Bill Black: The Day Orthodox Economists Lost Their Minds and Integrity (#MMT)

Yves here. I’m behind reposting Bill Black’s series debunking the barrage of intellectually dishonest attacks being launched against MMT. I’m skipping over his fourth piece, Four “Tells” That Show Krugman Knows He Cannot Win an Honest Debate, but urge you to read it as well.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Originally published at New Economic Perspectives

Fifth Article in a Series on MMT

Something extraordinary happened yesterday.  Orthodox economists, frustrated by their inability to intimidate progressive elected officials, have launched a coordinated assault on MMT in hopes of making it politically dangerous for elected officials to embrace MMT.  Yesterday brought three remarkable revelations about orthodox economists’ willingness to engage in naked intellectual dishonesty in their desperation to find something to discredit MMT.

The orthodox economic attack on MMT should be a ‘slam dunk’ – if orthodox economists were correct about MMT.  There are two obvious ways to deliver the ‘slam dunk.’  First, orthodox economists preach that a theory’s predictive ability is the test of its validity.  MMT scholars have been making predictions for decades, so orthodox economists should be able to produce a large number of falsified predictions by MMT scholars and declare victory.  There is only one problem with this option – MMT scholars have an exceptionally fine predictive record and orthodox macro scholars have such a terrible predictive record that prominent economists deride “modern macro” as the “dark ages” (Paul Krugman) and a religion unsuccessfully posing as a pseudo-science (Paul Romer).  .

The second way orthodox economists could ‘slam dunk’ on MMT scholars would be by quoting them (not contrary to context) and then presenting objective evidence or logic proving that the MMT scholars’ quoted statements were indisputably false.  If, as the orthodox economists repeatedly assert, MMT positions are ludicrous, then this ‘slam dunk’ should not require orthodox economists to even work up a sweat.  Orthodox economists religiously fail to cite and quote MMT scholars.

Actually, I have been hiding the ball on you.  As a white-collar criminologist, I study the third ‘slam dunk’ strategy – the strategy orthodox economists actually use to discredit MMT – fraud.  As white-collar criminologists, we emphasize that “accounting control fraud” is a “sure thing.”  A strawman argument is a fraudulent debate tactic that becomes a sure thing if you get to be prosecutor, judge, and jury.  The orthodox ‘scholars’ have found it impossible to quote MMT scholars writing something that is demonstrably false.  It is child’s play (a ‘sure thing’), however, for an orthodox economist to create a strawman claim that is obviously, demonstrably false.  The orthodox economist crafts the strawman to be demonstrably and obviously false.  The orthodox ‘scholar’ then fraudulently claims that the strawman represents MMT scholars’ position.

The obvious needs to be stated.  Creating a strawman is intellectually dishonest, unethical, and represent a “revealed preference” – it reveals that orthodox scholars know they cannot win an honest debate.  If the facts and your predictive successes support your orthodox theory, you have no need to create and ascribe strawman arguments to smear rival scholars and theories.

Yesterday, dozens of orthodox economists, many of them prominent, collectively lost their minds and their integrity.  They coordinated their actions to create a show trial that would have warmed Stalin’s spleen.  The show trial purported to judge the validity of MMT.  The sole ‘evidence’ allowed in the show trial consisted of two strawman claims written by orthodox ‘scholars,’ but falsely ascribed to MMT.  MMT scholars do not simply not make the two strawman claims – MMT scholars say the opposite of the strawman claims.  These are not new strawman claims, they are identical to the false claims Krugman has been making for eight years.  In plain English, a show trial of orthodox economists proclaimed MMT false based on the ‘prosecutors’ crafting two statements the prosecutors falsely claimed represented MMT theory, even though MMT scholars have repeatedly written the opposite.  Further, MMT scholars have been refuting the strawman arguments the ‘prosecutors’ drafted – for at least eight years.

Orthodox economists conducted a show trial to pronounce MMT guilty for being correct.  The irony is that the show trial proved MMT scholars’ actual views correct.  Every orthodox ‘judge’ that voted on the strawman claims agreed with MMT scholars that the claims were false.

The “Initiative on Global Markets” (IGM) reported the results of its show trial on March 13, 2019 – the day orthodox economists lost their minds and abandoned even the fig leaf of integrity.


Question A: Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt.

Question B: Countries that borrow in their own currency can finance as much real government spending as they want by creating money.

MMT scholars do not make or support either claim (see articles 2 & 3 in this series) – so how did IGM manage to create two strawman claims, falsely ascribe them to “Modern Monetary Theory,” and report this show trial to the world as a universal condemnation om MMT by their panel of orthodox economists?

MMT scholars, for decades, have been explaining when, how, and why deficits can matter.  For at least eight years, MMT scholars have been repeatedly refuting Krugman repeatedly advancing this false strawman argument.  Whoever drafted these questions knew that they did not represent the position of MMT scholars and that MMT scholars disagree with both of the strawman questions.

The show trial represents a natural experiment of the competence and intellectual honesty of orthodox economists.  The results of that natural experiment are spectacular – a large group of the world’s prominent economists failed the test of honesty and competence even though the test set such a low bar that they should have passed it without discernible effort.  As always, show trials demonstrate conclusively the lack of morality and integrity of the ‘judges.’  Not a single member of the ‘judges’ in the show trial passed the twin tests of competence and integrity.  They disgraced themselves and our discipline.

The form the IGM economist panel uses has a space for comments and a number of the panelists wrote comments.  Not a single panelist wrote a comment objecting to the strawman questions falsely attributed to MMT scholars that made a mockery of the purported ‘process.’  Not a single panelist blew the whistle on this shameful show trial.  There are two possible reasons: one bad, the other awful.  It would be bad; and revealing, that not a single prominent economist on the panel knew enough about MMT to know that the questions were vile strawman claims.  It would be awful; and revealing, if any of the panelists knew enough about MMT to know that the questions were strawmen – but still participated in the show trial and failed to blow the whistle on this scandal.

