerian minimum wage job guarantee policy, he surely intends for his son to manage the state slaves or otherwise benefit in the private sector from their labor, but not to be himself impressed by the state into a life no one actually wants.

        There is also this assumption that we all benefit from the economy and therefore the state has a claim on our labor. (You can find the relevant passages that imply this yourself above). But I don’t really see that the state slaves benefit from the economy in the way Kervick’s son stands to benefit from the economy, so I don’t think Kervick’s son has right to their labor–but Kervick certainly does.

        Old boss, new boss. I’m hard pressed to see the difference. Indeed, a few days ago someone– I think it was jsmith– posted an academic article on neoliberalism. It’s startling how well the MMT-ers’ labor based moralism fits with the rest of the neoliberals, as described by the MMT-ers own academic colleagues:

        “The welfare state can no longer be a ‘static’ protection system but must help individuals to ‘dynamically’ manage their life. Yet this new role of the welfare state calls for a new type of relationship between the individual and the state and has as a ‘major consequence’ that the exercise of a right becomes inseparable from an appreciation of behaviour.

        The idea that there are no (social) rights without responsibilities is based on an external monitoring of the benefit recipients, with the necessary sanctions, as well as internalized constraints in the form of an ethic of reciprocity between the individual and the state or rather between the individual and the ‘community’ in the Third Way view (Giddens, 1994). At the centre of the representation system that structures this view is the notion of ‘supply-side citizenship’ (Plant, 1998), according to which citizenship is an achievement, not a status, and that participation in the labour market is the normal way to qualify as a citizen. The realization of the individual’s abilities can principally be achieved through paid employment; on a slightly more positive side, the labour market is also regarded as the place where individual freedom can express itself.”

        The article is “Morals and politics in the ideology of neo-liberalism,” Bruno Amable. Socioecon Rev (2011) 9 (1): 3-30. Special issue: “Commonalities of capitalism.”

        If we’re just being superficial about it–which I take it we are– then I’m not going to say I don’t think there are serious problems with the US job market, because I do.

        But I also honestly think this preoccupation with the presumably idle is a serious cultural ill–indeed, a cultural ill bordering on mental illness– born of the fact that there is only one right way to live in the US and it is a way that almost no one really wants, but which no one is permitted to admit and few dare to do so.

        That’s a brain dead totalitarian culture right there. Pandering to that and institutionalizing it even further–particularly in a police state that is metastasizing like a cancer– is something I’d have to think twice about.

        And, not for nothing, it is this fixation with ensuring that no one gets anything for nothing that we saw in Clinton’s “welfare reform” that is the leading edge of today’s “entitlement reform.”

        Sometimes you have to take the thing by the neck. But you shouldn’t expect a known propagandist to do so. That’s like reading the American Prospect when a Democrat is running for re-election.

        1. jsmith

          Yes, I posted that article and I’m glad others have read it because it really is important to understand the “scholarship” behind the modern technocratic neoliberal fascist state/world in which now exist and how that “scholarship” is basically thinly-veiled dicta telling the proles how it’s gonna be – hint: not good.


          As I’ve seen you and others note here before, MMT and its adherents may have merit in attempting to describe the monetary system we have but a dangerous step is taken when we start speaking such things as labor, responsibilities, etc. in that all of a sudden – much as how the line is very, very fine – if existent – between neoliberal economics and neoliberal politics – again there is a dictation to the masses of how it’s gonna be.

          On a related noted, I generally understand people’s apprehensions and misconceptions about Marxism and socialism, however, it is rather conspicuous that you can find/have serious discussion about human labor, its worth, what the purpose of society/work are, etc etc throughout the Western world without a single mention Marx, socialism, alienation, revolution, etc etc.

          Instead, we are treated with more theories that – like neoliberalism – are rooted in the existent system while the larger and deeper questions/situations which Marx accurately addressed/predicted are left unasked and unanswered.

          As the first commentator alludes to, while MMT theoretically has merit, when we are talking about the current system is it even possible to begin discussions without admitting that while there are nominal distinctions don’t the banks control both the Fed AND the government right now and if that is so – which it is – then aren’t we really arguing in pure fantasy?

          Well, if the Fed wasn’t beholden to the banks…

          And every single level of our government wasn’t beholden to the banks…

          Present fascist system–>something happens–>MMT wonderland

          Hmm, didn’t Marx also address what was needed in that middle step?

          These overarching questions concerning the present and true nature of our society need to be addressed before we as a society can ever hope to release ourselves from the shackles we – as workers – once again find ourselves in.

          Let’s BEGIN the discussion on Marxian levels as they have – over more than a hundred years – easily proven to be the most accurate and insightful no matter how ignored or maligned they’ve become.

          We have to first shatter the false consciousness that has imbued our society to such a pervasive level – through a masterful propaganda system, etc – that we can seemingly only offer ourselves what amount to warmed-over versions of the system that already is in place.

          Take it to the worker level BEFORE we go against the professors and their technocrat lackeys.

          There is no way that the common person is going to understand MMT but it already has been shown that the common person can and will understand the ideas of Marx and that will bring us as a society closer to where we need to be.

          Here, the attendant response is “look at Stalin blah blah blah” but wanting to accurately educate workers that they live under a system that seeks to exploit them and their loved ones from birth to death is at present a far cry from gulags and purges and I think it’s time we all grew up and got to work in discussing our plight from perspectives that we’ve explicitly and implicitly been told not to utilize by our masters for decades.

          Gee, I wonder why they would do that, huh?

          1. Aquifer

            ” ….I generally understand people’s apprehensions and misconceptions about Marxism and socialism, however, it is rather conspicuous that you can find/have serious discussion about human labor, its worth, what the purpose of society/work are, etc etc throughout the Western world without a single mention Marx, socialism, alienation, revolution, etc etc.”

            Hmmm, did Marx have a serious discussion about these things without mentioning Marxism? As far as alienation, revolution, even socialism, is concerned, they predate Marx …
            I would like to have discussions about all this – but what rather sticks in my craw is this insistence about bringing Marx, himself, or “Marxist” ideas to bear as if these ideas sprang de novo from the mind of Marx and cannot be discussed without invoking his hallowed name. So is this about Marx or about the ideas he writes about? If the latter, and you have already noted that invocation oh his name often provokes a sour face, then why insist on it?

          2. jsmith

            I haven’t read that book but from what is available on Google it seems that while the author mentions Marx and is familiar with his writing – again I only read the forward/intro – it appears that the author would like society to rapidly move beyond Marx to a new economic formula which in my opinion somewhat detracts from what I think needs to happen as I suggested in my original post.

            The rest of this response is for both you and Aquifer as it somewhat is the same point.

            Common people need a language so that they can understand how they’ve been screwed, how they’re being screwed and how they will always be screwed under capitalist systems.

            Yes, everyone – even the most brainwashed I believe – have inherent understandings that things aren’t right, that they’re taking in it the pants and life is harder than it should be.

            However, it is difficult for people to understand that their hardship is the same as the hardship of their neighbors is the same as the hardship of the illegal immigrants is the same as those of workers in other countries and so on and so on….

            Marx – who was influenced by many people and mentions many of them in his writing – provided that vocabulary and unified what a number of different thinkers had been hinting around and suggesting and he did it – mostly – in ways that people could understand or at least in ways which could be easily explained to common people.

            The problem I have with the writer – again not having read the book so I may be in error – is that he is an educated man who would like people/workers to progress PAST Marxist thought to a new system without allowing the people to first create a “class consciousness” so that they deeply and inherently understand that – yes Virginia – they’ve been routinely and systematically screwed for generations and there’s no end in sight.

            Instead of a member of the academia saying “Oh well, Marx is outdated, shopworn, etc etc…” let’s just skip over all that stuff, I contend that we should first fight against the capitalist propaganda that has stifled and prohibited discussion involving Marxist ideas.

            Make sure the common worker “gets” Marx before we go forward.

            As to Aquifer’s point, one of my main reasons for actually invoking Marx is not as much to contribute to his hagiography but rather to actively combat his erasure from discussions in academic, political and social milieu.

            I agree, Aquifer, that we could discuss all of Marx’s ideas without mentioning him but why not? Because we’ve been told by our neoliberal “betters” that it’s naughty? Because he’s not “outdated”? Or because he was accurate in his descriptions/predictions?

            There is a huge canon of Marxist writing – like any branch of thought, some good, some bad, some atrocious – but by not mentioning Marx it 1) only galvanizes the neoliberal censorship/gag order that has existed concerning Marx and 2) disallows other curious and intelligent people the means by which to discover for themselves what the original proponent(s) of these ideas stated/thought and often in much better terms than their later adherents and followers.

          3. jsmith

            Should be “Because he’s “outdated”” and there should be an ‘x’ or ‘s’ on ‘milieu’.

          4. jsmith


            If common people understood that their exploitation was a systemic feature of capitalism and not a bug that can be attenuated by the throwing of “bones” to sub-sections of the populace – e.g., tax rebates, etc – or the blanketing of the population with nonsensical yet insidiously effective propaganda – e.g., take your pick of examples – then the reins of the elite’s control become weaker or must then morph into more overt manifestations – ie., goose-stepping fascism, etc.

            Education is a non-violent means of resistance which can/will force the hands of our elite and in that light it has been markedly conspicuous how our betters haven’t wanted us to educate ourselves on Marxism.

          5. Aquifer

            js – i appreciate your response, and would like to tease it out a bit more, to whit – what is it that Marx brings uniquely to the discussion of “socialism, alienation, revolution” such that it is necessary to invoke him, per se, in the discussion? Is it his ideas about “class” and the necessity of “class consciousness”? For me that, frankly, is a part that sticks in my craw for a very pragmatic reason – who gets to define the memebership requirements of this “class” thing – i have had this conversation in at least one other venue, as well, and have become “alienated” myself from those who I might otherwise have considerable in common with, over this “class” bit – ISTM that if Marxists want to talk about “class” they had best decide how to incorporate a whole lot of folks that Marx himself perhaps didn’t encounter or consider …. I don’t see that being done. The “Marxists” out there i have encountered are every bit as rigid in their dogma as the “Neoliberals” are.

            As i have said – I am a pragmatist – look at all “systems” pick out aspects that work well in some situations but not in others – the same Rx is not good for all patients – but that, apparently, isn’t allowed in a dogmatic system, which, at least as it’s presented by its acolytes, Marxism appeare so be …

          6. Nathanael

            Marx didn’t have a clue what to replace capitalism with, unfortunately. Saw what capitalism was, was disgusted, said “Throw it all out!”, didn’t have a coherent replacement.

            He was a very trenchant analyst of capitalism, but the “Marxists” have mostly become dogmatic idiots. Though I like the work of Joan Robinson.

          7. Nathanael

            I think if you want people to understand issues of CLASS — have them read VEBLEN, who describes the behavior and attitudes of the current ruling class really accurately. (With one interesting exception — his ruling class venerated the ancient, ours also venerates the ultra-modern.)

          8. jsmith

            Without getting too bogged down into trying to classify certain individuals into one class or another I believe that if most people – i.e., workers – simply understood the 3 main distinctions – i.e., capitalist, worker, petite bourgeoisie – and how Marx defined those classes through the relation of each to the concepts of labor and capital, this would be a huge boon to society.

            There will always be points of distinction that can and have been argued as to who goes where but let’s start with everyone in the America/the world knowing that under capitalism:

            Worker: you don’t own sh!t so must sell yourself to/are exploited by the capitalists/bourgeoisie.

            Petite Bourgeoisie: you own some sh!t, are still are exploited – to a lesser extent – by the capitalists, but you defend the system because you got yours.

            Capitalist: you own everything and buy and sell people to accumulate even more sh!t.

            With even this rudimentary understanding, people – again, mostly workers – then see that it’s not about “participating in free markets”, “joining the world business community” and all the rest of the incessant sloganeering it’s really about being forcibly and continuously manipulated, exploited, used and abused until they die or somehow acquire the means of production.

            What I’m attempting to drive at is that the Marxist class system is a useful way for people – again mostly workers – to understand that 1) nothing will change until they take back what has been taken from them by the capitalists and 2) barring the introduction of divisive tactics, that the vast, vast majority of humanity is suffering under the same yoke.

            Again, many people already understand all of this but Marxist constructs help concretize nebulous thoughts and better clarify just what it is the over-worked, beaten-down worker who has no time of his/her own has been experiencing.

            I agree, that academics and doctrinaire Marxists do themselves disservice by alienating people to the theoretical constructs that Marx provided as the benefits of helping people understand these concepts would build up resilience to the never-ended crap that is pored into the ears of consumers citizens and foster more in-depth and non-academic discussions of where we should be going as a society.

            Having personally witnessed the introduction of Marx in to community college classrooms and the overwhelmingly positive response it gets from students, I say that it’s way past the time to begin such discussions.

          9. jsmith

            I won’t have much time to post but to Nathaneal’s point.

            As to Marx not being prescient and unkind to his ancestors by not spelling out exactly what we as a society should do now:

            He saw nearly 150 years ago that the capitalist system was a detriment to mankind.

            He predicted to where it would inevitably lead.

            He accurately described the suffering it would produce.

            And – in doing all of that and much more – people nowadays say…


            To the dustbins of history!!!

            Don’t even bother with having the – gasp – workers educated to their plight, rather, make them wait until the academics have figured out a plan.

            Hmmm, seems like Marx would have had something to say about that, too?

            Gotta go.

          10. Aquifer

            js –

            “Without getting too bogged down into trying to classify certain individuals into one class or another …”

            Well there ya go – therein, STM, lies the rub – In order to know “where my interests do/should lie” i have to know what “class” i am in – so where’s the checklist? How many boxes in each column A-worker, B-petit bourgeois, C-capitalist do i need to check to know? I am NOT being facetious here. It seems in my conversations with the “experts” in this area, i am not allowed to self-identify, but am told i “must be” or “can’t be” this or that ..

            So where does this classification put folks like Yves, Lambert, myself, the folks in the peanut gallery in all their many hues and situations in life?

            i will not stuff myself or anyone else in a class box, nor will i allow anyone else to do so – and THAT is why for me, though I can engage quite well in discussions of, and favor many of the tenets of, “socialism” – for Pete’s sake they go back at least to early Christianity – Marxism’s “class” analysis is more a barrier to, than a facilitator of, getting that coalition we need to break free from what we have now and get on with making something better …

            I have fundamental needs, desires, aspirations as a human being that i share with all other human beings, as human beings – i want to start there – THAT is the biggest potential cohort there is in this endeavor …

          11. jrs

            I think there are really only two classes, capitalists and workers. Small (mom and pop etc.) business people could be a third class but simply aren’t a major economic or political factor period. Landlords are either somewhat like small business people or on a larger scale pure capitalists.

            I think seperating out the professional middle class is a mistake. I completely believe that their fortures lie with LABOR and that they should cast their lot accordingly. They also work for a living and every pressure will be bought to bear on their wages and working conditions as well. That they don’t identify with labor, is their own phony brainwashed lack of class consciousness, and I figure the capitalists will get the last laugh at those tools.

          12. Aquifer


            i have found that goes both ways – not simply that professionals “refuse” to identify as working folk, but that “working folk” refuse to consider that such professionals might have anything in common with them – a sort of “reverse snobbism”, if you will ….

            Everybody has to be a card carrying something or other …

            On the one hand you seem to accept that all are working folk, on the other your slip is showing a bit – “That they don’t identify with labor, is their own phony brainwashed lack of class consciousness, and I figure the capitalists will get the last laugh at those tools.” Tools … I wonder what one of these “tools” would have to do to pass your “identity” test …

            All politics is personal …

          13. JTFaraday

            “In order to know “where my interests do/should lie” i have to know what “class” i am in – so where’s the checklist?”

            Here, I’ll make it simple for you. For the purposes of this conversation, with a little bit of luck, Dan Kervick’s son won’t be a victim of the chosen labor policy of his pit bosses over at “‘New’ Economic Perspectives”–a policy of which he has, nevertheless, been an enthusiastic supporter.

          14. Aquifer

            JT – I would, indeed, appreciate it if you could elaborate on that “chosen labor policy” of the “pit bosses” at NEP. I would be very curious to know what that is ….