If no one on the ‘expert’ panel had even the tiniest exposure to the MMT scholarly literature required to spot the use of strawman questions to ensure that the panel discredited MMT, much less expertise in evaluating MMT, then IGM has to fix its system.  It also needs to apologize to MMT scholars, elected officials, and the public.  IGM must promptly withdraw formally their ‘verdict’ in their show trial.

Consider how IGM would have operated if it actually wanted to report the informed views of orthodox experts on heterodox theory instead of conduct a show trial.  IGM would use questions drafted by the heterodox scholars that would accurately reflect the heterodox scholars’ theories.  IGM would ask the heterodox scholars to provide an executive summary of key MMT principles.  IGM would require its panelists to read enough of the scholarly MMT literature to make an informed judgment.  Far better, however, would be to create an ongoing, collegial dialog among orthodox and heterodox scholars rather than these mock rulings by panels composed exclusively of orthodox scholars.

We are now running another natural experiment – how many of the orthodox ‘judges’ will admit their failures, apologize, and act to reduce the harm they caused?  I write this article as an addendum to that natural experiment.

I urge the orthodox economists who disgraced themselves by aiding this show trial to seek redemption.  Perhaps you were simply conned by the people who created the strawman questions.  For that to be true, you must be exceptionally unaware of MMT – and willing to condemn it without doing any work.  Apologize, but do not stop there.  You should be enraged at those who made you complicit in this disgrace.  Find out who created the strawman questions and who suggested the show trial and blow the whistle on their frauds.  In your joint, open letter of apology, each of you should identify how many published articles or books by MMT scholars you read prior to condemning MMT.  The next week will test your integrity and your zeal to restore it.

I urge journalists to ask each of the ‘judges’ to identify how many MMT scholars’ works they had read.  My prediction is that the cumulatively, the ‘judges’ in this shameful show trial had read fewer than five works by MMT scholars.

Journalists should also ask every ‘judge’ in the show trial to cite and quote the work of at least one MMT scholar making the statements ascribed to us by twin the strawman questions.  I predict that none of them will be able to do so.

Ignorance, of course, is not remotely a defense.  If you have never read any of the scholarly MMT literature and someone asks you to be a ‘judge’ in a show trial obviously created to condemn MMT, you have an ethical duty to refuse and to try your best to prevent the show trial from disgracing our field.

While I always hope for redemption, my prediction is that most of the ‘judges’ that disgraced themselves and our discipline are proud of their role in the show trial.  I believe they will claim they did a great service to the country by smearing MMT through fraudulent strawman claims. Orthodox economists are already citing the show trial ‘verdict’ as proof that MMT is false.  Justin Wolfers, who often writes in the New York Times, tweeted his glee at the results of the disgraceful show trial.  He described it as “evidence” (in a show trial designed to ensure that the ‘judges’ had zero evidence, and instead was based entirely on two fraudulent strawman statements).  He then claimed that the “only real debate” was between the ‘judges’ that “disagreed” with the faux MMT strawman and the ‘judges’ that “strongly disagreed.”

Wolfers’ dishonesty spurred Paul Krugman to tweet a level of calculated dishonesty that exceeds the term “disgraceful.”

Prediction: MMTers will say this doesn’t fairly represent their views. Why? Because they say that about *any* attempt to represent their views clearly. MMT is an attitude, not a model; try to pin it down and they will move the goalposts.

Krugman has been working in his columns and tweets for the last two weeks trying to perfect the wording of this bit of cynical dishonesty.  It is such a brazen lie that I dubbed it Krugman’s chutzpah.  It is a Catch-22 – if MMT scholars ‘admit’ that Krugman’s dishonest strawman claims he falsely ascribes to MMT scholars are correct, we are admitting our theories are bunk.  If we point out that Krugman, again, is falsely ascribing a dishonest strawman claim to us, then Krugman declares this act proves we are not scholars and have no theories.  Whatever we do, in response to his lies Krugman defines us as the loser.  He will now claim that the show trial, which used his strawman claims, proves he was correct.

For years (see articles 3 & 4 in this series), we were willing to ascribe Krugman’s strawman arguments to his ignorance of MMT.   We repeatedly explained not only the falsity of his strawman claims – which in every case he ascribed to MMT scholars without ever providing a citation or quotation – but also our actual views.  It has been clear for at least six years, however, that Krugman is deliberately deceiving his readers.  We know this because he keeps ascribing falsely to us the same strawman arguments that we have repeatedly explained to him are false.  The show trial used the identical strawman claims that we are on record consistently refuting.  Krugman ascribes to us in these twin strawman claims views that are the opposite of MMT precepts.  MMT explains that deficits can matter and goes on to explain when, how, and why the can matter.  Krugman, and the orthodox show trial, repeatedly, without citation or quotation and ignoring our refutations, simply lie and say that MMT purports that deficits never matter.

We also know that Krugman is lying rather than ignorant because he slipped up in a March 26, 2011 column – nearly eight years ago – and admitted that he knew that MMT explained that deficits can matter a great deal if they cause a shortage of real resources.

As I understand the MMT position, it is that the only thing we need to consider is whether the deficit creates excess demand to such an extent to be inflationary. The perceived future solvency of the government is not an issue.

We enjoy that Krugman column because it documents another predictive success of MMT compared to Krugman’s analysis.

Krugman knew that his “prediction” that we would respond to the show trial by stating that the positions ascribed to MMT scholars in that ‘trial’ were strawman falsehoods that we have repeatedly exposed as lies for over a decade had a 100 percent chance of proving accurate.  He has seen us rebut the same lie many times when he advanced the identical strawman falsehood repeatedly for nearly a decade.  Any reputable scholar would respond to a strawman argument by pointing out that it was a strawman.  A strawman argument is a classic logic failure.

Krugman has redefined chutzpah by claiming that if he lies repeatedly about his opponents’ argument by repeatedly advancing a strawman claim, and his opponents repeatedly refute his lie, his opponents have wronged him and he has won the debate.  Every aspect of Krugman’s chutzpah is logically false, dishonest, immoral, and wackiness of epic proportions.  As a criminologist, I emphasize an important research finding.  The fraudsters’ key to success is typically audacity, not genius.  Krugman’s audacity is breath taking.  As a criminologist, I particularly love the audacity of making a “predict[ion]” he knows is certain to come true – MMT scholars will refute the lies and strawman questions that the orthodox economists who staged the show trial used to declare MMT scholars ‘guilty’ of claiming things are true that MMT scholars actual teach are untrue.  Krugman will then claim his predictive success demonstrates his skills and the perfidy of MMT scholars

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  1. Sound of the Suburbs

    How did a ridiculous ideology based on flawed, 1920’s neoclassical economics come to be seen as the ideal for globalisation.

    They had to use every trick in the book.

    Even after its almost total failure in 2008, it’s still with us almost unchanged and MMT represents change they don’t want.

    It wouldn’t be so bad, but the economics still has all its old problems.

    What is the problem with neoclassical economics?

    The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.

    1) It doesn’t look at private debt
    2) It makes you think inflating asset prices is creating real wealth

    Bank credit flows into asset price inflation until you hit the Minsky Moment.

    Neoclassical economics has still got the same old problems it’s always had.

    1929 and 2008 look so similar because they are; it’s the same economics and thinking.

    1929 – Inflating the US stock market with debt (margin lending)
    2008 – Inflating the US real estate market with debt (mortgage lending)

    Bankers inflating asset prices with the money they create from loans.

    1. RBHoughton

      Positive Money, the UCL team trying to clean-up the monetary system in UK, has been promoting MMT for a few years and quite recently opened to allow full debate. I sincerely hope Naked Capitalism and other like-minded sites will collaborate in persuading profit-at-any-cost economists to consider the future of our civilisation and the best interests of us all.

  2. skippy

    Here’s a response I got from someone that claims they are a Keynesian – Tobin sort after posting both NC’s – mmt-responds-brad-delongs-challenge and B. Blacks last post.

    “How is a job guarantee not aggregate demand management?
    If the government is buying up excess labour it is stimulating demand.
    Unless MMTers are proposing the government only acts as a Dutch auctioneer selling the unemployed to the lowest private sector bidder. Which wouldn’t be surprising given their Friedmanite common ground – eg. tax demonisation.”

    That’s right kiddies MMT and blogs like NC which support MMT are now on par with the Chicago School Boys …. gets better ….

    “Why can’t MMT produce a spreadsheet? Oh yeah because then the world could clearly see whether their argument is correct. Rather than hiding behind arcane language and riddles.

    I mean unclear expression is always the first indication that the author has no confidence in their own arguments. Ambiguity and prolixity is always a deliberate, gutless, pre-emptive exit strategy.”

    Do I even need to go there – here at NC – with the excel = reality and just a hint of bad maths and physics [cough – neoclassical] is how truth is revealed – !!!!!!!

    Then again some are known for intellectual perfidy …. seems a common trend at the moment.

    PS did I mention this same person has no dramas with “lender of last resort” ….

    1. jsn

      This is further evidence of the care with which the Times maintains the Bernaysian “narrative”. In the same way they started putting the lead on the fold about 15 years ago in order to make sure readers were blinded to Times’ slant by the frame that preceded it, Krugman, and the economists Black is rebutting, have identified the point of complexity at which perception has to shift from what Khneman calls “fast” to “slow” thinking.

      Question A: Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt.

      By eliding over solvency and resource constraints with “deficits”, the question is designed to conceal the false priority given “deficits” by mainstream economists over real resource and solvency issues that are central to MMT.

      Question B: Countries that borrow in their own currency can finance as much real government spending as they want by creating money.

      Again compressing the realities of resource mobilization and availability into “finance” they are deliberately obscuring the relationship between money/spending and real resource mobilization, again the key to MMT.

      In both instances they are using the language heuristic to eviscerate the understanding of causality in real material relationships abstracting out the real, leaving only the representational side of the claim.

      It’s a pretty clever propagandistic jujitsu. It seems to summarize MMT, to the lay reader, while gutting it in the process.

      1. skippy

        I’m fond of Philip Pilkington: Economists – An Anthropological View NC post back in the day.

        “The point is that much of cultural organisation is arbitrary. It often serves no real purpose. Evolutionary psychologists might tell you otherwise, but they are just modern day myth-makers telling stories that try to give us meaning and, ultimately, justify certain cultural patterns that we hold dear by appealing to the narrative structure of evolutionary biology and imposing it on cultural development metaphorically much in the same way as marginalist economics transferred metaphors from physics to the social sciences. Levi-Strauss introduced the idea of the ‘bricoleur’ as the person who engages in such constructions.”

        Its in the concept of orthodox economists during the neoliberal period w/ a side of Philip Mirowski’s observations that I find the term bricoleur useful e.g. pretty much anyone named in Wray’s or Blacks posts coming out of the wood work as a united front against MMT. I also have to note the dialectal similarities to engaging various Austrian camps back in the day e.g. the IS-LM model is reminiscent of the action axiom i.e. mic drop and walk away victorious.

        Not to mention Keynes and his contemporaries were quite vocal about their views on econometrics full stop. Some seem to think today one can take neoclassical axioms and bolt on a few Keynesian views reduced to some model and call in neo – new improved neoclassical … cough Keynesian economics.

  3. Mike Barry

    Much of the resistance to MMT may stem from its name – Modern Monetary Theory. As I understand it, MMT isn’t really theory at all, it’s a historical review/explanation of money and the economy. A name like Modern Money Workngs or Modern Money Basics might shoot down the opposition.