          15. jsmith


            Sorry I had to run but to address your question about which class you belong to:

            If you don’t know you better axe somebody!!!

            Seriously, though, I think on the individual level it’s a choice. Yes, Marx defined these categories from observation but does that mean there couldn’t be a member of the bourgeoisie who sided with labor just as there were members of that class who sided with the capitalists?

            I personally don’t think so.

            Posed another way, if the revolution happened tomorrow, whose side are you on?

            As pointed out above by jrs, the idea of petite bourgeoisie wasn’t discussed by Marx as much as the other classes and people have argued your point for decades but my personal take on it has been that yes the categories exist but no they are not prohibitively set in stone.

            Many doctrinaire Marxists would label this type of thinking bourgeouis I’m sure but f@ck them, the main point I’m trying to get at is that the Marxist model – there’s the word I should have used originally – is a good model that should be disseminated more as it is accessbile and fairly accurate to people.

            The capitalistic system – esp. neoliberalism – seeks to and effectively does isolate individuals as it exploits them thus nullifying the only true weapon the poor and disposed have: numbers.

            In providing an understandable model such as Marx which seeks to consolidate the power of working classes I think that it has been shown to be a powerful tool.

            Also, my main concern is not with the relatively few people who have both the education and socioeconomic situation to even ask such questions as to their class but more with the millions of Americans and billions of people worldwide who definitely belong to the worker class and need to learn more of their situation and how they are part of a huge exploited brotherhood – yes, let’s sing Kumbaya.

            Just for fun, here’s that old website the Global Rich List. According to it, if you make $1000/year you are in the top 44% of incomes in the world!


            That means that 56% of the world is less well off than you.

            That is a lot of workers, lots of poor people, lots of exploitation.

            A lot of people who would benefit from understanding that it’s not their individual luck, skill, birth, fault etc etc that is making them poor and suffer.

            Rather it is the systematic exploitation of their life for someone else’s profit.

            If people understood this, that there lot was INTENDED to be this way – not an accident, not just “life” – then we could start to get somewhere I believe.

            If you respond, I might not be able to respond in turn as I’ll be away from the machine for a day or two.

          16. jsmith

            Meant to be “I personally think so” that is I think there could be a “technical” member of the petite bourgeoisie who sided with workers.

            Saw that needed to corrected.

          17. Aquifer

            jsmith –

            Hmmm – thanx, but I decline – i would prefer to axe no one. As to whose side i would be on in a revolution, I suspect i would be one of those poor schmucks running around trying to patch up the ones getting axed by everyone else – and being incarcerated if i happened to patch up the “wrong” person …

            i am not being facetious here – the “class” issue you refer to always seems to be intimately attached to “class conflict” leading inevitably to “class war” – which i suppose may be useful as metaphor, but i get the feeling that all too many of its adherents want the “real” thing. At that point it ceases to be an “economic” discussion and becomes an overt political one – And frankly i have seen no discussion about how to get from “Capitalism” to “Socialism” other than by “revolution” – which means what, precisely?

            As i have said many times, i am a pragmatist, not an ideologue – a holder of Jamesian truth as “that which works” … and there are many “truths” out there – no one has a monopoly – i reserve the right to explore and choose from all … and then sit down and, hopefully discuss and formulate a plan or many with those who have done the same …

            I prefer to approach folks not as a “class” but as people, because then i don’t have to think about “which side I’m on” – it’s clear …

        2. Paul Tioxon

          A place for everybody and every body in his or her place!

          “We owe all of our fellow citizens an opportunity to participate fully in the common work of building a prosperous life for ourselves, and we also owe them a fair share of the economic goods that all of that work produces. And when we finally do right by them, perhaps they will at least be able to buy a well-earned lunch.” So says Dan K.

          A social order of the people, by the people and for the people. All three, of-by-for, are both necessary and sufficient for democracy to operate. But democracy, like a color, does not exist independently from institutions fully operating as a part of society. There needs to be many democratically operated institutions within society for it to be considered on the whole, a democracy. The one sorely lacking democracy is the workplace. The factory floor, the cubicle or construction site all lack the consent of most of the workers, most of the time regarding the conditions, the terms of employment and a say in the direction of the enterprise. There needs to be than just a place for everybody with everyone in their proscribed role. The trauma of idling the populace may only give some minds a greater time to consider the social order as a whole and ways to reconstruct it via alternative institutions. How long and under what shitful conditions do I have to labor for a well earned paycheck?

          I watched may grandfather collapse dead, in front of me when I was 3 1/2. He was not quite 70. He died in a home with his name on the deed and no mortgage. The house is still there, with someone eles’s name on the deed and a mortgage attached to the title of the property. The work that went into that house does not have to be repeated again, for a long time. It is well built of stone masonry. But it seems, over and over and over again, despite so much work done and so much wealth created, we still have to earn an honest day’s pay with an honest day’s work. I believe we only owe a few hours honest work at this point in time. The previous generations did not work like slaves and fight wars for the honor of leaving more and more work for their kids and grand kids. MMT is not so much about a free lunch but the circulation of capital, currency and investments… what big investments society needs to make next, the kind of big decision that belongs in the hands of social institutions that build the human enterprise with generations of people in mind, and not the abstract concept of profit as recorded on balance sheets.

          1. Aquifer

            I have heard it said that John Adams, when asked why he did politics, answered, “I do politics so my son can do business so my grandson can do art”

            So how much longer do we have to go through the business phase?

        3. Dan Kervick

          “But we have to know that when Kervick promotes that nasty, neoliberal austerian minimum wage job guarantee policy, he surely intends for his son to manage the state slaves or otherwise benefit in the private sector from their labor, but not to be himself impressed by the state into a life no one actually wants.”

          I’ll let the rest of your rant pass since most of it isn’t really an argument, but just an ad hominem diatribe based on some personal animus you have toward me. But the passage I just quoted is so far off the mark, it has to be called out. You have let your spleen run away with your case. As everybody who reads the things I have written knows, there is nothing austerian about my views. On the contrary, I have consistently called for a significant expansion of the public role and public sector, and the running of large federal deficits – in part grounded in the government’s ability as the issuer of the currency to spend in excess of it’s revenues.

          I have also routinely, end even stridently, attacked neoliberalism. Neoliberalism is the intellectual and political trend of the past several decades pushing in the direction of more laissez faire economic institutions, weaker government regulation of the economy, less government spending and more reliance on the private sector. Again, everyone who reads the things I write knows that I have been calling for an expansion of the public sector and public enterprise, and a return to something like the New Deal ethos that preceded the triumph of neoliberalism. Usually I am attacked for defending some kind socialism, so this charge that I am actually neoliberal is a new one for me.

          I haven’t fully outlined my own version of the kind of full employment program I support, but I do think full employment – defined as a job for everyone able *and willing* to work – should be our goal. My preferred approach is combined with a broader, radically egalitarian approach to economic policy, and calls for a significant increase in the minimum wage along a combination of redistributive and predistributive policies aiming at bringing the income gap way down. I don’t think there is anything nasty and totalitarian about a society in which everyone who wants to work has a job. I am appalled by the criminality of the government policies that have left many tens of millions of people unemployed – especially young people – in Europe, the Middle East and the United States.

          1. Aquifer

            Maybe if, at the outset, when talking about guaranteeing jobs, you coupled at the hip a description of them as “providing a living wage, defined as that which allows a person working (fill in the blank #) hours, in safe, satisfying working conditions, enough money to feed, clothe, shelter his/her family with “some left over” – you could cut this sort of criticism off at the knees …

            I have my own critiques of aspects of MMT, but your underlying motivation, IME, is not one of them ..

          2. Andrew Watts

            “I haven’t fully outlined my own version of the kind of full employment program I support, but I do think full employment – defined as a job for everyone able *and willing* to work – should be our goal. My preferred approach is combined with a broader, radically egalitarian approach to economic policy, and calls for a significant increase in the minimum wage along a combination of redistributive and predistributive policies aiming at bringing the income gap way down.“

            The problem is that there hasn’t been an era of American history where all these things were possible at the same time. The New Deal-era included. Which did not provide anything close to full employment until the War. Which later spawned military Keynesian policies after the War. Looking back in the era of Andrew Jackson you saw full employment but a huge gap in the distribution of wealth. Which ended the same way it did in our day; economic depression.

            Most people’s problems with your analysis is the subtle defense of capitalism. Which perpetrates a lot of the inequalities you claim to stand against. Laissez-faire policies appeal to capital because it institutionalizes the privilege it sees as it’s birthright. And it’d be right, because it is it’s birthright.

            Which is why Marx really needs to be drawn into the conversation.

          3. Dan Kervick

            Andrew, I defend a version of what used to be called a “mixed economy” – an economy in which private property and private enterprise and free exchange play a role; but also in which public ownership and public enterprise and regulations on exchange play a role. Depending on their political perspective, some will see this as a defense of capitalism; some see it as a defense of socialism. I try to take a practical and utilitarian perspective on economic affairs, and don’t think there is some timeless model or easy answer. We are always attempting to harmonize a lot of conflicting human desires and do the best we can given the permanent reality of human power struggles. In our present historical circumstances, the left-pointing or more socialistic parts of my outlook tend to be the ones that I highlight and that stand out for a lot of people since in my view we have drifted very far into an extreme form of capitalism based on private property, individual achievement, avaricious seeking after personal satisfaction and unregulated exchange, a perversion of human existence that has destroyed almost any remaining sense of a social contract based on democratic equality and justice.

          4. jrs

            I think we should maximize leisure not work. Let’s get down to brass tacks, most people hate their jobs. They would quit if they won the lottery tommorow, they are only doing it for the paycheck. That’s how work is generally experienced on the ground level, that a few professors with incredibly priviledged jobs are often the one’s pontificating on the nature of work, ah well, it’s just silliness.

            HOWEVER in this crony crapitalistic system, wage labor is the only way most people can get money, so jobs are the only way to get first and formost the necessities of life, but also a lot of things that maybe in a better world wouldn’t be comoditized but in this system frankly are. So maybe what we really want (since we can have anything? I mean you are already asking for things *well* outside the status quo and not just tinkering….) is work-sharing, or a basic minimum guaranteed income (without work – couldn’t MMT be used to do this?), or if not that then worker control of the workplace.

            The Abolition of Work:

          5. Aquifer

            jrs – I agree! Work for most is NOT personally satisfying – it is something they do to get the bucks they need to DO the things they want to do, or, more likely, these days just to pay the rent, get food and healthcare if they can – i knew folks who kept working in healthcare long after they should have been able to retire in order to – get healthcare!

            I have long noted the irony of people working longer and harder to get the money so they could buy more “labor saving” devices – clearly what they WANT is to save themselves some labor!

            But most folks, IMO, do need something “useful” to do, though I suppose you could argue that is a result of our twisted social upbringing. Methinks you are suggesting that, in fact, folks ideal existence might be sort of a Garden of Eden scenario – so do you suggest that the system we choose be the one that gets us the closest to that?

          6. jrs

            Mostly I don’t think we need to work as hard as we do at present. A lot of labor is “waste labor” if you will, most of the labor that goes into the military industrial complex, the world as a whole would be better off without it. All the labor that goes into advertising propaganda beyond just being aware a product exists, the world would be better off without it. And even then we still don’t have a need for the labor of lots of citizens and they are involuntarily unemployed. We’d be better off if we could collectively work less and more equitably distritibute work, leisure, and wealth. Which it seems can’t happen in the current economic arrangement. Instead there is lots of useless labor done, more and more work for lower and lower compensation required of the employed, vast waste of natural resources producing throw away junk, and large swaths of unemployed.

          7. Aquifer

            jrs –

            i agree with your broad outline. The question is how do we get there. Seems to me there are multiple facets, one of which is the choice of economic system we have – for purposes of this thread, is MMT a suitable monetary tool for producing what you describe?

            Another is the political system – i feel strongly about using the ballot box as a very important tool – to choose the folk to whom we give some of these other tools …

            The issue of “property” – what it is and who has it – runs strongly through and across all these lines – economically, politically – but if we understand that property is what the law says it is, then perhaps we can define it in a way that is “most likely to effect our safety and happiness” …

          8. Andrew Watts

            We had a mixed economy. It was undermined first by the increased cost such an economy imposed on growth. Later on it was opportunistic capitalists who destroyed the constraints and regulations it imposed on it’s behavior. At the time this process was unfolding capital was able to guarantee more growth through the expansion of credit and the cannibalization of the working class. The alluring appeal to this scenario is when the idea was thrown in the dustbin of history. For the middle class would not suffer from the loss of any of it’s privileges. Until we’ve reach the present day where that doesn’t seem likely to happen. An expanded version of this process is unfolding right now in European countries. Who are just as enamored with the idea of a mixed economy.

            It is easy to divide an economic pie that increases in size. Which if we’re being honest here is the sole goal of what MMT is trying to accomplish. The problem is that there is no going back to the 1950s or 1960s America when this economic model was most relevant. The opportunities that existed then and the relative position of America (or other countries) is now a far divide from what it was.

            That’s why I’m pessimistic enough to believe this will end with either the rich brutally crushing the poor, or the poor terrorizing the rich with the specter of Marx. There being little to no middle or working class in between. It’s also what makes me desperate enough to consider any alternative.

        4. Aquifer

          JT –

          Methinks your ad hominems considerably reduce contemplation, of whatever value your post may otherwise have, and if you really want folks to consider/respond to your opinion/observation re the state of moral discourse, you really should edit them the “f^^^ out”, IMO …

          I would tend to agree with you that this connection between working and eating, e.g., needs to be explored – it is not an easy one to parse and goes back a long way (the Biblical story of the Fall, e.g., STM to deal with this in some way), so is this a social meme that predates all the “neoliberal” BS? I think it might be useful to explore that, but the tone of your post would make it considerably less likely for me, e.g., to want to explore it with you, quite frankly ….

          1. JTFaraday

            “you really should edit them the “f^^^ out”, IMO …”

            Not a chance. These people consistently expect everyone to toe their ideological line. As the latest incarnation of ham-fisted progressive poseurs, the MMT-ers will get back what they give.

            If you look below, you will encounter my observation that there is no talking WITH these people. Consequently, I refuse to do so. I may, however–in their general spirit of giving– occasionally talk AT or ABOUT them.

            If you don’t like my policy, feel free to skip my commentary.

          2. Aquifer

            JT – i probably will, which is too bad, because methinks you raise some issues potentially worth exploring, but when you bury them in personal invective, looking for the baby in all that bathwater becomes not worth it …

            That was the point of my post – too bad that winds up getting more print than your other potentially interesting point ….

          3. JTFaraday

            Fine, I’m surprised anyone reads me at all.

            As you say above, “all politics is personal,” I’m just calling the local metaphysician’s interests out of his phony “common good” framework like I see it.

            You also referenced the bible above. If you believe in doing unto the children of others as you would have them do unto yours, then Dan Kervick is obviously not your man.

          4. Aquifer

            Jt – I generally read all of your, and just about everybody else’s, stuff unless, after a few phrases, it is clear I have seen the same before …

            As far as Dan Kervick – i must confess this does indeed sound quite personal, so i am curious, what makes you so sure he would treat other folks so badly?

            I realize a lot of the “rhetoric” that is used could well be considered as pure prop – but I do confess i accept the possibility, because i must, i suppose, to keep my sanity, to the extent i have any, that there are folks out there who do, indeed, give a damn – so i will start with the benefit of the doubt and proceed step by step – if you have any evidence why that courtesy should not be extended to Mr. Kervick – please do tell ..

            Also, if you don’t think anyone reads you, why do you write?

        5. TK421

          “our current (bottomless pit MMT-money funded) military adventurism in the mid-east”

          The people who run our wars in the Middle East do not practice the principles of MMT because they demand that those wars be “paid for”, preferably by cutting social programs.

          And blaming the destruction of Iraq on MMT is exactly as rational as blaming the dropping of bombs on the theory of gravity.

          1. JTFaraday

            Please. When Bush launched this nation into the bottomless pit in the middle-east, did they raise our taxes? No, we got a big tax cut. You must think we have no memory.