    1. KLG

      I get “Evolution is just a theory” all the time. Yes. Just like gravity, relativity, continental drift, cell theory, quantum theory, anthropogenic global warming. Now, if my interlocutors said “String Theory is just a theory,” I might nod in agreement ;-) But illiteracy can’t be cured by dumbing down the terminology. Classical economics and its offshoots are more phrenology-with-math than anything else. Alas. Conventional economists are the stupid person’s idea of what a smart person sounds like. Including Krugman.

      1. lyman alpha blob

        String theory is not just a theory – otherwise how could Obama have played all that 11 dimensional chess?

    2. Samuel Conner

      But they don’t do that with “the Theory of Relativity”, or “quantum theory”, which are just about as settled facts (granting that more fundamental explanations are still being sought) as one can imagine.

      I wonder whether, decades from now, when truth has won in this debate (as I am confident it ultimately will) those who remain among the present VSPs who embarrassed themselves while hindering progress will be able to live with themselves.

  4. Tinky

    Much of the opposition to MMT is rooted in a very reasonable skepticism that those in power might ever be expected to execute it both wisely and fairly. And given what we have witnessed over the past decade, I frankly don’t see how such skepticism can be easily dismissed.

    Arguing that MMT is simply a description of “how many works” won’t cut it, either, at least for most.

    1. eg

      So how exactly is an inaccurate representation of the operations of fiat currency supposed to help “those in power execute it both wisely and fairly”?

      The objection fails upon cursory examination.

      1. anon y'mouse

        the statement fails because it assumes that MMT needs to be “executed”, which implies that it is not being so now.

        but, it is not some program that will be enacted. it is a representation of what we are already doing now. we just do it for the MIC and the banking sector and the oil and car companies, instead of for the people.

        there is a real blockage that we are “doing” MMT now because of the lumping in with policy proposals like Med4All, Green New Deal. of course, we know that this is an answer to “how do you pay for it?” we know that MMTists are saying “you pay for it like you pay for things now, because this is what we do now already.”

        the people who have been “schooled” to standard think that we MUST raise taxes or obtain loans to spend. they cycle their thinking right back into the old mode. they do not understand that these constraints are self-generated and customary, and not necessary parts of the equation. they do not understand that the government is not, on some level, like a household or a business entity. they assume “primordial” money (my term for money that is just out there, existing in a way that we all have to try to grab onto some, including the government, in whatever way we best can). they do not recognize that the government is the currency generator.

        it is an eternal problem. MMT should have been separate from the policy proposals (i know the economists think those proposals are integral). it creates the problem of trying to clear too many hurdles at once, and to people schooled to the standard view, makes MMT look like a child’s explanation of why and how their strapped parents can afford to buy them a pony.

        look at how this “advice” is portraying it: <a href=";

        that is how almost every american is going to see it. not just because those in power WANT them to see it this way, but because it gibes with what they already know to be true about THEMSELVES (and their businesses/bosses).

        perhaps the program should have been to torture the political propositions that come out with a demand that they explain where they “get” the money that funds the MIC from, or how they will “repair the hole” left by the rich tax dodge they just put through. and yet, Bernie and his ilk basically just answer with MORE standard econospeak: “we will raise taxes and increase the SSI cap and make the rich pay their FAIR share!”

        MMT is not getting backing even from the politicians that actually DO know it, at least rhetorically.

        1. ChristopherJ

          Good response, Anon

          I agree, we appear so sure of MMT and opponents continue to make us look dumb. Look, it’s already happening, we say. Yet our MMT arguments, however elegant, do not cut through centuries of governments ‘re-spending’ the taxes they collect. S’way everybody does it, no?

          ie, if MMT is the cure to neo liberalism, why hasn’t one country done it?

          The academic economists that answered that survey know that their continued employment and membership of their club depends on them supporting the lies about MMT.

          Sadly, such pronouncements continue to be persuasive arguments that deceive the masses and continue to provide fig leaf cover for the misery we must endure

          The pony analogy is apt. thanks

    2. Grant

      “Much of the opposition to MMT is rooted in a very reasonable skepticism that those in power might ever be expected to execute it both wisely and fairly”

      Another comment that makes it seem as if we don’t already do what MMT is describing. It isn’t something we could try, it is something we do. It is true that the government could use its spending power to do bad things, good things, and things in between. That is why elections matter, it matters who you give power to. This also impacts what we do in response to the environmental crisis, how good of a healthcare system we have, etc.

      “Arguing that MMT is simply a description of “how many works” won’t cut it, either, at least for most.”

      I don’t understand what this claim means. Does it mean that the people in this debate that use ISLM models, loanable funds and the like don’t agree with MMT for sound reasons that are based in objective reality? Are you talking about people that agree with a lot of what MMT economists say but disagree on particulars? Or, do you agree with the editor of the Financial Times, who said that fantasy is preferred over reality because acknowledging reality could lead to bad things happening? Neoclassical economists have ways of analyzing “how things work”. The problem, of course, is that their models have no basis in reality. Please, someone that wants to critique MMT, read the literature and come up with thoughtful critiques that are not funneled through some reality-less neoclassical model.

      1. Tinky

        Yes, it is something that we do now, and it is failing badly due to the policy choices of captured politicians, etc. And you imagine that those crucial problems are remotely likely to be changed through elections, at least as they are currently practiced in the U.S.?

        As far as “How money works” goes, what it means is that even those who may be persuaded of MMTs potential are likely, and again quite reasonably, to wonder how it might realistically be employed in such a way that broader society would receive the lion’s share of the benefits, rather than Big Money interests and a small group of people who do its bidding.

        1. Grant

          “And you imagine that those crucial problems are remotely likely to be changed through elections, at least as they are currently practiced in the U.S.?”