            The reason this is an issue now, has nothing to do with the “deficit” and everything to do with privatizing the big social programs for seniors, pace Paul Ryan, as only the latest privatization avatar, following on Robomney of Mandatory Healthcare Financing fame.

            Second, and I keep telling you this, when a group of putative “theorists” uses the same term–“MMT” –to refer to “merely that monetary system we have now” as well as “our fairy tale monetary system and social policy” then those theorists open themselves up to just this sort of assumption. Which only makes sense intuitively– what else could be funding the war?

            And I’m not the only one who thinks there is some obfuscation going on with regard to this definitional slipperiness. See joebhed’s comments below.

        6. charles sereno

          JTFaraday: Sir, you are so ridiculous that I felt impelled to respond after reading only 2 paragraphs. You end the 2nd with — “Surely, we all believe in the common good.” You give no indication that you’re being sarcastic. In your previous sentence, you identify “the common good” as a typical platitude with which Kervick brainwashes his audience. Can you at least separate your self-contradictions by a sentence or two? Like a proficient troll-o-bot would?
          Kervick’s essay is very clear. It proves there are some uses to philosophy.

          1. JTFaraday

            If you can’t see that “human rights” and the “common good” can be used as empty sloganeering propaganda, and that from time to time you may have to make a judgement call about that, then I can’t help you.

          2. skippy

            @JTF, Selling stuff… needs baubles, wet the palate, a morality play, a toe in the door (wedges).

            Yet, to date, all the efforts applied have been for the privileged classes, running repairs to the currant economic machinery, aggressive neoliberal trickle down policy, FFS…. which is Americas major export IMO.

            Skippy… they will do anything to save their ideological baby… anything… if they don’t win… Gawd is dead… and they killed it. If America is anything other than Number #1… its total failure of the foundation myth in toto.

          3. charles sereno

            I’m not sure where this will appear. It is in reply to JTFaraday, time stamp 4:41 pm.

            I agree that you can’t help me. “Human rights” and the “common good” of course can be used for devious purposes (Human Nature 101), and some of that may be taking place as we speak in Egypt. However, for you to imply that Mr. Kervick may be using “empty sloganeering propaganda” in the face of your own numerous replies begs the question of who’s calling whom what. I don’t wish to declare you wrong on my own authority. I simply pointed out a glaring contradiction in your statement which you do not address. You did succeed though in drawing me into personal aspersions I’m not comfortable with, not to say too many words to get my thoughts across.

    2. JTFaraday

      It’s not cynical; it’s realistic.

      How did you ever slog through all of that before 4:21 in the morning?

    3. Dan Kervick

      Simon, in this case “our” refers to US citizens. The currency system is a set of institutions that has been created by the US government, and is administered by various branches of the US government. I take it as axiomatic that in the American system, the citizens are by right sovereign over the government. It is thus our right to alter, abolish, modify or improve that monetary system in whatever way we desire to achieve whatever purposes we might want to achieve.

        1. Aquifer

          This planet – I share these sentiments, and so did our FF, which is why they put them in the Dec. of Independence. Now you can argue that the right to “alter or abolish” was stated in terms of the government, and not the monetary system, per se, except that the ensuing Constitution dealt directly with that issue in terms of allocating that power to the Gov’t …

          As to whether “we the people” are, in fact exercising that power is open to discussion. The clowns that hold and exercise that power directly ARE, after all, the ones “we the people” put there … And “we the people” can choose better, considerably better. The meme that “we the people” are powerless is a very convenient one for TPTB. As somebody has said, the best way to keep people from exercising power is to convince them they have none …

          1. Dan Kervick

            Thanks Aquifer. I’m well aware of how far our current way of life falls short of a vibrant democracy. But to me that just means that we have to work to build democracy.

          2. Aquifer

            Mr. Kervick –

            As you may or may not have noticed elsewhere, i have some real problems with MMT vis a vis a place for things like the “payroll tax”, but the other real issue that folks seem to have a real problem with, and justifiably so, IMO, is the idea of giving/ceding/accepting, whatever, this enormous “money printing” power to a gov’t that is so clearly “in the pocket of” (the most polite image ..) folks who clearly are not functioning in the public interest and have no intention of so doing …

            My interest, for the last couple of decades, is in trying to make sure that we GET a gov’t we could actually trust such power to … If you think selling MMT is hard, try getting folks to believe we could get such a gov’t …

            I have noticed that your description of/programs for promoting such public interest seem(s) very much like the platform of the person i supported in the last election – Jill Stein …. Your positions via taxation are different, clearly – but ISTM that your goals are very much the same …

            In any case, I think that it might be good for all our sakes if we not only promoted a system that returned that “printing press” power to we the people, exercised through our government, as your system seems to, but convinced folks that we DO have the power to elect a gov’t we could trust to carry out that work, and that we must use that power toward that end – something we haven’t done in a long time ….

          3. Dan Kervick

            I really don’t know how to convince people of that Aquifer. I think we do. But if we don’t, then to put it bluntly, what’s the f’ing use of anything? Why vote for Jill Stein, Joe Stein, or vote at all, or write an essay, or write an angry reply to an essay?

            I’m going on a radio show here in NH that has a decent-sized progressive audience to try to spread the word about the things I believe in. I’m eager to work with others to try to build some kind of movement for change. Maybe it’s hopeless. Maybe we’re like the Roman Empire in its latter years, doomed to centuries of decline and decadence. But so then what. Sit around and rant about it in self-satisfied impotence just to prove how “un-naive” we are?

            I’m old enough to remember when the “conservative movement” was a minority affair mired in failure. Eventually, though, they spread their ideas so successfully that they took over the country. I feel like I’ve spent my whole adult lifetime digging out from beneath their horseshit. So I know that the political culture can change dramatically because I’ve already lived through it. The present time seems like a moment of opportunity to begin the long job of changing it again into something more humane and less disgusting. Maybe I’m deluded. But believing there is hope seems like a more satisfying and purposeful way of going about life then stewing is fatalistic pessimism and bitterness.

            So I have no idea how to convince people that there is a possibility of success if they need to be assured that such a possibility exists before they try anything. I think there is, but personally, even if I’m wrong, I would like to go down swinging rather than just take it in the a** the rest of my life.

          4. Carla

            “As somebody has said, the best way to keep people from exercising power is to convince them they have none”

            On that note, along with my friend and neighbor Susan, who also comments here, I spent a couple of hours today collecting petition signatures at our local post office.

            We were asking registered voters in Cleveland Heights, OH, to sign our petition to put an initiative on the city ballot next November, supporting a U.S. Constitutional Amendment declaring that Corporations Are Not People, and Money Is Not Speech.

            Similar initiatives were on the ballots of Cleveland suburbs Newburgh Heights, OH, and Brecksville, OH, last month, and both passed handily. They were the first in Ohio to pass at the ballot box.

            We had many interesting conversations with our fellow citizens about where the power should reside in a democracy, and what a far cry we are from there now. Almost all of those who engaged in the conversation signed our petitions. Many thanked us profusely for circulating them. For me, it is invariably a humbling experience to do this work.

            BTW, for all those on this thread who have referred to money as a medium of exchange, I beg to differ. Currently, it is simply an instrument of power. Some of us want to change that.

            Anyway, check out http://www.movetoamend.org to learn more. If you’re in Ohio, go to http://www.movetoamendohio.org to find a webinar about getting a local initiative going in your city or town.

          5. Carla

            Correction: the initiatives in Newburgh Heights and Brecksville were the first to APPEAR on ballots in Ohio, AND they passed easily.

          6. Calgacus

            Aquifer: the idea of giving/ceding/accepting, whatever, this enormous “money printing” power to a gov’t that is so clearly “in the pocket of” (the most polite image ..) folks who clearly are not functioning in the public interest and have no intention of so doing

            Governments ALREADY HAVE “this enormous money printing power”. They exercise it RIGHT NOW. It is not a matter of giving it. It is a matter of recognizing a real, active power which is currently not being exercised in the public interest.


            Carla: “As somebody has said, the best way to keep people from exercising power is to convince them they have none”

            Absolutely! “The most potent weapon in the hands of the oppressor is the mind of the oppressed” Stephen Biko

            BTW, for all those on this thread who have referred to money as a medium of exchange, I beg to differ. Currently, it is simply an instrument of power. Some of us want to change that.

            Must differ. Money is not “a medium of exchange”. “Medium of exchange” is a figment of the Austrian imagination. It never existed anywhere. It is the wrong way to think about money. Money is a unit of account. Account of what? Credit/debt relationships. In other words, it is essentially an instrument of power of the creditor over the debtor, and cannot be anything else, or it would not be money. You don’t solve problems of power by defining them away, by ignoring their existence. That is what mainstream economics does.

            A sane distribution of money is a minimum requirement of a sane economy. The minimum of sanity is to recognize the right of everyone to get some money by their valuable, scarce labor. In other words the Job Guarantee. If the JG is not a right, then the word “right” has no meaning.

      1. Nathanael

        Dan, I believe a number of people are making the political argument that revolution is necessary in order to re-establish democratic control over the US government.

        Given that a majority of voters voted for Democrats for the US House, and Republicans ended up with a majority in the US House, they have a point.

        I believe that your arguments are orthogonal to the question of whether we actually have a functioning democracy; your arguments are about what we should do if we, the people, *are* able to control the government. Am I correct?

        1. Dan Kervick

          Yes, Nathanael, thank you. If people think that our monetary system is *not* our monetary system because its all run by a few Wall Street bankers or whatnot, then my question is “What do you want to do about that?”

          I would suggest that for a large number of the major challenges facing us, there is no “horizontal” answer. For example, the health of our whole planet is being destroyed right now. It’s a small planet, and we’re all stuck here on the same rock. You can try to move sideways into some alternative enclave of social innovation, but meanwhile the people who own and control the planet will go right on devouring and destroying it while you’re experimenting with your alternative local currency system or whatever. You will inherit the wasteland and choke to death on the rot along with everyone else.

          So to me the approach is to identify those parts of the democratic infrastructure that still function and are still healthy, and then try to build on them to build a powerful democracy and take control of things.

        2. jrs

          It depends perhaps if you believe the government will always inevitably fall into the hands of the ruling class or not.

          But to move down from generalities to U.S. specifics:

          In a system of extreme wealth inequality (that would be the U.S.), in a system where this money and wealth inequality is openly ALLOWED to pour endlessly into political campaigns, in a system where the very governmental structures thwart majority will (that would be the U.S., I mean if you are talking constitutional convention, consideration of a parlimentary system, building a new system that better allows 3rd parties then maybe, but the system AS IT IS …), in a system where even the media is controlled by a few giant corporations, in a system where protest is increasingly dangerous when not irrelevant …

          Hmm while it might be possible to reform such a sytem short of revolution, at the very least you’d start with trying to get money out of politics, and then moving on down the list .. To start with money printing, even though yes the current money system does reenforce structural inequities, just seems bizarre, very cart before the horse. Like how can that possibly work when everything else is broken?

    4. Susan the other

      Rothschild was a private banker dedicated to controlling the sovereign. He was never interested in democracy, certainly not democratic self interest.

    5. Pelham

      But if the money isn’t ours, whose is it?

      Of course it belongs to all the people. It can’t originate from any other source. Granted, functionally, a tiny number of people control our money system. But in point of fact, the money system does belong to all of us and we should, each one of us, have an equal voice in how it’s used.

      1. Aquifer

        Bill Moyers’ current interview show had Bernie Sanders discussing the current move by the FCC to allow big media conglomerates to own TV/radio/papers in the same town/city (Poor Bernie, he had no answer when Bill asked him why Obama’s FCC Chairman was trying to do the same thing Bush’s did which, when Bush tried it, was overwhelmingly opposed by “we the people” and the Senate) It is a very good show and i hope Yves helps raise consciousness about it to elicit renewed opposition ..

        The reason i mention it here is that your point about consolidation of “we the people’s” money system in the hands of a few is being precisely mirrored in the consolidation of “we the people’s” airwaves, in the hands of a few.

        Maybe this might be a good analogy for MMT – many folks already know about this media consolidation issue and have expressed opposition to it – maybe if they understood that our “medium of exchange of the economy”, money, has been/is being monopolized in the same way our “medium of exchange of information”, the airwaves, they might transfer that same sense of indignation …

        Maybe? Just a thought ….

      2. psychohistorian

        Your assertion that the monetary system belongs to all of us is wrong.

        The Fed banks are PRIVATE institutions and all profits go to individuals.

    6. Rich

      Let’s say I cut a tree down, saw it into different lengths, cure the wood, create a desk and 5 chairs, then sell it to the gov’t as lowest bidder. The gov’t then creates the money by registering a debit on its account books and then sends the money to my bank where it becomes a credit. I created legitimate value, the gov’t created legitimate money, the debit equals the credit, therefore there is no borrowing, therefore there is no interest, therefore there is no debt. Why on earth would I want the gov’t to borrow money? To funnel wealth to the 1%?

      1. joebhed

        Excellent point.
        Google up The Muscle Shoals Project, Henry Ford and Thomas Edison.
        There is no reason in the world for the government to borrow any money.
        But right now, the ‘theoretical’ monopoly-issuing power’ that MMT subscribes to is not only completely acceptable, they see it as an essential component of the vacuous private, debt-based creation and issuance privilege system of our monied aristocracy.
        I see MMT as a great construct that is about half-way to being developed, but impossible to advance without jettisoning several early mis-steps, the most basic of which is this : money IS debt.
        Wray’s error on the ‘nature’ of money being debt and an ‘accounting’ identity, rather than the means for exchanging society’s goods and services is an anchor that needs weighing before MMT can get underway.
        Money is money.
        Debt is debt.
        Better the twain
        Had never met.

        For the Money System Common.

  2. Andrew not the Saint

    I feel quite frustrated with MMTers because although their heart is in the right place they’re invested in describing the financial system (how it works today) which IMHO will collapse within next 20 years, probably even sooner. The collapse will come either due to a severe deflationary contraction or a hyperinflationary bust, and whilst the plot might differ the end of the story will look surprisingly similar either way – lots and lots of misery.

    Firstly, people need to wake up and realise that the one and only priority of the central governmental-financial-military mafia is to sustain itself, not to help the people.

    Secondly, most of people are too hypnotised by mainstream media, consumerist urges and being corporate slaves to wake up easily – when they do it will be a very nasty slap in the face. And a lot of angry people will probably look for a “big daddy” fascist party offering the sense of security they just lost, rather than to try to think clearly and work out solutions on their own.

    Thus, I can only see increasing levels of evil the longer the collapse is delayed. Decentralization is the only way for short-term survival and long-term prosperity of the people. Following the same logic, currencies need to be decentralized too – it’s too easy for another class of mafiosi (this time with a different set of feathers) to arise and create yet another monopoly.

    Also importantly, economists should be thinking less about math and more about physics. Currencies should be backed by something fairly tangible – generally speaking labor or resources (e.g. land, raw materials, energy). We’ll find ourselves in situations where a lot of people will be out of work, which means that labor-based currencies will become the best way of keeping people productive. Something like the old guild system comes to mind as a good starting point, although in smaller communities it could be a lot less structured.

    Lastly, economists need to realise that multiple classes of currencies (short-term/long-term) are a lot better suited to the way people use their money nowadays. Let’s say that most people spend 90% of their income on a yearly basis and save up 10% for long-term wealth building. That means that 90% of the total volume of currencies need not be “hard” in terms of longevity. This is where some kind of a special “hard” non-expansionary currency could be defined centrally (e.g. tax-based), but even that is questionable knowing that people can function pretty well by storing their long-term wealth in real estate, company shares and gold, which combined should well cover the 10%.

    1. Moneta

      I’ve come to think that perhaps all this will ultimately lead to the creation of multiple nations in Canada and the US. We need a better control of our money supply and excessive centralization is not helping us. Too much corruption.

      The focus on globalization, centralization, big box everything is creating a void in people’s lives. Human brains are wired for life in small groups and our disregard of this fundamental need is coming back to bite us.

      1. tiebie66

        I do not really agree. The environment dictates the scale of systems that can be supported. In very stable environments, more efficient (and possibly lager) systems should predominate. In very unstable environments, robust (i.e. with backups, thus less efficient) systems are needed.
        IMO, the present environmental (climate, oil, pollution, etc.) uncertainties will foster more political fragmentation.

        1. joebhed

          Unless what?
          Please Google up Soddy’s Cartesian Economics lecture : The Bearing of Physical Science Upon State Stewardship.
          A short read.

          Then get his book on “Wealth, Virtual Wealth and Debt”.
          It might be available online.

          MMTers will ultimately find that a mis-definition of money is their achilles heel. And, that a proper understanding of money’s “ditributive” role of the national wealth is the true foundation for reforming society.

          For the Money System Common.

      2. charles 2

        Why Canada and the US only ? Fragmentation of the EU, China and India continental empires should also be in order.

    2. Dan Kervick

      I don’t really understand how a currency system can be decentralized into a bunch of fragmentary separate currencies, and also be “backed” by something that holds its value like labor or a widely used commodity. A currency is backed by something if it is redeemable into that thing. There has to be some law or rule specifying that people have a right to redeem the currency on demand into some determined share of whatever is backing it. For such rules to be enforceable and credible, there have to be governments upholding them.

      How could a currency be backed by labor? Would some government maintain a labor force at its command, and then require the workers to work for you if you wanted to redeem your money?

      1. Andrew not the Saint

        “There has to be some law or rule specifying that people have a right to redeem the currency on demand into some determined share of whatever is backing it. For such rules to be enforceable and credible, there have to be governments upholding them.

        How could a currency be backed by labor? Would some government maintain a labor force at its command, and then require the workers to work for you if you wanted to redeem your money?”

        Dan, I don’t have all the answers but it’s only a start in terms of brainstorming. I hinted at the guild concept in my post. You join a plumbers’ guild, a bus drivers’ guild – the guild is in charge of maintaining professional standards for membership. Any number of guilds could exist in order to foster competition.

        So lets say a guild issues 1M worth of their currency with an expiry date of 2 years. The guild administrator would auction them off for a more convertible means of exchange (whatever that happens to be – some hard-ish currency, gold, silver, booze, cigarettes…) and the things necessary for the guild to operate. Individual guild members then set the prices for their work in the guild’s currency and later on exchange that for hard currency with the guild admin. And then the cycle is done and the guild’s currency is extinguished. The expiry date would serve to deter from long term demand spikes, i.e. to enable the guild to issue new currency without worrying about not being able to honour the redemption commitment. Also, I’d leave it up to the guild to define their level of redemption commitment and let the market be the judge of their value.

        In regards to enforcement of redemption – of course, there needs to be some level of government to prosecute violence, theft, fraud, embezzlement, to enforce contracts. In case of an “honest” (non-fraudulent) collapse, the currency naturally goes *poof* – it would hurt the holders, but by nature of the system the currency would be held in small amounts and for fairly short periods of time.

        This kind of government would be a fraction in size of what exists today – roughly comparable what you have at the county level + a bit of state and inter-state support (e.g. common territorial defense)

        Again, I don’t have many of the answers but at least I have no pipe dreams about reforming the big government.

      2. lambert strether

        I like this metaphor:

        … our “medium of exchange of the economy”, money, has been/is being monopolized in the same way our “medium of exchange of information”, the airwaves…

        And what are the airwaves “backed by”? A nutty question.

      3. Dan Kervick

        Andrew, thanks for this thoughtful comment and please forgive me if my tone sounded overly negative. I see better what you are talking about now, and it’s an interesting proposal.

        I think one traditional problem with a currency or transferable IOU backed with one one kind of commodity or service – say plumbing services – is that type of currency is only one step away from barter. The only people who will accept it are other people who have a use for that service. And if the value people attach to that service declines, everyone who is holding that currency experiences a sudden collapse in their wealth. A more generally acceptable currency like the dollar retains its value in a more stable and reliable way, even while the relative prices of specific commodities and services change, because the value of the currency isn’t anchored to any one thing but floats. Part of the MMT perspective is that a government can maintain the value of a currency by imposing tax obligations in it.

        1. Andrew not the Saint

          Dan, I’m not against government tax-based currency at all, as long as:
          * It’s issued interest-free
          * No private entity is allowed to create it, unlike today as in Fractional Reserve Banking
          * The government has very tight constraints on being able to expand the volume. I.e. it should be able to inflate the volume only as much to help the overall liquidity (to faciliate exchange goods and services), NOT to try to “stimulate the economy” which in theory is a nice thing but in practice works pathetically bad.

          This is why I see privately-issued currencies as a crucial aspect of stimulating the economy, especially during bad times, i.e. times when there’s a surplus of labor.

          Moreover, even if there’s a collapse in value of a government currency (knowing that mismanagement and corruption does happen) it wouldn’t hurt as much in a mixed-currency environment as it would in the current single-currency economy.

          1. Dan Kervick

            Banks create IOUs – that’s what bank currency is. Are you envisioning a system in which no one in the private sector has the right to issue and IOU?

          2. EconCCX

            Banks create IOUs – that’s what bank currency is. Are you envisioning a system in which no one in the private sector has the right to issue and IOU? @Dan Kervick

            Are bank deposits mere IOUs in your view? Well then, can you justify their being taxable as income? Why must we forward the final money of the state to tax authorities on the basis of a private party’s mere promise to pay? Whose IOU’s would you count as taxable income to those who are merely owed it?

          3. Andrew not the Saint

            Anyone would be able to issue currency, which are IOUs, but those currencies would have to be backed by some real goods or service that the issuer can ultimately deliver (with some risk of course). In my post-collapse world, banks would be able to issue currency backed only by their own services (e.g. credit card, mortage fees etc). They would certainly NOT be able to issue any government-backed currency or we’re just back to the same old chicanery of fractional/fictional reserve banking and parasitic FIRE sector.

            When I explained the concept of no more FRB some people immediately jump up and yell “no way that would ever work – the lending would completely halt”. And then I point out the emergence of peer-to-peer lending today which works very well in spite of them being massively disadvantaged against tradtional banks.

          4. Calgacus

            EconCCX:Are bank deposits mere IOUs in your view? Well then, can you justify their being taxable as income? Why must we forward the final money of the state to tax authorities on the basis of a private party’s mere promise to pay? Whose IOU’s would you count as taxable income to those who are merely owed it?

            Of course bank deposits are IOUs. So is currency, a dollar bill, a bond. All are “mere promises to pay”. What does this have to do with their taxability as income? Monetary income is accumulation of others’ IOUs.

            We do not forward the final money of the state to tax authorities. We set in motion a process that does this, by using a bank account, bank money, bank IOUs, bank credit, banknotes to pay our taxes. But then the bank has to forward the same amount of reserves to the state. That the state accepts deposits, banknotes in payment for taxes from the general public – but NOT the banks – is what gives the banknotes value derived from the state’s money, lets them trade at par with the state’s money. And also implies that the central bank must provide reserves on demand to banks.

            Whose IOU’s would you count as taxable income to those who are merely owed it? Doesn’t matter whose IOUs Dan, you or me count, it matters whose the IRS counts. The state’s, the banks’ are surely the minimum. Nothing “mere” about being owed by the state or a bank.

    3. TK421

      “the financial system (how it works today) will collapse within next 20 years, probably even sooner”

      Then a new system will arise in its place, right? It’s not a bad idea to start laying the intellectual groundwork for what that new system will be.

      1. Nathanael

        Bingo. We need to start explaining what we want a new system to look like, and we need it to be a system which would actually work.

        (Marx failed abysmally at that, which is one reason Marxism failed. Marx provided no serious alternative to capitalism, but instead vague platitudes and half-thought-out ideas. This allowed ‘Marxism’ to be replaced with whatever-the-boss-wanted in each ‘Marxist’ state.)

        This principle applies both politically and economically. MMT seeks to describe a working, stable, economic system which gives people decent lives and which uses money. (We have not managed to devise a working economic system on a larger scale than ancient Egypt which does not use money.)

        Politically, the same applies: if the system is collapsing, we need to provide the intellectual ideas which will underpin a new, better, system.

        I have been trying to explain “party-proportional representation” and “approval voting” to people, because those are the reforms we need — most other electoral reforms are bogus ideas which won’t actually help.

      2. Andrew not the Saint

        Yes, but before you think about solutions you need to be able to foresee at what complexity level the system will be able to operate.

        What I can see happening is that you a concensus (i.e. democracy) will be operate only at the local level – where all important decisions will be discussed and agreed upon at the town hall, rather than through any representative-voting mechanisms which have proven to be extremely corruptable.

  3. Brian

    People want to work. Easy solution: get rid of machinery and do all construction with manual labor.

    The problem is that as the government issues money into the economy is that it cant direct where it needs to go. Worse yet, it has little ways to know how to deploy it as effectively as possible because it source of “income” is involuntary (taxes or money creation), whereas a business that transacts from a voluntary customer has a better means for gauging whether demand is being met.

    Further, what you’re implying is to continue to over inflate assets, ie keep issuing currency or bonds until there’s enough in circulation to prevent the asset prices from collapsing. Why do you have to do this? To keep people working. The problem with true bubbles is that they change people’s economic behavior, in this case, took on jobs centered around housing. Until they take on new skills they either remain unemployed or we create artificial work, that is, more jobs (like housing) that are unsustainable because they’re either unskilled jobs but need to pay high (to employ quickly) or they’re skilled jobs that take a time to acquire (but which skills are needed and in demand, we couldn’t tell because it would be directed from by the government which is removed from the price signals).

    Further more, what in some ways makes economic theories naieve is that civilizations have gone to the way side throughout all of history, and this is more due to a culture becoming decadent than anything else — which ironically, for all the left’s clamor about respecting cultures, culture factors very little in their analysis. If only the Ancient Romans had MMT.

    1. Aquifer

      “get rid of machinery and do all construction with manual labor.”

      You have a point – many things are often built better when done by hand …

      Hershey, when building his chocolate factory/town was reputed to have said, when a foreman introduced him to a machine (steam shovel, I think) that could “do the work of 50 men”, “get rid of the machine, hire the men …”. Of course Hershey was “a capitalist” I assume and “must have had nefarious motives” …

      Kirkpatrick Sale’s book “Rebels Against the Future” makes Luddites downright respectable …

      On more than one occasion I have watched construction type machine operators spend time,effort, and gas trying to get their machine to do what they, or they and a buddy or 2 could do faster and more easily manually …

      Of course there are some jobs that really are too awful to ask folks to do them on a regular basis …. OTOH I, for one, would be loathe to part with my Dremel for the sake of a hand drill, but there has to be somewhere in between and ISTM we have replaced too many people with too many machines, not to mention which ISTM the earth would be a lot better off if we dug it up and cut it down at a much slower place ….

    2. citalopram

      “People want to work.”

      No, not really. Workaholics might, but most people just do it to buy pretty things.

      I don’t miss work one bit.

  4. Moneta

    With no government spending, most money would only get injected into the system through hard asset collateral. And since most hard assets are owned by a small group, the economy would be much smaller.

    I like MMT in that there is the potential for getting our monetary system off the hard asset basis. Government can inject money without hard asset collateral.

    The problem is that we have been on a sort of dual monetary system for the last few decades. Partly based on hard assets and partly on MMT.

    However, government has been printing money and growing the economy but all values are out of whack. For example, the average Canadian does not even pay enough taxes during working years to pay back his years of tuition. Perhaps we can’t look at it that way and should look at GDP and other measures but the reality is that we have no means of measuring the true value of the teacher’s work in the current monetary system.

    Furthermore, materialism skews the whole system. Every time we hit a hard patch, we get more frugal and limit our spending on essentials which are typically goods or hard assets. All producers of goods and services want to own hard assets such as cars, houses and all the stuff that fills them. But since labor is unlimited and hard assets are not, for MMT to work in the long run, we would need less focus on materialism over the long term. This is very hard to imagine in a world of 9 billion people. Hard assets per capita will get scarcer and the desire for these will just intensify.

    Because the whole value of labor system is so screwed up, people are asking for less government involvement and more privatization. There is currently a desire to know the true value of labor and many think it will be through private enterprise. Unfortunately if we privatize, the system will shrink because it will increasingly be based on hard assets.

    We need a market economy to get the true value of labor but MMT goes against this since government prints.

    For MMT to work efficiently, it needs to be managed by a group of genius visionaries.

    1. diptherio

      “…we have no means of measuring the true value of the teacher’s work in the current monetary system…There is currently a desire to know the true value of labor and many think it will be through private enterprise…We need a market economy to get the true value of labor…”–Moneta

      I would humbly submit that the “true value” of a thing is almost never monetary (or entirely monetary) in nature. The true value of a teacher’s work is not measurable on a monetary scale since the benefits of the teacher’s work are mainly psychological and social, not monetary, in nature. Incommensurability is the technical word for it. It’s like judging a basketball team on the basis of how many touchdowns they make, or judging a painting on the basis of how much it weighs.

      The same, I would argue, holds for labor generally (as well as pretty much everything else, with the possible exception of financial instruments). The values that are created by labor are not essentially monetary in character: the monetary benefits are just the easiest ones to measure. Unfortunately there is no obvious metric for measuring things like self-confidence, social cohesion, peace-of-mind, etc.

      A problem with our market-mentality is that markets only know how to value things using the dollar metric, whereas the value of most everything in life is more, or at least other, than strictly monetary.

      1. Moneta

        I agree. But we can say the same thing about all jobs and deeds, remunerated or not.

        The irony is that people have really come to believe they are worth the money they are making. It just goes to show how little people understand how money gets injected.

        Right now, in Canada, our teachers’ pension plans give them a pension worth around 1 million while being hugely underfunded. Those workers without guaranteed pensions contributing the same amount would have around 500K.

        Labor markets are so distorted that we don’t even know who is worth what. If we want to fix our system, we will have to better understand the value of labor.

        1. diptherio

          “Labor markets are so distorted that we don’t even know who is worth what.”–Moneta

          I protest, sir or madam, to the thought one person might be judged as being “worth” more or less another. The worth of labor, as the worth of people, is essentially non-monetary, so any market mechanism of valuing it, ‘fixed’ or not, is a defacto denial of the true worth of a person’s time and talent, which is to say, of their very life.

          1. Moneta

            I dream of a world where everybody’s work is deemed of equal worth but I just can’t wrap my mind around how we get there economically.

            In a world where everyone has equal economic worth, who gets the hut in Kolkata and who gets the house on Malibu Beach?

        2. Aquifer

          We already know what happens to the measure of labor’s “worth” when left to the “market” – as little as employer’s can absolutely get away with – the idea of a “minimum wage” is already very “market distorting”, but methinks you know as well as i what happens without it …

      2. Aquifer

        Methinks you would like, if you haven’t already read it, Raj Patel’s “The Value of Nothing” … as in we know the price of everything and the value of nothing ….

    2. Aquifer

      “average Canadian does not even pay enough taxes during working years to pay back his years of tuition.”

      Should he have to? Isn’t he paying back society by teaching its young’uns? Maybe society should be paying him to go to school …

      1. Moneta

        All I know is that I am surrounded by people who did the same jobs and worked as hard, yet some have no pensions and the other ones have guaranteed pensions and it makes me sick.

        We have become so disconnected from nature that we competely disregard its physical laws. Mother Nature will determine what happens in the near future whether we print or not.

        1. Aquifer

          I agree – everyone should have decent pensions for old age and decent healthcare for life, and a good education for a whole lot of reasons – and because these things are things that are necessary for “life, liberty, and the pursuit of happiness” – a society that professes to believe in those ideals should take it upon itself to provide the fundaments for them for all its people – otherwise, what’s the point of society?

  5. beene

    The real problem is debt currency which has since the beginning use of currency destroyed every economy it has been allowed to develop.

    1. Dan Kervick

      John, you are to some degree right. So what is your view on the best way yo turn that situation around and make the country more democratic?

        1. Nathanael

          Impractical. Decentralization creates robustness, and robustness is good….

          …but there are a lot of areas where there are real economies of scale. Transportation networks are the extreme example; you get the best railroad network from a single centralized operator. You can’t decentralize these without making them worse.