          Who knows, but we need structural changes and I have long been involved in activism. Won’t happen unless we try. We didn’t get Social Security, Medicare, the 40 hour work week, the weekend, safe working conditions, women didn’t get the right to vote, marriage equality, or environmental protection by sitting on the sidelines and waiting for some superhero to put those changes in place. Canada didn’t get Medicare, the UK the NHS systems by that either. But what does that have to do with the insights of MMT? I have a background in ecological economics. MMT doesn’t talk about that either, because MMT doesn’t touch on every part of the economic system. If it describes particular things as they are, which it seems to do well, then what is the point of saying that what it describes is sometimes used for bad things? I mean, in our country’s history we have used the government to spend money on building bridges, the TVA, national parks, NASA, public schools, Medicare, and many of our major technologies in recent decades have come out of the state/military sector. We have also spent money to enslave other human beings, start wars, steal land, to foment coups in other countries, the drug war, among other things.

          “those who may be persuaded of MMTs potential are likely, and again quite reasonably, to wonder how it might realistically be employed in such a way that broader society would receive the lion’s share of the benefits, rather than Big Money interests and a small group of people who do its bidding”

          Once again, what does this have to do with MMT? It is a political economic question. If the state doesn’t have a role in spending on things we need, and if private interests will not because they are not profitable and because the benefits are not captured in markets (hello environmental crisis), what do you propose? Whether we spend money on more war or to benefit Wall Street versus working people will be determined by our activism, who we elect and what we force those in power to do. If you want examples of how money can be spent for a collective good, there are endless examples here in the US, in other developed countries. Again, why look to MMT for these things? All MMT will tell you is that if there is idle productive capacity, if more workers can be hired to make more things or to provide more needed services, if the money doesn’t go to parts of the economy where it just sits there doing nothing, then state spending could result in more stuff being produced, more services provided, a cleaner environment and more jobs. Given the environmental crisis, the decades long grinding stagnation in this country for most and our crumbling infrastructure, what is the argument against public spending at this point? Is your argument that because powerful interests could use the power of state spending to do bad things that we shouldn’t use it to do good things?

          I would just like to point out that nothing you are saying is a critique of MMT. I hope you realize that.

          1. Tinky

            I am criticizing some of those who are promoting it, as it is of dubious value as currently employed, and I see no compelling, dovetailed arguments as to how it might realistically be employed more equitably.

            I am also skeptical of the mechanics, though John Hussman does a better job of articulating my concerns (a few paragraphs down in the linked post) than I would:


            Hussman ends with this:

            It [MMT] carries with it no particular
            requirement for the government to spend in a way that
            leads to durable expansion in economic activity, sufficient
            to ensure that the new liabilities can be carried indefinitely
            without an ultimate collapse in their value. The failure to
            seriously consider and embed those issues as central elements
            of the theory is what makes MMT (and lots of other models)
            little more than arithmetic, rather than economics.

            Put simply, debt and deficits can only be judged as beneficial or
            detrimental to the extent that we know how the funds are being
            used, and the extent we believe that the direct and indirect
            benefits to society are enough to repay or at least permanently
            carry the resulting liabilities.

            One of the first things you’ll hear in an undergraduate
            economics class is that “Economics is the study of how scarce
            resources are allocated.” Then, without any sense of irony, most
            professors will launch into Keynesian theory, money multipliers,
            and other models that effectively assume no scarcity or
            resource constraints whatsoever.

            In my view, real, thoughtful economic analysis asks questions
            like “What are the resources”, “What are the constraints, and
            where are they binding”, “Where are the barriers, distortions, or
            coordination failures?”, “What are the externalities”, “Who bears
            the costs ?”, “What relationships are actually true in the data?”,
            “What are the incentives and how will this policy change them?”,
            “What are the unintended consequences?”, and “What are the
            most productive uses?”

            The standard of living of any nation, after all, is measured by
            the amount of goods, services, and intangible well-being that
            individuals in that nation can enjoy. The productivity of any
            nation is measured by the amount of goods, services, and
            intangible well-being that individuals in that nation can
            produce. I’d absolutely define both of these broadly, so that
            individual well-being is given adequate weight in assessing our
            collective prosperity, and I’d also include non-monetary factors
            like environmental sustainability. However we might account
            for all of that, our long-term standard of living is always
            dependent on how we channel our resources to nourish our
            long-term productivity. So many discussions of economics
            completely miss that point. In my view, it’s ultimately the point
            of economics that matters most.

            1. Grant

              “I am criticizing some of those who are promoting it, as it is of dubious value as currently employed, and I see no compelling, dovetailed arguments as to how it might realistically be employed more equitably.”

              This comment and Hussman’s comment you linked has nothing at all to do with MMT, public and private money creation, deficits, public debt and private debt, the role of banks in the system, etc. All of those things are relevant, but to any economic system in existence. Why MMT, which focuses on a relatively narrow part of the economy, would be expected to answer those things, I haven’t a clue. These are all, once again, political economic questions, questions that exist whether or not you can counter MMT and what it says about these things. If some spending could be shown to be a huge benefit for society, which is also equitably shared, what do you say if someone confronts you with the “How are you going to pay for it?” comment? Will you ignore the insights of MMT? If they ask, “Won’t the government spending more money result in lots of inflation?”, again, do you ignore the discussion that MMT economists have had on the matter? What if a Krugman type gives you something like ISLM, and claims that the government running a deficit doesn’t add to the stock of money in the economy, that it would actually “crowd out” private investment, what would your response be? Give me a few examples, respond without the insights of MMT in a way that reflects objective reality.