          So you have to have a system for centralized operation of things which work best when centralized.

          1. Moneta

            Agreed. But the pendulum always seems to swing too far. Now we are seeing consolidation and centralization in everything.

            We will need to differentiate but we are not there yet. In fact, I think we are entering the hockey stick phase.

            We saw it with the banks and we’ll probably see it in many other sectors over the next few years… we can’t lower rates so when the next slowdown strikes, we’re going to see a lot of bankruptcies and M&A. That’s when I think we will finally hit the wall.

          2. Andrew not the Saint

            So you’re saying that one MUST have a centralized government or there would be no inter-state railways? Right – people with good faith and common interests just CAN’T find a mutually benefitial solution without a big daddy watching over and having the last word? Give me a break…

            I’m no propertarian-libertarian but I intesely hate this kind of authoritarian thought, which emanates from the “liberals” just about as much from the “conservatives”.

    2. Susan the other

      The objective of debt money has always been to “develop” at a highly productive rate causing profits to grow, hence causing the economy to grow. We have come to the end of the line with that one because monetary profits, even at these highly productive levels, fall short of the money required to service debt and still have enough profit to satisfy self interest. And we all know we have destroyed the environment. What we need, what we need MMT to provide for us, is not Marxian materialism, but social equity by providing lots of low productivity jobs with high social value. Teachers, researchers, designers, social workers, medical workers, permaculture farmers, on and on. These things do not produce profits measured in money. They produce social profits. And only MMT can do this.

      1. Aquifer

        Sto – Your analysis is spot on, IMO, and I completely agree with your promotion of “low productivity”, at least with regard to making physical objects, not to mention which if we take longer to dig one hole in the earth, we won’t have time to dig so many …:)

      2. Moneta

        And this means we must flick a switch in our brains that turns off materialism and, by extension, consumerism.

        The question is whether it is even possible considering our Western sense of material entitlement?

      3. tiebie66

        “We have come to the end of the line with that one because monetary profits, even at these highly productive levels, fall short of the money required to service debt and still have enough profit to satisfy self interest.”

        Yes, but why? All of these activities are dependent on processes that use energy. And they grind to a halt when the energy equations no longer work. MMT is still very weak on this point, though the attempt to address the ‘free lunch’ is appreciated. Unfortunately, the role of money in the economy (and, by extension, finance!) is not understood and the description of resource constraints appears to be cursory, rather than insightful.

        Consider an engine that operates to extract coal from the ground. The engine needs fuel (coal) but also needs a lubricant (money). MMT is correct in its implication that the engine will operate better when it is known which parts of the engine has run out of lubricant, thus, where to apply the lubricant (sector balances). However, this is -not- the same as adding more fuel to the engine! If the engine is running low on fuel, adding more lubricant may be of only very limited benefit. Indeed, it often seems to be that MMT conflates fuel and lubricant and treat the lubricant as the fuel (e.g. having the government augment flagging aggregate demand by spending money into existence). When the engine cannot extract more coal from the ground than required to use as fuel, it stops working because the lubricant is not fuel and no matter how much is added, the engine remains short on fuel.

  6. john bougearel

    Dan, while I appreciate your presentation of Abba Lerner’s functional laws of finance (new for me), but I had to laugh when you said that ‘our economy is a democratic society [and]that what we produce should be a matter of public choice not iron law.

    First, there is scant evidence that our country is a democratic society any longer. There is more evidence to the contraire, that what once might have been a democratic society has certainly now been relegated to that of being nothing but a myth. (please note the record gun sales in recent years escalating in recent months. The Amererican public maybe onto something here. Perhaps these record gun sales stem in part from feeling the existential angst of a loss of rootedness of our society in democratic values and constitutional law (another myth). This indicates a revolution on the order of present day Egypt or Greece or Spain is too far off in our distant future in America. Just saying.

    Then too, think about what our economy and government manafuctures and produces and exports. Our companies export jobs, produce and manufacture overseas under the myth of globalization. Our government manufacture and produce economic and social crises around the world, both at home and abroad.

    Public choice about what we produce and manufacture has long been wrested from the American public. What choice is left but to submit, or to gear up for the coming social revolution and protest…Just saying…

    1. Dan Kervick

      John, you are to some degree right. So what is your view on the best way yo turn that situation around and make the country more democratic?

      1. docG

        I’ve written about this problem on my blog, aptly titled “Mole in the Ground.” http://amoleintheground.blogspot.com/ If you know the lyric to that song, you ‘ll have an idea of what my position is.

        The mountain of greed and corruption must be “rooted down,” no question. The good news is that it is already consuming itself, and will soon collapse of its own weight. The secret to re-establishing democracy in this country is to let it. It’s really that simple.

        What you are proposing reminds me of the thinking of all those people who used to remind us that “everyone needs a place to live,” so the obvious bubble forming in the housing market didn’t really mean anything, it could be allowed to go on forever. “The government can always print more money” sounds a lot like that line of thinking. “This time it’s different.” Sure. Anything to preserve the status quo.

        The jobs you’re talking about aren’t worth it. So who cares whether government stimulus ala MMT is going to create more of them? As I see it, the only alternative, like it or not, is some form of socialism. Which can come only after the present system has been allowed to fall of its own weight. Let it.

        1. LifelongLib

          Small and decentralized governments are vulnerable to takeover by local thugs and strongmen. Even the U.S. constitution recognizes this by having the federal government guarantee a republican form of government to each state.

          1. Nathanael

            “Small and decentralized” was the rule during the feudal period in Europe. Even if your local city became a bastion of liberty and democracy, you would be at the mercy of the thugs who took over the barony *next door*, who might decide to invade and loot you at any time.

            Yeah, I like decentralization for its robustness, but there are areas in which it *just doesn’t work*.

          2. Moneta

            There is never going to be an optimal rubust and stable system that will last forever. Everything is cyclical.

            The Roman Empire got too big and collapsed. Then we got the dark ages.

            So even if these settlements were infficient and unstable we got them anyway.

            If we need decentralized, we will get it.

          3. Andrew not the Saint

            I disagree strongly. Why didn’t any foreign empire manage to rule over the Afghanis?

            A minority of thugs always need a relative concensus of the majority of populace in order to be able to rule. The issue is that you cannot expect to have freedom without having to risk everything, including your and your family’s lives, to defend it. It’s that simple.

      2. Nathanael

        Dan, I advocate a ground-up movement for
        – party-proportional representation in local legislatures, state legislatures, and the US House, which is the only way to get third/fourth/fifth parties into Congress, which is the only way to keep Congress ‘honest’
        – approval voting for single-member offices like President, which has the same effect (eliminating the two-party shutout)
        – abolition of the US Senate, which is malapportioned

        Now, I don’t expect the existing political system to agree to any of this. But until the majority of the people are *demanding* it, we have no chance of getting it anyway, even after a revolution. Once the majority of people are demanding it, it may become possible to force the system to accept it.

      1. JTFaraday

        What you’ll find is that the propaganda wing of the MMT cult–when Pilkington started slinging the rhetoric of religion and the occult around, he thought none of the lesser species would ever dare throw it back in his face–permits no dissent where their would-be technocracy is concerned.

        It doesn’t matter if what you say is as childish as Dan Kervick’s 1950s school boy textbook civics or or not. It may not be, but you can always expect them to tell you that it is. As a result, you can’t talk to them at all:

        Ray Phenicie says:
        December 21, 2011 at 10:47 pm

        I believe you are firing off a response that is not well thought out. Professor Wray is not a dilettante. For your edification…


        In this case, the blindness of the propagandist in question lead him to completely misread the comment in the first place– which, if you look upthread– had nothing to do with the Sainted Professor Wray.

          1. Ben Johannson


            You have done nothing but slander, insult and argue ad hominem in this thread. If you want to convince someone you need to up the quality of your arguments by an order of magnitude. Your style just turns people off and adds nothing useful to the discussion. You do not understand MMT and should at least make an effort to do so before you attack its proponents.

  7. JGordon

    “It is a system of institutions created by human beings to help realize opportunity, and match opportunities for the creation and transfer of goods with the potential producers and recipients of these goods. It’s our monetary system, and we can do whatever we want with it to achieve our society’s full potential. We can create, destroy, transfer or manipulate the monetary medium of exchange as we see fit to advance the good of society and improve the condition of our people.”

    Thanks to this article I have now seen the most basic flaw in MMT. In response to the quote above: except that curiously enough it always, always seems to end up being criminal bankers and their corrupt political cronies in charge of fiat money systems. In fact, you will never ever have a centralized money system where the criminals don’t end up in control of it. That is reality and that is why fiat money systems always end up bringing horrors to the populations they are inflicted on. So the only solution is to have decentralize non-fiat money systems.

    1. Dan Kervick

      Sorry, but I have been a round too long to fall for another romantic laissez faire scheme of liberation. “Decentralize”, “privatize”, “deregulate” has been the creed for four decades at least now. And what it has given us is more inequality, more insecurity, the destruction of middle class prosperity and the plutocratic rule of those people who happen to be the winners of the social Darwinist struggle that all of that deregulation enables. The libertarian approach to our economic life is part of the problem, not its solution. I see no reason to think that a decentralized free market of currencies will ultimately deliver anything other than usual result of unregulated financial capitalism based only on the norms of free exchange and competition – stronger fish ultimately kill weaker fish, big fish ultimately rule over small fish, and we end up an oligarchic hierarchy of privately owned and operated currency systems. All the concentrated power of “big government”, but this time not a single democratic institution left standing through which there is any hope of bending all that power to accomplish any useful social purpose. No thanks.

      1. JGordon

        This has nothing to with laissez faire or privatization or deregulation. What this does have to do with is criminals using the monetary system to screw over nearly everyone who is forced by law to use it. There is no way you will ever have a fiat system, no matter how noble and fair-minded it starts out, that is not eventually corrupted by insane, elite criminals. That is the nature of humanity: the most intelligent and depraved criminals will always be attracted to where the most power is. And that’s usually government. Or in this case, Wall Street and the Fed, since they basically are the government now.

        1. Nathanael

          Non-fiat systems are corrupted by the *same damn people*. They become the bosses of the gold and silver mines.

          You have not made an argument against MMT.

          1. Nathanael

            Now, if you’re making an argument for *multiple, competing private fiat money systems*, such as F. Beard has argued for — OK, that’s a valid argument.

            I think the economies of scale from having a single currency make it hard to maintain multiple competing currencies, but I think they should always be *legal*, as it allows a quick escape from a mismanaged currency.

          2. JGordon

            I am not a gold bug. And by definition non-fiat means precisely that anyone can use whatever currency they like. If people want to use bitcoin, instead of gold, more power to them.

        2. Dan Kervick

          And where do these criminals come from? Every plutocratic titan of industry started out as some little guy doing his little thing and competing his way to the top. I’ve seen all this stuff before. The local currency folks remind me of all those “rebels” building personal computers in their garages and basements during the era of Big Blue. The rebels started their own companies; competed with each other, chased glory and success. Some won the the big prizes in the struggle. And so where are they now? They are among the plutocracy that runs things!

          So I see some of what is happening now as a pseudo-progressive reprise of the same old American comedy of delusive freedom. People just want the freedom to go their own way with a few like-minded people and do their own thing, and they just want The State or whatever to stay off their backs and leave them alone. But if you don’t work on building an actual well-governed society – a democratic rule of law with firm institutions of equality and justice – then all of that “freedom” just creates the conditions for the survival of the strongest and the rule by the winners and the wealthy few.

        3. Ben Johannson

          There is no system which is not vulnerable to corruption. If a world where everyone is honest is the only one you’ll accept, then you aren’t really serious at all.

          1. JGordon

            That’s a false choice fallacy. Societies that are endemically corrupt collapse all on their without any help from anyone; eventually the corrupt and evil elites parasitize the society so much that it has to collapse, and the poor deluded peasants who love their servitude and support the elites let them get away with it–because by and large people are too complacent and stupid to see the bigger picture–until their bellies start going empty that is. But by then it’s already too late. That is where we are today.

            So the only thing to do is sit back, relax, and float away on the life raft while the pig goes down. And meanwhile I am here trying to shake people out of their complacency and delusions so that a few can get to work making their own rafts before it’s too late. Those who heeded my advice when Sandy struck did pretty well you know. Meanwhile many other got to experience first hand what gettning “help” from the government means: http://www.fourwinds10.net/siterun_data/government/homeland_security_patriot_act_fema/news.php?q=1352491193

      2. Andrew not the Saint

        ‘ “Decentralize”, “privatize”, “deregulate” has been the creed for four decades at least now. ‘

        Privatize and deregulate – yes, but decentralize? WTF? Where on this whole planet in the last 20 years has there been any significant change towards decentralization? Am I missing something?

        You can decentralize without getting rid of good regulation (the one that protects from theft and violence) and certainly without the propertarian mantra of privatization.

        The NC bloggers really need to educate themselves in the original meaning of libertarianism, not the bastardized term recently adopted in the US.

    2. lyman alpha blob

      Yes, corruption is always a problem but I don’t believe that requires throwing the baby out with the bathwater.

      Aruments of this sort have been going on for thousands of years. Look at Plato with his idea of the perfect ruler, the “philosopher king”. Of course he never bothered to explain where such a noble figure might be found. Never been a big fan of Plato/Socrates, who I find to be quite anti-democratic.

      But Kervick isn’t advocating for such a person to decide everything from what I can tell. “We” would decide collectively where money should be directed in the economy. Under the current system, “we” aren’t allowed to do that very well and I would be very skeptical of implementing MMT as the system currently is constructed because I fear that corruption would destroy any well-intentioned policies. But the current system will go the way of the dodo, and it’s very important to discuss what might take its place.

      The concept of wealth is one of human invention but I don’t see that going away any time soon. That being said, wealth is created by labor, much as Kervick has described. The amount of money in the economy should have some correlation to the amount of goods and services being produced. Right now that is way out of kilter, with the FIRE sector of the economy taking way too big a share. They create wealth for themselves today not by performing usefull services so much as by taking (aka stealing) the wealth of those who labored for themselves. Large bonuses for laying off workforce, big money off of housing derivatives way out of proportion with the amount spent on labor to actually bang nail to board, etc, etc.

      However every election day in my town and state, I am asked to vote on bond puchases for all kinds of things determined to be beneficial for my town and state – school construction, funding for higher educadtion, improving the water system, new infrastructure, etc. Of course the town and state can’t print their own money and have to borrow it instead, and by the time that newly created money gets into the hands of people actually doing the work, all kinds of people in the FIRE sector have taken their cut, often way out of proportion to the services they are actually providing.

      So I’m going to throw something out for discussion, which admittedly I haven’t thought out too much yet. What if towns and states clould issue their own currency for their own projects, using something similar to the state banks like N Dakota IIRC already has, with the Federal Government ensuring somehow that a dollar in Idaho spends roughly that same as a dollar in NYC? Money spent on these projects would only be spent if approved by voters, much the same as occurs now, so we all have a say.

      Of course there will be corruption in a system like this – there is in every system. That’s just human nature. But with less central control, I believe corruption would be much easier to monitor and wouldn’t occur on nearly as large a scale.

      I don’t think the US as currently constructed is going to last all that much longer- it’s simply too big with too few people making decisions that affect us all, decisions they are often bribed to make. Population continues to rise but when was the last time we had an increase in the number of Congresspeople to represent us? As someone above mentions, we might all be better served with several regional states rather than one big federal government. The way things are headed, I think this will happen whether anyone likes it or not. There was an excellent article in Harper’s few years back taalking about this scenario (which unfortuantely I can’t seem to find without poring through back issues in the attic). If that scenario does come to pass, I think it behooves us all to have a discussion now as to what might replace the current system. If we as a society do not, we probably will like even less the power structure that comes out of a vacuum.

      1. Nathanael

        I don’t think “size” is the problem with the US government, I think it’s lack of representation of people’s interests.

        If we had a *party-proportional* representation system, the 10% of the people whose top agenda item is environmental conservation would elect 10% of the members of the legislature (“Green”, probably not the current Green Party though) and those people would have a voice for their issues. Et cetera.

        Currently people’s views and interests don’t line up with where they live, but we have geographical districts — huh?

        Approval voting could give improved results in single-member elections, too.

    3. Cyrus Rex

      Interesting comment JGordon, except that you are both absolutely right and absolutely wrong in a single paragraph. The criminals are in charge of the money system, but it has nothing whatsoever to do with the fact that it is a fiat system. If you study history at all, you should know that they maintained exactly the same power and the same criminal intent and accomplishment when J.P. Morgan & company controlled all of the gold when we had the gold standard.
      Thus, it matters not whether it is fiat or commodity based, what matters is whether the people allow the criminals to run the show. For as long as there have been national interests Utopian thinking has always resulted in short-term successes and long-term failures. As said earlier, the collapse will surely come sooner rather than later, but it is unlikely that the replacement system will stand the test of time much better than has the one being replaced. Human history is a long testament to the frailties of human nature — it in the genes — sad but true.

  8. joebhed

    MMT will eventually pass/fail on the basis of whether it correctly characterizes the modern monetary economy(MME) that presently exists.

    Very few would argue with the claims made about how things might work to improve society’s welfare in today’s MME, operating principle being how they might work.
    The problem is in the “what is” premise of MMT.

    There are several flaws in that which is ‘given’.
    The first – that the nature of money IS debt is not addressed in this posting.

    The second is that in a MME, the government IS the “monopoly issuer of the currency”.
    This is not even close to being correct.
    As in this postulation :
    “”A government that is the issuer of its own currency has the option of increasing its deficit without increasing bond sales. It can issue new money in the very act of spending it.””

    Government most certainly COULD issue new money when it spends, as this is what monetary sovereignty is all about. But the same sovereign government can give up, and has given up, all of its autonomous, independent powers over money creation via allowing the so-called “endogenous” money system of debt-based private issuance.

    The denial of private money creation leaves that dilemma for later discussion.

    The third is that taxes and debt(proceeds) do not pay for government services.
    That is a construct built completely upon allegory, anecdote and nuance.
    It is not necessary to advance the public purposed money system, and today can only occupy the “that which could be true” column of monetary theory.

    MMT’s real gift is to present us with the potential benefits of a publicly-function based money system. Getting there is obviously achievable.

    But claiming we are actually there now has a debilitating effect on the public action necessary to buy that lunch – with our own money.

    For the Money System Common.

    1. Aquifer

      I have been reading your stuff here and there for quite a while without really understanding just what you were trying to say but this post makes a lot of sense to me – i may explore your ideas some more, as MMT, for me, has a few large flies in their ointment ….

  9. c1ue

    I think the problem with MMT – as noted above – is the implicit assumption that money printing doesn’t have long term effects.

    Clearly from the examples seen with Weimar, with Mexico/Argentina, money printing at some point does have a long term effect. And the long term effect is to reduce or destroy the trust required for a fiat monetary system to function.

    Thus the well which MMT describes as limitless, is in fact not so.

    It would be far more convincing if MMT acknowledged this and put some work towards understanding/describing when/how this level of distrust arises – as well as perhaps some thought on to how to regain said trust once destroyed/damaged.

    1. Nathanael

      Nope. It’s the exact conditions of money printing which matter. France deliberately printed huge amounts of money all at once after WWII and was even better off.

      It’s possible to print too much money. That should be avoided. It’s also possible to print too little money. That should also be avoided.

  10. Abe, NYC

    How are imbalances to be addressed? E.g. in 2006 the USA was obviously building too many houses. Does the spending have to be kept at a level sufficient to buy all of them, perpetuating the bubble? Or, if spending is to be constrained, how is it constrained on housing but maintained on everything else?

    1. Aquifer

      I had a bit of a problem with this, too – the idea that we should have enough money in circulation to buy all that could be produced – I know he nuanced this a bit later, but for me a crucial question is how much does that “production” capability exceed what the environment can sustainably provide – both in quantity and quality. It sounds like – “Hey, if you can make it, we’ll provide the money to buy it!”. Maybe we are actually producing too much of some stuff already, and not enough of other (fuel v food) – maybe the problem isn’t how to get more money into circulation to buy/make more stuff, but to distribute the stuff better – What does MMT have to say about that?

      When we get to the top of the ladder will we find it leaning on the wrong wall? Have we precisely solved – the wrong problem?

      For me, there has to be a bit more “fleshing out”, a bit more attention paid to some of those pesky little details that can make or break a system – that can’t be put in that “hell, we’ll worry about that later” box ..

      1. Hypothetical_Taxpayer

        A few pesky details, like in what counrty does MMT want to cause full employment? Or will we buy all the oil in the middle east because GM can make lots of gas guzzling SUVs? Little stuff like that.

    2. craazyman

      If they make too many, you pay them to take them down.

      It’s Say’s Law.

      Something like this must have happened to make the ancient Greeks invent Sisyphus. But at least he’d get a paycheck with MMT. Better than staring at the boulder while you’re unemployed.

      1. Aquifer

        LOL! By George, I think you’ve got it!

        craazy, i think I have said this before – you are one of the reasons I read NC!

    3. Ben Johannson

      A national 20% downpayment to qualify for mortgages and the housing bubble never would have happened. Reform of the banking system and the financial crisis never would have happened. MMT teaches us there is no reason not to radically change the way finance works. Go to Warren Mosler’s site and read his banking proposal.

      1. LifelongLib

        OT, but when you’re trying to determine if someone can pay a mortgage, a record of paying a similar level of rent is a better indicator than saving a 20% down payment. A person could do the latter living for a decade in their parents’ basement. It wouldn’t tell you much about how they handle living on their own.

    4. financial matters

      Recent bubbles seem to be caused largely by fraud. The tons of mortgage fraud has gone essentially unpunished as has poor corporate governance/corporate raiding and abuses such as high frequency trading and the plunge protection team.

      Dealing with these housing and stock market bubbles are a different kettle of fish than the basic productive sector of the economy.

    5. Dan Kervick

      Were we really building too many houses? If there are still people who want houses who don’t have them, then I don’t think we have to many. But we might have been building too many very costly houses, and fronting people too much money that they would never be able to pay back to buy those houses. But I assume local surpluses of houses would rapidly turn into a shortage if we took steps to generate full employment.

      1. jrs

        Nearly everyone in the U.S. has shelter (and I don’t mean cardboard boxes) so I think we have enough housing stock. Even if you want to get into the issue of homelessness, I think it is the case that the houses that are currently sitting uninhabited are more than equal to the homeless population. So again that would point to the problem not really being lack of housing stock. But someone should be able to own a dozen unused properties, well maybe, clearly then the need for housing stock is somehow greater, but again most people have shelter even with the current situation where this may be the case (bank owned property, rich people owning 2nd and 3rd and 4th houses etc.). The problem then is fundementally not one of housing stock but one of ownership. That people are renting houses when they would prefer to buy. Or renting apartments when they would prefer to buy condos or houses etc..

        I mean you can try to address this problem from a free-market supply level, increasing the supply of houses to drive down costs so more people can buy houses, the problem there is financialization plus government backing for high house prices (definitely something the government is supporting at this time) is working contrary to these purposes to drive up the cost of houses. Plus there is the sheer waste that excess housing construction (as occurs in a bubble) produces, farms are turned into suburbs so food travels further and further distances, wilderness is turned into suburbs with all the destruction of the natural environment we all depend on that implies, shoddy housing that won’t last and that is a bad use of resources is constructed, etc..

        Were we really building too many houses? If there are still people who want houses who don’t have them, then I don’t think we have to many. But we might have been building too many very costly houses, and fronting people too much money that they would never be able to pay back to buy those houses. But I assume local surpluses of houses would rapidly turn into a shortage if we took steps to generate full employment.
        Read more at http://www.nakedcapitalism.com/2012/12/dan-kervick-why-mmt-is-not-a-free-lunch.html#EGeKLYEMiigxXV35.99

  11. Ted Schmidt

    Dan, That is a nicely laid out piece. I think there are some difficulties with how to implement FF on the fiscal side. While the current tax and spending system is set up so automatic stabilizers work toward the goal of using the budget to stabilize growth, FF would need a more active fiscal mechanism to maintain the economy near full employment. While I don’t think there would a single lever for all circumstances, it seems to me that some combination of consumption and income taxes might be the best mechanism to regulate demand? And would there be an independent entity in the Treasury regulating the levers?

    I think once you get past the phony veil of money, it raises more serious questions like how much of our resources should be directed for the public purpose? 20% of GDP? (Which would of course vary somewhat when needed to promote the first rule of FF.) Then, how much of that should go to defense vs meeting domestic needs? And rather than the current phony debate about how we must raise taxes today to fund projected future deficits in SS and Medicare, we could simply focus on the real issue, how will we direct X% of the public resources to meeting the projected future needs in 2035?

    I have all kinds of other thoughts on this, but then it’s piece not a post.

    1. Nathanael

      1. Guaranteed minimum income (or equivalent) acts as an automatic stabilizer for high unemployment periods.
      2. Very high income taxes on the very rich act as an automatic stabilizer when there’s been a bubble which pours money into the hands of a few — they suck the money out of the top of the bubble. *High income taxes on the rich act as an automatic stabilizer during bubbles*.

    2. Nathanael

      Regarding “defense” versus domestic needs, I think the word “defense” is the key. Spend what we need for defense, then STOP.

      At the moment we spend most of our military budget on offense, and we need to CUT IT OUT.

    3. Dan Kervick

      Thanks Ted. Some of the issues you raise about fiscal mechanisms came up in the discussion of this post at New Economic Perspectives, where it was originally posted. Would you mind if I refereed you to that discussion? I would have preferred to write something here, but I have to go put up Christmas lights :)

  12. Jim Haygood

    ‘The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce.’

    This is the basic principle of central planning — and it’s impossible to implement.

    MMT is a secular religion. Big Government is its god: the welfare/warfare state in all its bloody glory.

    1. Nathanael

      Impossible to implement? The ancient Egyptians implemented it with great success.

      Of course, they had what amounted to a single-good economy, but still. It shows that there is a level at which active planning works.

      1. Yves Smith Post author

        Yes, that’s an intriguing example everyone forgets, or glosses over. Worked for thousands of years too (the Pharonic price setting), or at least hundreds (the regime clearly did, not as clear on the duration of the controls).

        Or maybe those inbred Ptolemys were just better central planners than our modern technocrats.

        1. Calgacus

          Yes, John Henry has a good article in the Mitchell-Innes volume on Old Kingdom Egypt as an ancient economy, with money, but that had not yet developed markets. Also Bell (Kelton) & Henry’s Hospitality versus Exchange: the Limits of Monetary Economies, Review of Social Economy 2001; I think. There’s a free version somewhere, can’t find the link for the moment.

        1. Aquifer

          Yeah – that’s the first thought that came to my mind, too … Methinks one has to consider to what extent, if any, the success of that planning depended on a slave labor force …

        2. skippy

          Not really slaves, city’s and towns had to supply X amount of labor for empire projects… mostly grandiose civil projects to magnify the pharaohs elevated status. Um… Gawd on earth, fill my priests silos with your toil and I will redistribute it for ya, for the benefit of ***OUR*** (cough… I/MY) Empire!

          Skippy… count how many times they had to move such massive stone construction, chasing the Nile’s ever changing course… JOBS!

    2. Ben Johannson

      Don’t be silly. If there are people unemployed whomant to work, hire them. If monetary ifnlation is high, spend less or tax more. This isn’t rocket science, and it’s not difficult to determine the appropriate level of output and aggregate demand.

    1. skippy

      Those growing up under the “Invisible Hand” (negative reinforcement – FU Skinner-) capitalists, free marketers, laissez faireists, just in-time, creative destruction, profit worshipers, then you add on the 350ish BSD billionaire’s in the land of freadoom and assemblage of non-sovereign multi-national capital gravity wells…. and you have a wee bit of a problem… eh.

      “The abused has an irrational belief that the abuser is omnipresent and omniscient.” – ***Thank you Gawd[s***[!!!]… SNORT.

      Bob, in this day and age, that we hamstring ourselves, destroy a planet, injure the young at birth and then feed upon them like carrion, cling to antiquity’s failures, when all we have to do is cut the cord… to that putrid placenta… and accept the rights, privileges, and responsibility the Universe has bequeath us… life would be enjoyable.

      But – WE – can’t have that, suffering is the corner stone of it all, as proclaimed from above… so saith the “Priests of Plenty” (labors silos)…. retch.

      MMT is just a tool, the currant tool users are insane, having been beaten from birth by – their – creator[s. I’m sure we can cajole them into doing the right thingy, morally and ethically, as there is so many historical examples… eh. Sadly its always a case of who beats down whom and becomes, after a time, what was replaced.


      The original iHole[?] and the subsequent up grades? Not to worry the future is here today!




      Got that… its going global.

      Skippy… We don’t tell you – what – to think… just – how – to think… Welcome to ithink…. brought to you by a couple guys in a garage with a dream???

      PS… Expectations of newly minted iholes (children born)… will exceed Gold’s wildest historical highs… off to the mines[!!!!!!!]

  13. Demosthenes

    Mr. Kervick, thanks for an excellent summation — I had difficulty explaining to people how MMT was not “manna from heaven” and this will help tremendously. A shame that so much of the readership here on NC can’t look at a piece of political theory and weight it on its own merits.

    I cringed to read that some commenters are lumping you with the neoliberals and others are calling this article propaganda. Sigh. Please keep writing your articles — some of us are actually reading.

    It seems that everywhere on the Net where there is MMT, there are trolls — you must be getting something right!

    1. Dan Kervick

      Thanks for the words of encouragement Demosthenes! The criticisms are useful, of course, because the more active I get about trying to write and spread these ideas in public, the more prepared I have to be for all the things that can be thrown at me.

  14. Hugh

    The post and the comments expose the fault lines that remain between MMT and its critics, even those who support many of its ideas. I like that Dan Kervick discusses resources and We the People. These are close to my own views. But there is a stumbling that goes on between MMT as a description of a fiat currency system and how it can be used in our current political-economic system. The system we have is not interested in solutions. Its means and goals are kleptocracy, wealth inequality, and class war. Even the suggestion that they are proper users of MMT torpedoes any further discussion. It is rather like suggesting to bank robbers how they can better use banks, which to the rest of us sounds a lot like how they can better rob them.

    MMT has had neoliberal roots and it is not clear it has dispensed with them. This is especially true with the Jobs Guarantee which was initially described by its MMT proponents as a low wage labor stock for private businesses.

    So I would suggest that Dan Kervick consider recognizing that our current political-economic system is only going to loot us, and that if MMT ideas are going to be used to help us ordinary Americans, then this presupposes a change over from our current system.

    I would also encourage a stronger embrace of the living wage. This brings me back to MMTers trying to move from MMT as a monetary theory to one that encompasses social purpose. It is much easier and persuasive to begin at the level of society and ask the question of what we want as a society. And then go from there to an examination of the resources to get us there. And then lastly to an inclusion of how MMT can be used to effect the distribution of resources to this further these goals. If you go this route, social purpose is there from the beginning and at every step. And resources quickly follow, how much we have and what limits are on them. Going the other way from MMT to resources to us as a society doesn’t work. It is too much of a stretch. Rather like starting with the tail of the dog and trying to show the rest of the dog plus its role as the family pet can be inferred from it.

    Lastly, I would just point out something that I used to use in discussions of foreign policy. To construct a policy, it must answer three questions in the following order:

    What do you want?
    What can you do?
    What can you live with?

    Answer those three questions and you have a policy. It seems like the same could be asked of MMT, and for that matter the rest of us.

    1. JTFaraday

      “MMT has had neoliberal roots and it is not clear it has dispensed with them. This is especially true with the Jobs Guarantee which was initially described by its MMT proponents as a low wage labor stock for private businesses.

      So I would suggest that Dan Kervick consider recognizing that…”

      And how many times has this been suggested already? He knows full well what it is.

      The problem is that a lot the people who read them think this is fine because the idea of unemployed people sitting on the couch eating bonbons in front of the TV while collecting unemployment for 6 months is just too much for them.