              Even if we were to think of the government like a household, where that public money goes, how it benefits society collectively, the ecological impact, all of that is relevant, but not to what MMT discusses. I don’t understand how this isn’t obvious. MMT is not an explanation of the entire economic system, it doesn’t go into, for example, the relationship between humans, our economic system and the environment. Ecological economics, environmental economics, natural resource economics, those fields goes into that. MMT doesn’t have much to say in regards to how countries have historically developed. On that, there are developmental economists, people that study trade and trade theory, Michael Hudson among others posts here about that stuff. Ha Joon Chang is another one I like. There are lots of economists that focus on very particular things, like financialization. Economists like Robin Hahnel have developed sustainable, equitable and democratic alternatives to capitalism, and he has great critiques of markets. I don’t read Costas Lapavitsas’s work on financialization looking for information on ecological economics, because that isn’t what he talks about. So, why turn to MMT on the things you are discussing when that isn’t the particular focus of MMT?

              Just so you know, because I don’t see any evidence that you have spent tons of time studying MMT (you seem to want to find reasons to oppose it, for whatever reason), MMT economists do discuss things like resource constraints. Look up their discussion on the connection between inflation and full employment, resource and productive constraints.

            2. Darthbobber

              Any economic theory of how things work is subject to the “criticism” that it does not, in and of itself, guarantee good governance or wise decisions about priorities. These are fundamentally political and social decisions.

          2. Tinky

            I wrote a response, but it seems to have been lost in “moderation”. Perhaps an included link to a Hussman critique was a problem, but I hope not.

    3. paulmeli


      This is kind of funny really. You’re making the same kind of argument that is being eviscerated in the article.

        1. ChristopherJ

          true that, Tinky.

          Have been at the centre of Australian govt and still have links to senior people there. I used to think that we continued to borrow for deficits because the senior bureaucrats distrusted a political class that knew it had (virtually) an unlimited budget – ie governments could more easily retain power simply by doling out money to constituents.

          So yes, I think the public are deeply skeptical that our politicians can make good spending decisions.

          But, perhaps this is because they have always faced two hard choices for new spending – increase taxes or borrow?

          Which is precisely what the public servants tell them as they don’t want us all to have a pony either. Undeserving, idle sods and all that…

          1. Synoia

            Australia is sovereign in its own currency if, and only if, it runs a trade surplus.

            Otherwise it is governed by the US Dollar, and is a US Vassal state.

            Which in practical terms means Australia would have to be either is an industrial powerhouse, or an oil exporter.

        2. paulmeli

          It’s not a straw man to question how MMT might realistically be employed equitably, etc.

          I say it’s a straw man because the idea that TPTB can’t be trusted has nothing to do with having an understanding of the operational realities of a monetary system/using that knowledge to advance progressive policy ideas.

          I would think that proper education and critical thinking skills would be a weapon in that fight, so your attitude confounds me.

          GIGO holds here and that’s a big part of the problem. You seem to be promoting the idea of solving our problems with BS.

          I have met the enemy and he is us.

          1. Tinky

            The “operational realities” at the moment are that TPTB have created enormous amounts of debt, and used an obscenely large proportion to fund the MIC (while destabilizing the world), zombify TBTF banks and corporations, and enrich those who are already wealthy. All this while grinding down the standard of living of the vast majority of the population.

            Good luck advancing progressive policy ideas while dismissing those who are cynical of the dream that those in power might employ the magic of MMT equitably.

            1. Grant

              You opposing MMT is you supporting austerity in this political context. It doesn’t really matter what your motivation is. With our massive amount of problems, with all of the people suffering and dying in this society, healthcare system and economic system, with the environmental crisis, I think it borders on nihilism. I wouldn’t say that if you showed that you understand MMT and had actual critiques of it, instead of a thousand other things you attribute to it. We could spend on things that private industry will not, but you want to stop that it seems, for a reason that isn’t clear. I don’t know what your intentions are, but it is obvious that you aren’t in a position to critique anything in particular in regards to MMT, you just want a reason to dismiss it, which is dismissing how things actually work. In this political context, if you attach yourselves to those critiquing MMT from the establishment, and those critiquing it from the right, you are working to undermine our capacity to solve our largest problems. Saying that the insights of MMT can be used for bad things isn’t logical, because spending on anything, in any context, can be used for bad things. If you dismiss MMT for that reason, do you dismiss government spending in general?

              You aren’t being honest about why you oppose MMT, everything you have said here is not a critique of MMT. So, be honest, with yourself, about why you oppose it. And don’t run from studying things you think you don’t agree with. Don’t just run to people that will critique something because you want to oppose it. Read from MMT economists. I just spent a week reading von Mises. It was painful, but I did it. It’s okay, at least then you can understand what you want to oppose. Sorry for posting so much in this thread, but I am getting sick of people attacking objective reality without taking a bit of time to understand what they are critiquing. These things have real world consequences.

              1. Tinky

                While I appreciate your generally thoughtful replies, you aren’t characterizing my views accurately. Aside, perhaps, from the Hussman quotes, I never “attacked” MMT. I have consistently stated that my primary concern is how (extreme) deficit spending might be expected to be employed equitably.

                Even if one accepts MMT whole hog, those concerns are obviously both relevant and crucial to the discussion.

                “You opposing MMT is you supporting austerity in this political context.”

                You can do better than that. I have made it clear that my primary concerns revolve around how governments spend money, and have specifically criticized the type of spending chosen since 2008. And your conclusion is that I am attacking MMT and supporting austerity?! Please.

                My original point that the oft-heard phrase “it’s how money works” won’t be remotely sufficient to sway skeptics without addressing how it might realistically be employed fairly still stands.

                1. jsn

                  In order to use the tools of state, one must first understand what they really do.

                  The “economic orthodoxy” of the post Samuelson synthesis has been to deny how a key motivational tool, state created money, actually works, precisely while the most base and cynical amongst the elite use them to to their sole advantage: Wall Street & MIC.

                  The problems you are focused on are the eternal problems of good governance made worse by the compounding complexity of modern, technological civilization. Yes, it’s pretty hard to see how to pry the power of government from the current kakistocracy (Obama as much as Trump), but the residue of democratic process is the only non-violent tool I can see available. Am I confident it will work, of course not, but for want of an alternative I’ll stick with it until I see one.

  5. rob

    So, what is the difference between MMT and the neoliberal economists? Just the prescription? Sure spend when the bubble is bursting, is better than austerity.. that is a no brainer. But it doesn’t address the creation of the boom bust cycles inherent in our privately controlled monetary system. The fact that bankers are bankers, they tend to want to lend( and create money) when there is money to be made, and that inflates the bubbles. Then they tend to want to pull back and not lend (not create money, and let the debt being paid off suck the money out of the system) which bursts the bubble.. OVER and OVER again….
    So the neoclassical profession of economics is really just public relations for the monetary and financial services industry. They are just the paid staff, to push subversive ideas to the population.. who isn’t really paying attention, but is assuming someone is….

    But really, neoclassical economics is just voodoo. But the real purpose is that it is justification for the people who effectively control the markets and the money, by their very whims… to have credible(to some) justification for their actions and excuses.
    So along comes MMT, And what is the difference?
    We have experts who say, we can run this dog and pony show better…. but really for whose ends?
    I have seen nothing coming from the MMT camp that actually changes the physical power structure of our monetary system. The new boss would be the same as the old boss… and we just get fooled again.
    MMT says that laws, rules and procedures are IN PLACE NOW, that we could handle our monetary affairs better… if we just use them more wisely…
    Doesn’t that implicitly mean that the private banking system that has been in place for a hundred years, and all the power structures and power people and corporations, who prey on the population of this country daily, will REMAIN in place tomorrow. All MMT is really trying to do is move the deck chairs on the titanic.

    The system of private money creation remains in place. All the misplaced incentives remain in place. All the money we can make, going to entities who prove themselves to be bad actors, repeatedly…remains in the “solution” MMT is offering

    Now, What the MMT work does show is that if we as a people were to reform our monetary system, the US dollars that could be created debt free, as an act of law, can in fact be used for better outcomes for people and the environment, and our posterity, without really having to worry about the neoclassical boogeyman stories. MMT does show that the old boss is a liar. They just happen to be working for the same boss… MMT goes half way. They start to show that things can work better… but then they drop the ball. What we need is new legislation to actually change the monetary system we have, so that we could actually express our right as a sovereign currency issuer nation. That is the second half of what needs to happen.

    1. eg

      Arguably the MMT half is only the economics — the half necessary to falsify the “but we can’t afford X”

      Necessary, but not sufficient, because the other half is not economics, it’s politics — the will to demand that what fiscal space is actually available (as revealed by the economics of MMT) is used for public purpose

      That the two are necessarily in conjunction is right in the very old fashioned name originally given to the field: “political economy”

      That the neoclassicals rejected the “political” half of their own field to disappear down a rabbit hole of marginalism, micro and mathematics divorced from reality (rational actors, efficient markets, ubiquitous and perfect information) and without serious examination of their assumptions reveals their program to rig the game in favour of “them that has” over everyone else.

    2. False Solace

      > But it doesn’t address the creation of the boom bust cycles inherent in our privately controlled monetary system

      This is exactly why the JG is an integral part of MMT. Yes capitalism creates boom/bust cycles, but the JG guarantees aggregate demand which minimizes the negative effects.

      1. rob

        actually, if I have this right,
        The JG isn’t an integral part of mmt. MMT is just the description of the systems mechanics; as is.
        The JG is just an idea that proponents of MMT say COULD be employed, BECAUSE we don’t have to worry about spending in this way. It is another thing. It is one prescription to the political class, that they COULD AND SHOULD consider…..

        But it doesn’t really change anything. I think a JG would be great. Better than the trillions given in the name of corporate welfare… in tax breaks, loopholes,incentives and military expenditures… but it would not change the underlying nature of who or how money is created in this country. And if all the money created becomes the banking and financial services industries “right”to”profits”..They too will have more… to pervert all the systems,markets,politics,etc….. JUST LIKE THEY DO NOW.

        I also don’t think “capitalism” is the problem with boom/bust cycles. The monetary and banking system are the main causes of boom/bust. When money is created by speculators, they speculate… they drive up wall street in the name of profits now.
        The rest of the business world is less a driver of these cycles, they just ride the ride.
        The banks create money when they make loans. the banks are the same as the federal reserve.. they create money, and they get it cheap. All they have to do is get a return on cheap money… so speculation happens at insanity levels.when the bubble is being blown… when it no longer can resist the facts of nature.. the bubbles burst… and those bankers who have been given the right to make money, by lending it…. then become “conservative”, and make fewer loans, which keeps new money from being put in the system when it is actually needed, and the resulting paying off of those earlier debts, become the thing that takes money from the money supply, compounding the problems….

        And the thing is , it isn’t like there isn’t an alternative… “greening the dollar” plan of the green party, is what MMT proponents need to get behind. After people see the monetary system is actually the problem, rather than just asking the same bad actors to “do better next time”. We can change the system.
        After the monetary system is changed, BY LAW. Then all the progressive ideas MMT enthusiasts wish would happen, actually could.
        read the “need act” proposed by dennis kucinich in 2012 112th congress HR 2990 .
        The system can be changed for the better, it has been known for 80 years in this 100 year history of the federal reserve, that the private money creation will create boom bust cycles, and banks just work this way. and as long as they are free to do what is in their interests, they won’t be accountable for what is in the peoples interest. The chicago plan from the 30’s, was the first time there was a plan to fix this problem. The problem remains. And MMT won’t do anything about it.

  6. TG

    In all of these debates on economic theory, one is reminded that economics is forever subservient to physics.

    In Bangladesh, as population pressure drives people into crushing misery, the (non-population) policy of the government is simply irrelevant. Capitalism, socialism, MMT, monetarism, whatever, it doesn’t matter. While economics is powerful, ultimately an economy is just people working slowly and erratically to put brick on top of brick, and flesh and blood people have limits. With a stable or slowly growing population, even modest incremental improvements can in time compound to prosperity. But when people try to double their population every 25 years or so, exponential growth is so powerful that before too long nature will stop them (as it is in Bangladesh – fertility rates are now falling because of widespread malnutrition), and the average person will of necessity be crushed to subsistence.