      I’m not kidding, I’ve seen this comment. In fact, I think was Marshall Auerbach. The hypocrisy of their putative “anti-austerian” position is outrageous.

    2. jsmith


      I – for example – am not trying to argue that MMT doesn’t describe the monetary system etc but rather that if there is no social underpinning to the theory other than basically what neoliberalism has already offered us then it’s a pointless gesture when MMTs adherents start rolling out social policy as we’d all be much better served starting from a socioeconomic model – such as Marx – that from the outset gets to the crux of the matters concerning our society and the allocation of resources, as you pointed out, Hugh.

      To address an ealier comment by Nathaneal:

      Marxism has failed?


      Because if Marx didn’t propose a concrete answer to capitalism, then what failed surely can’t have been Marxism, right?

      In Marx I see a socioeconomic model that has for well over 100 years accurately depicted what has happened and will happen over and over again in a capitalistic society but I see almost NO ONE speaking to said model in our day and age and this is disturbing to me as an engaged American who loathes the collapsing of convesational parameters to suite the needs of our neoliberal lords.

      No, let’s instead crunch some numbers, draft some equations and completely ignore our socioecnomic realities by depriving ourselves of Marxist discussions which address the situations one can see here in the US and around the world.

      As Hugh states, we are going about this backwards.

      Marx may not have the exact prescription/answer for what ails us but he nailed the description of our societal “symptoms” in toto.

      MMT is describing just the monetary “symptoms” of our society yet comes dangerously close – to borrow Nate’s thinking – to going even further than Marx in stating exactly what we should replace the entire current system with and I think that is where the warning bells go off for me.

      Really got to run.

    3. Ben Johannson

      No. MMT is politcally agnostic and contradicts neo-liberal dogma on virtually every issue of substance. If you’re going to claim MMT is founded on neo-liberalism, then make a specific argument supporting your powition rather than gross generalizations.

      1. JTFaraday

        Nonsense. We all know that the reason they won’t reconsider the minimum wage in their Job Guarantee is so the private sector can hire the rats out of the slums for bit of extra cheese– because that’s what they’ve said over and over again.

        You just don’t like the sound of the truth.

        1. Dan Kervick

          What in the world are you talking about? You’re a liar – now just making things up to satisfy your hatred.

          One of the points of the job guarantee is that the job guarantee wage would itself be the minimum wage. And because employers would no longer have an unemployed buffer stock of desperate workers to draw from, the bargaining power of all workers would be dramatically increased. That floor wage can be set at whatever level we want. I would like a high one that forces firms to distribute more of their revenues down the lowest-paid workers.

          1. JTFaraday

            No, Dan.

            Apparently, both Hugh and I have seen these discussions where the Job Guarantee crew has rationalized the job guarantee against the concerns of the private sector. They are determined to keep the pay sh*t rate in order to facilitate the exploitation of labor by the private sector and the economic good of their pals in the money management business.

            The problem here is yours, Dan. You laid down with dogs–small time dogs, more like suck up Paul Ryan than Robert Rubin, but dogs nonetheless– and now you’re getting up with fleas.

          2. dilletaunted

            Plenty of MMT’ers suggest the Job Guarantee be at a living wage. What’s important is that its fixed. Those supporting a Job Guarantee at the current minimum wage stress that the decision to take the Job Guarantee is entirely optional. No one suggests taking away current social insurance benefits.

            You don’t even know what you’re angry about.

        2. Calgacus

          The wage of a guaranteed job, open to all, must be the minimum wage. “They won’t reconsider the minimum wage in their Job Guarantee” because they can’t “reconsider” it and still think rationally. They can’t make 2+2=5 by reconsidering it either. That the JG must be minimum wage is a truth of logic. It is not an optional position.

          Lake Woebegone, where everybody is above average, is purposively humorous fiction. Unfortunately this is not true of economics comments. Although I am heartened by the fact that even the most irrational things one sees on the web do not quite attain the lunacy of the academic Laputans.

          The JG wage must be the minimum, otherwise it is not a real guarantee.
          Proof: People will always go for a higher wage, rather than a lower wage. So whatever the JG wage is, people will flock to it and away from lower paying work. That is one of the points of the JG – it would instantly give a raise to the worst paid people and the unemployed. But they won’t generally intentionally leave higher paying jobs for the JG – that don’t make sense, comrade.

          Of course it is better for the poor and the unemployed to have a higher wage. But at some wage, this will just cause inflation, and not lead to a higher real wage, which is determined by the finite productive capacity of the economy.

          Those who oppose an oh-so-evil cryptoneoliberal minimum wage JG are, as Minsky emphasized, supporting a minimum wage of zero for the non-guaranteed job. And I say that those are effectively saying, that the unemployed and working poor aren’t worth anything at all. That they are pieces of shit. They can eat the wonderful utopias these illogical people dream up for the lesser people though.

      2. Malmo

        MMT will have my ear when those proponents get off their asses and get stridently political. I want to hear them pine for a classless society, where the laborer has as much security as the president of Harvard.

    4. tiebie66

      There is a fundamental problem with the demand for a ‘living wage’ and the fact that someone -else- has to provide it and that the environment needs to support it. To the extent that one receives what he has not earned he is a rentier or freeloader. To the extent that another supplies without benefit, he is a slave. Even in aggregate, these things remain basically true.

      I do subscribe to equal opportunities, but not equal outcomes. Enlightened self-interest makes me willing to slave for the former, not the latter.

      These considerations are quite separate from the issue of fraud. Much like medicine needs to understand the functioning of the kidney apart from addressing the criminal practice of medicine, economics needs to have its basic principles sorted out besides focusing on fraud. In the absence of fraud, there may not be enough for everyone: we don’t know because we have not clear the fundamentals yet.

      1. diptherio

        “There is a fundamental problem with the demand for a ‘living wage’ and the fact that someone -else- has to provide it”–tiebie66

        I see…unfamiliar with the labor-theory of value, I take it.

      2. Hugh

        “There is a fundamental problem with the demand for a ‘living wage’ and the fact that someone -else- has to provide it”

        There is no “someone”. It is about commitments we make to each other as a society about how our resources are distributed. How precisely can we have a just, stable society without a living wage? How is paying less than a living wage anything other than peonage?

        “To the extent that one receives what he has not earned he is a rentier or freeloader.”

        This seems quite a jump from the discussion of a living wage. So in your estimation are the young, the old, the disabled really all just a bunch of rentiers and freeloaders? How do you define the “undeserving”? How do you define “earn”? We have all been indoctrinated with all kinds of class war crap, that our actions are to be determined by our fear that some vague group of “someones” is going to take advantage of us, and so rather than building a fair and just society our efforts get turned into a race to the bottom. Rather to live in hell than have the possibility that someone might take advantage. How is that any different from what we have now?

        1. LifelongLib

          If we allowed slave labor than nobody would have to offer wages at all. On the other hand, if the government guaranteed a minimum standard of living to everyone then nobody would work for a wage that did not at least match that standard, and probably not unless the wage substantially exceeded it. So it’s all a matter of arrangement.

    5. Dan Kervick

      “MMT has had neoliberal roots and it is not clear it has dispensed with them. This is especially true with the Jobs Guarantee which was initially described by its MMT proponents as a low wage labor stock for private businesses.”

      Where? Bill Mitchell? Randy Wray? Pavlina Tcherneva? It doesn’t sound like anything I have read in their work. If you want to understand the motives for the job guarantee, please read the papers by Bill Mitchell on unemployment, or his book *Full Employment Abandoned*

      1. JTFaraday

        No, Dan. If you can refute our characterization then you do it, instead of clogging the airwaves with more propaganda.

        1. Dan Kervick

          I’ve just tried responding to this several times with some passages from Bill Mitchell, but the comments system is swallowing it. Maybe it’s because I said “horsesh**” before?

          1. Dan Kervick

            See these two blogposts on Mitchell’s billyblog:

            Public service employment programs – what really have we go to fear?

            When evidence strips one back to their ideological core

      2. Aquifer

        As a very interested observer – ISTM this “he said, (s)he said” dispute could be cleared up if

        a) JTF could clarify if (s)he (make no assumption about gender, don’t know it) thinks there is any merit to a JG at all, and if so, what would the conditions be under which it would be adequate/good idea

        b) DK could clarify what MMTs JG looks like

        and then one could compare ….

        If no JG at all is acceptable to JTF then DKs JG is a moot point, no?

        I would be curious, in any case, as methinks this issue of living wage and conditions of work is a biggie in my concept of “public purpose/public policy”. I suggested such a description considerably upthread and got no response …

        I will be curious to see if there is one here –

      3. Hugh

        ““ … the theoretical offering that MMT provides … is that if we are concerned about efficiency and price stability then there is a superior buffer stock available to a public currency issuing monopoly.

        “That is, if we really understand the way the currency works and the way the labour market works then we can have both full employment and price stability by using an employment buffer stock rather than an unemployed buffer stock.”


        “MMT shows you how it is far better to conduct fiscal policy by spending on a price rule. That is, the government just has to fix the price and “buy” whatever is available at that price to ensure price stability. But what is the price the government would be fixing?

        “Answer: the price it offers labour to enter the employment buffer stock – that is, the JG wage… .

        “In the face of wage-price pressures, the JG approach maintains inflation control by choking aggregate demand and inducing slack in the non-buffer stock sector. The slack does not reveal itself as unemployment, and in that sense the JG may be referred to as a “loose” full employment… .

        “So in a fiat monetary system, price stability is maximised using employment buffers rather than unemployment buffers.”

        Bill Mitchell as quoted here: http://www.correntewire.com/the_wapo_mmt_post_explosion_kevin_drums_take_on_mmt

        This is profoundly neoliberal in its outlook. Workers aren’t people. They are just a commodity. You got inflation? Just drain part of this commodity into a buffer stock. It doesn’t matter what their needs, hopes, lives are. Government can just buy them up as cheaply as it can and not as they need. And cheap is implicit in all this because the idea is for this commodity to be liquid and easily passed back into the private sector. Give them meaningful work paying a good wage in the public sector and they just might want to stay.

        Mitchell thinks he is being generous and efficient in creating an employment rather than unemployment buffer stock, and I think many MMTers would agree with him, but it is all extremely dehumanizing and neoliberal. The focus should be on the people and it isn’t. No mention of self-respect, meaningful work, living wage, God forbid quality of life. His approach reads like a chemistry experiment with people being some of the compounds involved. Is it any wonder that many of us look askance when MMTers turn around and argue that MMT inherently has public/social purpose embedded in it?

        1. Dan Kervick

          I understand your criticism, but you are using “neoliberal” in a very weird way which perhaps is contributing to the confusion here. If you think that the system Bill is envisaging involves too much government technocratic planning, or that it views human beings to abstractly as a “labor force” and is for that reason dehumanizing, then that is a debate worth having. But then what you are objecting to is the same thing people objected to in the past when they criticized socialism or other systems they viewed as excessively dirigist or centralized or planned. But that its the very *opposite* of neoliberalism, which was a movement back in the direction of laissez faire, privatization and deregulation, and aimed at a smaller role for government. Bill is obviously arguing for an expanded role for government.

          In his papers, Bill is often arguing with other economists, and therefore speaks their language in those papers and advances arguments of a kind that might appeal to people of different moral and ideological dispositions. He has basically been waging a long campaign against economists who have argued that significant involuntary unemployment is either (a) inevitable or (b) something that has a “natural rate” and that we can only eliminate if we are willing to trade it off for high inflation, or (c) something that has a natural rate below which we get *accelerating* inflation or (d) something that governments cannot alleviate except in the short term by inducing temporary confusion among workers about the relationship between their wages and the price level. He thinks they are wrong, and hence spends a lot of time trying to rebut all of these positions.

          Now why does he *care* about this? Because mass involuntary unemployment is inhumane and causes all kinds of social and individual pain, including high suicide rates, high rates of depression and alienation, and a breakdown of the norms and bonds of solidarity that hold societies together. You will find these concerns expressed frequently on his blog. He runs a whole center devoted to combating the problem of mass involuntary unemployment. But unfortunately, when arguing with other macroeconomists who often don’t share the same values or feel compassion and outrage about the same things, you have to make arguments that will get a foothold with them on some area of professional common ground.

          1. Hugh

            Do you hear yourself? You were asked to refute the characterization of neoliberalism elements in MMT. That is a question of argumentation not citation. But in response you told us to go read some Bill Mitchell and put the onus on us to cite him or other MMTers espousing neoliberal ideas. That really wasn’t my responsibility to do, but I did it anyway. Your response? Not to believe what Mitchell says because he is engaged in doctrinal disputes with other economists. Well, if we can’t take what he says at face value, what’s the point?

            As for neoliberalism, it is synonymous with corporatism. It invokes concepts like laissez faire and small government in its propaganda but it is anything but. It feeds off of big government and the special privileges government confers. I mean just look at the recent multi-trillion bank bailouts. Deregulation by the way is in no way antithetical to big government, just to effective governance.

            All in all many of us have had this same experience again and again when discussing MMT with MMTers. We go round and round the same circles. If we take MMT on as a monetary theory, we are told it is so much more. It has public purpose built into it. If we analyze from that perspective, we are told that it is, in fact, value neutral. If we dispute MMT’s general features, MMTers demand details. If we provide details, we are told to read more of the MMT canon.

            If MMTers can not provide some clear, concise, agreed upon statement of what their views are to serve as a basis of discussion they really should stop bothering us and pretending that MMT has any greater rigor or legitimacy than any of the other failed economic theories of their colleagues.

          2. Dan Kervick

            I feel like you really didn’t read my response. But again, it seems you are using your own private Pickwickian definition of “neoliberalism” so that you get to stick by your dotty claim that MMT derives from neoliberalism. It’s like if I said Ron Paul’s libertarianism derives from Leninsism, and then backed it up by saying that libertarianism is *really* the dictatorship of the proletariat, but libertarians just use all that talk about liberty and laissez faire as part of their diabolical communist propaganda.

            Neoliberalism is a doctrine and set of policies based on privatization, decentralization, deregulation and promotion laissez faire. It has an established intellectual and policy track record of promoting this agenda. We are now living with the wretched consequences. Neoliberalism grew straight out of the importation of Hayek and Friedman into the economic mainstream, and the repudiation of Keynes. And everyone who has read two paragraphs of MMT writing knows which side MMT is on in this debate. Now that the crack-up of this liberalizing free market tendency is so obvious, the Austrian nutters are trying to dispossess themselves of their bastard child and attribute its paternity to someone else. But it won’t work.

            If you are too lazy to read Bill’s piece, fine. Hopefully other people read it. But please stop making it up as you go along.

          3. Hugh

            Apparently your confusion concerning neoliberalism stems from your inability to distinguish between neoliberal propaganda and neoliberal policy. I suppose this should be unsurprising since, as FromMexico lays out below, you also have an inability to distinguish between MMT as description and MMT as prescription.

            Again I suppose laziness is in the eye of the beholder. I find it extraordinarily lazy, not to mention arrogant, that MMTers still refuse to describe MMT in any coherent fashion, that when challenged, their only answer is to tell those challenging to go read a book, and then have the unmitigated chutzpah to tell us not to pay attention to what said writing actually says but to intuit, perhaps via some enlightened spiritual experience or telepathy, what the author actually “means”.

            How completely and utterly phony. You guys are blaming us for not having your act together. Naked Capitalism should be a pretty congenial venue for MMT. Many of us here after all agree with many of its ideas about fiat currency, but if you can’t sell us on MMT, rather than attacking us, maybe, just maybe, you should take some of our criticisms to heart. Nor should you affect surprise at them. We have been making them for years, and, despite some pique, remain unanswered. But if you can’t sell us, who can you sell?

    6. lambert strether

      If MMT had neo-liberal roots, you’d expect see MMTers hired at neo-liberal institutions, being published in neo-liberal journals, speaking at neo-liberal conferences, and going on the teebee with the rest of the neo-liberal priesthood.

      Instead, we see MMTers out in the flyover states and the Australian outback, their conferences get sponsored by obscure blogs, and so forth.

      Since there’s plenty of factional infighting in the neo-liberal community, I’d hazard a guess that MMT isn’t just another neo-liberal faction, but that the paradigm really is different.

      1. JTFaraday

        Just by happenstance, I already explained that at 8:01.

        ie., see Paul Ryan and Scott Walker. (Did you know they grew up on the same street?)

      2. Hugh

        No. Just because MMTers are heterodox doesn’t mean they have rejected all neoliberal views, just some.

    7. From Mexico

      I very much like this comment. Metaphysically speaking, it is very Kantian.

      Perhaps one of the greatest devotees to the Kantian philosophy of science was Einstein. Susan Neiman explains in “Subversive Einstein”:

      Though we know that Einstein first read the ‘Critique of Pure Reason’ at the age of thirteen, standard discussion of Einstein and Kant concentrates on space and time. At least as worthy of further scholarship would be Einstein‘s own remark in the Schilpp volume: “I did not grow up in the Kantian tradition, but came to understand the truly valuable which is to be found in his doctrine… quite late. It is contained in the sentence: the real is not given to us, but is put to us (by way of a riddle).“ To view reality as a riddle that is put to us is to question statements like Fritz Stern‘s, which I quoted in beginning, and with them the picture of Einstein as far from reality. Such statements assume that we know what reality is: what certain and what is not, what can be known and what can only be dreamt or intuited, what is given to us from objects outside us and what we contribute to their structure, what can be confirmed by experience and what calls experience into question. To view reality as a riddle that is put to us is to ask all these questions, and more. Kant‘s major reason for doing so was to call attention to the difference between the way the world is and the way the world should be. The first is the object of science, the second is a matter of ethics, and we confuse them at our peril. Those whose only reality is what we experience leave no room for experience to be changed by ideals of justice and progress that challenge the authority of experience itself. Yet those whose lives are guided by ideals without regard to experience are in danger of becoming merely utopian, or even totalitarian. Both in science and in ethics Einstein was aware of the risks of tradition-bound empiricism as well as of foolish idealism. More than anything else he was a Kantian idealist: with a commitment to maintaining ideals that are not derived from experience but that shape it. While maintaining a clear-eyed view of the way the world is, he never forgot the way it should be – and always acted according to the latter. Did this make him unrealistic? Telling someone to be more realistic is a way to say: decrease your expectations of the world. Einstein never did.


      Morally and ethically speaking, it would not be possible to get any further from your description of the MMTers than Einstein was, as Neiman goes on to explain:

      Yet his essay “Why Socialism“ – written in 1949, hardly an opportune time, goes so far as to say that “the economic anarchy of capitalist society as it exists today is the real source of evil“. Socialism, for him, is the reasonable response to a crisis of value: he thought the present sense a result of the lack of connections between individual and society. That break itself is furthered by the fact that the media are so thoroughly controlled by economic interests that individual citizens cannot use the political rights they have, while fear of unemployment makes them docile and tame… What‘s unusual in Einstein‘s arguments are first, his unequivocal rejection of Soviet-style communism: “No purpose is so high that unworthy methods in achieving it can be justified.“ Equally unStalinist was his claim that socialism can never be scientific. Einstein‘s socialism was a moral commitment, the only one he thought could give life meaning.

      Einstein’s socialist leanings probably go a long way in explaining why the MSM and the academe did a hit job on him, portraying him as a “Luftmensch,” a “bumbling professor with a German accent” (Time Magazine), an “eternal child” and a “sad fool” (Die Zeit), “childlike” and “wholly without sophistication” (J. Robert Oppenheimer), “innocent” (Isaiah Berlin), and “well-meant in the ususal sense, but lacking a certain closeness to reality” (Fritz Stern).

  15. Conscience of a Conservative

    MMT is a very useful theory. It explains much. Unfortunately it ownly works as a theory until it doesn’t.

  16. financial matters

    I like this description of MMT “the whole point of analyzing and clarifying the monetary system is to help people see through the glare of the economy’s glittering monetary surface to the social and economic fundamentals that operate below that surface”

    “The monetary system is best seen as a public utility that is employed by its users to finance the production and exchange of goods and services.”

    Simply trying to understand the concept of money and how it can be most productively used by a society..

    “Thus there can be no such thing as an economic limit due solely to our society as a whole being “out of money”. That’s like saying we can’t organize better schools, or write more and better books because we have run out of words.”

    It’s useful to fully understand some of the basic financial underpinnings before framing it into a more political platform..

    1. Dan Kervick

      Thanks financial matters. What I was mainly trying to get at in the essay, which you zeroed in on here, is the criticism of MMT that accuses it of confusing the government’s ability to manufacture money out of thin air with the ability to manufacture wealth out of thin air. The former power is only a tool that can useful for spurring real wealth generation.

      1. joebhed

        Thanks for much in the dialogue here.
        Reading this particular point emphasizes to me that you NEED to read through Soddy’s “The Role of Money” to make the identity of its ‘distributive’ role the foundation for achieving MMTs objectives.
        This can only be achieved by moving MMT’s mark from its ‘unit-of-account’ function to its ‘means-of-exchange’ function.
        Sorry, but accounting is tertiary to people’s relationship with our circulating media, and MMT puts it at the top, in a somewhat Hamiltonian way.
        Absent that foundational “distribution-exchange’ underpinning, MMT can never be the vehicle for social change that it purports as its aspiration.

        For the Money System Common

    2. From Mexico

      There are three leading schools of economists trying to halt the Austerian blitkreig and its Neoclassical and Austrian Panzers. The Allied defenders include the MMTers (like Kervick), the Post Keynesians (like Krugman and Steve Keen) and the Classicists (like Michael Hudson, who Keen describes as a classical economist with Marxist orientation).

      There’s a great deal of internicine sparring that goes on between the Allies, like the recent knock-down drag-out between Keen and Krugman. I learned a great deal from that embroglio.

      However, I think one must keep in mind that other schools within the Allied coalition are not the real enemy.

      1. financial matters

        I tend to see Keen, Hudson and Kervick as strong allies with basic things in common such as being strongly with the 99% and wanting our money to be used productively as opposed to bailing out the FIRE sector.

        Krugman I find quite a bit more labile.

        1. From Mexico

          And that may have been Keen’s point, to demonstrate that Krugman is more Neoclassical than Post Keynesian, sort of a Neoclassical in Post Keynesian drag.

          But historically, hasn’t that been the role of the NY Times and its writers, to pull a King Leopold in the heat of battle?

    3. Carla

      “The monetary system is best seen as a public utility that is employed by its users to finance the production and exchange of goods and services.”

      If the above statement by Dan Kervik were true, we wouldn’t even be having this discussion.

      I suggest that this might be more accurate: “In a democratic society, the monetary system would function as a public utility…” etc.

      It seems to me that as things stand, the monetary system is simply a tool of the powerful few that they use to bludgeon the rest of the population. Here (in the U.S.), there (in Spain, Ireland and Greece) and EVERYWHERE.

  17. psychohistorian

    Lots of smoke and not much light here…….unfortunately.

    Yes, I am throwing rocks and admitting I can’t do better at the moment. But that is not going to stop me from complaining about the level of discourse. We need better to move us from where we are.

    Maybe a start with private ownership of property, uncontrolled ongoing accumulation of such and uncontrolled inheritance that over the centuries has given us the global inherited rich that run the show.

    IMO, if we can’t end the control of the global inherited rich by ending ongoing inheritance and accumulation of property we will go nowhere.

    1. skippy

      Feeling up to taking Natural law on?

      According to Adam Smith, the expectation of profit from “improving one’s stock of capital” rests on private property rights. It is an assumption central to capitalism that property rights encourage their holders to develop the property, generate wealth, and efficiently allocate resources based on the operation of markets. From this has evolved the modern conception of property as a right enforced by positive law, in the expectation that this will produce more wealth and better standards of living. However, Smith also expressed a very critical view on the effects of property laws on inequality:
      “Wherever there is great property, there is great inequality … Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.”[7] (Adam Smith, Wealth of Nations)
      In his text The Common Law, Oliver Wendell Holmes describes property as having two fundamental aspects. The first is possession, which can be defined as control over a resource based on the practical inability of another to contradict the ends of the possessor. The second is title, which is the expectation that others will recognize rights to control resource, even when it is not in possession. He elaborates the differences between these two concepts, and proposes a history of how they came to be attached to persons, as opposed to families or entities such as the church.
      Classical liberals subscribe to the labor theory of property. They hold that you own your own life, and it follows that you must own the products of that life, and that those products can be traded in free exchange with others.
      “Every man has a property in his own person. This nobody has a right to, but himself.” (John Locke, Second Treatise on Civil Government)
      “The reason why men enter into society is the preservation of their property.” (John Locke, Second Treatise on Civil Government)
      “Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.” (Frédéric Bastiat, The Law)
      Socialism’s fundamental principles are centered on a critique of this concept, stating, among other things, that the cost of defending property is higher than the returns from private property ownership, and that, even when property rights encourage their holders to develop their property or generate wealth, they do so only for their own benefit, which may not coincide with benefit to other people or to society at large.
      Libertarian socialism generally accepts property rights, but with a short abandonment period. In other words, a person must make (more or less) continuous use of the item or else lose ownership rights. This is usually referred to as “possession property” or “usufruct”. Thus, in this usufruct system, absentee ownership is illegitimate and workers own the machines or other equipment that they work with.
      Communism argues that only collective ownership of the means of production through a polity (though not necessarily a state) will assure the minimization of unequal or unjust outcomes and the maximization of benefits, and that therefore private ownership of capital should be abolished.
      Both communism and some kinds of socialism have also upheld the notion that private ownership of capital is inherently illegitimate. This argument centers mainly on the idea that private ownership of capital always benefits one class over another, giving rise to domination through the use of this privately owned capital. Communists are not opposed to personal property that is “hard-won, self-acquired, self-earned” (Communist Manifesto) by members of the proletariat. Both socialism and communism are careful to make the distinction between private ownership of capital (land, factories, resources, etc…) and private property (homes, material objects, and so forth).


      then see:

      Though philosophically conservative, Declarationists such as Jaffa have been outspoken critics of originalist construction jurists including Robert Bork, Antonin Scalia, and William Rehnquist, likening them to legal positivists. Bork and legal scholar Lino Graglia have, in turn, critiqued the Declarationist position, retorting that it is single-mindedly obsessive over the Dred Scott decision and resembles a theology rather than a legal doctrine.


      Skippy… If the State is a vassalage of Law, where does the Law come from… in the first place… eh.

      1. Aquifer

        I suspect that version of “Natural Law” is not one that would hold water (or anything else) for indigenous folk ….

        The “labor theory of value” – by which one owns that which one labors on – another mechanism for land theft from folks who had not “improved” the land … hey, if i cut down the trees and planted crops i have “improved the land” and have a greater “natural” claim to it than the poor schmucks who just happen to have lived and roamed and hunted on it for generations …

        And then there is that wonderful “right of discovery” which endowed ownership – “”And now i claim it for Queen Bess and let us hope my name she’ll bless’ – Amazed the Indians watched in pairs, they’d always thought the land was theirs”

        As i learned in Property 101 – Property is what the law says it is …

        So what laws shall we make …

        1. Aquifer

          Perhaps I should have said a “labor theory of property” – but I think you know what i mean …

        2. charles 2

          The “poor schmucks” were not really angels. Steven Pinker puts homicide at 15% of the cause of all death in hunter gatherers societies. There is a reason why property based societies thrive since this “social technology” was discovered.

          1. Aquifer

            Ah yes – so with the “profits” from our endeavors we can research, finance and build things that wipe out whole cities at a time and some of the vast wastelands that are the “improvements” we have made in the landscape can be seen from space ….

            The Egyptians built the pyramids and we strip the forests and denude the land, but it is all good because we are “improving” our “property” …

          2. Carla

            “Steven Pinker puts homicide at 15% of the cause of all death in hunter gatherers societies.”

            I believe Steven Pinker’s claims can, and have been, challenged.

          3. LifelongLib

            Recent discoveries suggest that Native Americans actually “labored on the land” much more than had previously been thought. Much of the “pristine nature” the European settlers encountered was actually the result of centuries of work by its earlier inhabitants, most of whom were killed by introduced diseases long before the settlers arrived. And many Native American agricultural methods were (and are) so different from European ones that they were not recognized by Europeans as agriculture.

          4. skippy

            Deaths in wars in the 20th Century – Milton Leitenburg

            Cornell University


            The Hobsbawm numbers are aghast, there is little chance of ever doing any real data sets, impossible to capture the breath and scope. Yet it was all about property and ownership, not promoting – well being – for any living thing. Just further consolidation of Natural Capital (to include humans)… by any ideological means… necessary, by and for… a select few.

            Skippy… “the hunter gatherers societies”… Charles 2 – where did that come from. We can’t go back, whats the point, knee jerk? Lets see if these laws can keep up with the environmental changes on the event horizon and the increasing compression of events… eh. If history is any lesson, it will be totalitarianism solution by the biggest owners of Capital dressed up for species survival. The fittest must live… so the unfit… may survive… service them.

  18. mlopes

    Error below, please change:

    “Thus, a combination of tax changes and government spending changes will tend to increase government spending if it increases the government deficit”

    should be changed to:

    “Thus, a combination of tax changes and government spending changes will tend to increase total spending if it increases the government deficit”

  19. Roland

    “But the critics will go on to charge that MMT mistakenly concludes from these few institutional and operational facts that there are no economic limits to the wealth-generating capacities of the government.”

    That would not be my main criticism of MMT.

    Rather, my problem with MMT is that the use of fiat makes it too easy for a regime to pursue its policies without sufficient accountability to those who will eventually have to pay the price. Such a regime would also suffer from too much misallocation of resources.

    That problem is not unique to MMT. It’s also a problem with most fiat currencies–especially with the fiat currencies issued by great powers.

    This is also a well-known problem with regimes which do not depend on wide taxation of the public to obtain their revenue, e.g. governments which enjoy large resource rents such as the Middle Eastern despotisms.

    Now it might be objected that MMT involves no borrowing. But MMT does aggressively speculate against future inflation. It’s a sort of virtual borrowing by the mass of the public, with a highly variable interest rate, and with the biggest debtors chosen almost randomly. The public, in aggregate, is never in debt, but nevertheless various sections of that public will probably get walloped by inflation.

    That’s assuming that the government doesn’t simply lie about the inflation to begin with. There is a real accountability problem, since the government doing the spending is also the one that measures the inflation.

    How could those most affected by MMT-generated inflation in certain sectors or regions be assured that the fiscal system would adjust itself quickly or smoothly enough to make them whole?

    A government earnestly committed to its programme, even if undesirable inflationary consequences were found out, would likely respond with rhetoric over how a given bout of inflation was “temporary,” or “inevitable,” or “necessary,” or perhaps even “deserved”–that is to say, typical elite rhetoric.

  20. Calgacus

    Roland: Rather, my problem with MMT is that the use of fiat makes it too easy for a regime to pursue its policies without sufficient accountability to those who will eventually have to pay the price. Such a regime would also suffer from too much misallocation of resources.

    Well, we already have an MMT system. Sure, it has all the problems you cite, but the point is understanding the system, what we are doing right now. The major point of MMT is to simultaneously attain full employment, which should naturally maximize growth AND to minimize inflation.

    Because we operate our MMT system by idiotic, incoherent superstitions propagated by the morons brainwashing victims at the “better universities” by faking mathematics they don’t understand, we manage to destroy fantastic quantities of real wealth, blight & end enormous numbers of lives – the life expectancies of the lesser people in the USA are starting to decline!

    The right way to look at the last 40 odd years of US economic history – the worst economic record in any similar period in US history – is that it is a spectacular negative achievement to have grown so little, so inequitably, so inefficiently, so stupidly. Took a lot of work and wealth destruction to have so much inflation. And we still did better in some respects than Europe!

    The comments on MMT inflation are unrecognizable. If by MMT you mean, as so many unfortunately do, “printing money”, ZIRP, then the evidence, such as it is, is that this is less inflationary than printing bonds. Look at Japan: years and years of ZIRP, still fighting deflation, not inflation.

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