    India has had prolonged episodes of double-digit economic growth, and with the benefit of centuries of technological progress produces enough food to feed the entire world of two centuries ago. But the average standard of living is inferior to late medieval Europe.

    The old Soviet Union had one of the most mis-managed central command economies ever, and yet, while not a paradise, compare movies of 1970’s East Germany with modern capitalist Bangladesh and the Phillipines etc. With abundant resources and low population pressure, even the most mis-managed political system cannot completely eliminate all progress. With a population pushing at the limits, no human society ever has gotten ahead of the game.

    So talk about MMT etc. all you like. It is, indeed, important. But never forget that economics has a deeper foundation.

    1. Susan the other`

      The hard choices we addressed a few days ago are about physics. It was implied that because they were hard, physical reality questions they could not be addressed by government, politics and policy. There is a disconnect in our thinking right at that confluence. When it comes to people everything is politics. The shameful fact that our congress chose to neglect making good fiscal decisions, beginning in the 80s, and now is ducking and mumbling and playing dead is a case in point. If we don’t make the hard choices, the physical reality of our world closes in on us. The circus that has been free market capitalism cannot begin to turn this around. Precisely because resources are limited. Just as MMT tells us. And the disconnect shows up as scarcity and social imbalances when the reality is ignored. We really have no time left to ignore this – our politics and our reality need to come together and where they come together isn’t in a physics textbook, it’s in our mutual cooperation, our policies. Because hard facts and choices do not implement themselves except by devastation. And money? Money is a medium of exchange which we use to implement fiscal decisions. Money is a token.

    2. Synoia

      With a population pushing at the limits, no human society ever has gotten ahead of the game.

      So that excludes China? /s

  7. TroyMcClures

    so many of the comments on MMT around here amount to ” And why doesn’t MMT have anything to say about why my kids won’t talk to me!?”

    Look, MMT is a true and correct model of how fiat currency functions right now. Today. Not in some distant possible future. Some fairly obvious policies arise from this knowledge, but that is where politics and morality come in, hence the fighting.

  8. MN

    Why do economists like Bill Black have to sling insults at everyone who is against MMT? I saw it the other day with Bill Mitchell on another website too. Traditional economists, the orthodox old guard-types are dismissed as crackpots. Smith, Keynes, Mises all old, neoclassical, and dead so they can’t defend themselves. As if one guy’s PhD makes him smarter and others dumber in the conversation.

    If I wanted to implement a greater government control over the populace, MMT would be the vehicle.

    If I wanted more and more people on the government payroll, working for the government, I would choose MMT.

    I give charity. I know where my $ goes and I direct it. I pay taxes. Where does this money go? Who allocates it? Strike that. Let’s just think about who doles out the money to whom and where and when? We’re just supposed to blindly trust that the efficiency and lack of favoritism will be the calling card of MMT? How’s the paving of rivers in Tokyo been going for the past 30yrs? The wound might have been sewn up, but there’s been no real healing, let alone a rebirth or regrowth.

    Serious monetary debauchery has gotten us to where we are this point. Regulatory shifts and socialized losses/privatized gains has destroyed the foundation of our financial system. I don’t need a theory to prove that. I’ve lived it in the markets around the world.

    All the bond guys now need someone to keep buying the bonds and keep the game going while $9Tln in global bonds have negative yields. If I was a bond guy, I’d say, “MMT all the way,” also.

    Remember when Bernanke’s white paper (2002) discussed deflation and how to prevent it? They’ve been following the playbook to a T. Then in 2010 he said something to the effect of, “I can crush inflation easily…I am 100% sure.” So we’re to believe, deflation, inflation, it doesn’t matter, Bernanke is the Wizard of Oz?

    Then Greenspan came with his, “I found a flaw in my 40yr thesis.” He ran the financial world for years, THEN discovered this flaw. Oh and btw, Greenspan a gold bug both before and after his Fed tenure, awfully silent on the subject during. Hmm.

    QE is the precursor to MMT. How’d that work for everyone? Well, if you’re elite, an asset owner, part of the rentier class, you have done great. If not, well, good luck. But fear not, this new MMT plan of government backstop on everything will do the trick.

    Again, if I wanted to control a wide swath of the population, I’d go with MMT. In fact, it sets up great for “Social currency police” state down the road. Report on your neighbors, you’ll get a better job and better rewards. I can see the 2020 election campaign, “Happy days are here again, you’ll get income, have a job, forget your debts…just vote for this person.”

    We’re from the government, we’re here to help. Sounds awesome, right comrades?

    1. AlexHache

      I do agree that some MMTers react too aggressively. It’s also true that it’s annoying to face the same strawman arguments again and again.

      As for the rest, it’s irrelevant as to whether MMT is correct or not. It’s as if you said “Without religion, everything goes haywire, there’s no morality anymore, are we supposed to trust politicians, lawmakers and businessmen?, etc.” That may (or not) be valid concerns, but surely they don’t help to understand whether God exists or not.

    2. Grant

      “If I wanted to implement a greater government control over the populace, MMT would be the vehicle.

      If I wanted more and more people on the government payroll, working for the government, I would choose MMT.”

      Stuff like this is why people get frustrated. If you want to fund our crumbling infrastructure (massive infrastructure gap, D- grade by the American Society of Civil Engineers), you either privatize it and put up tolls or have the state spend on infrastructure. We have an environmental crisis and private interests do not spend on things that bring positive environmental benefits because the benefits aren’t captured in prices, and they spend on stuff too much that has negative non-market impacts because those negative impacts are also missing in prices. So, what do you propose, if not a more active role for state spending? Flesh your idea out a bit. If we have decades of stagnating wages, massive inequality, if the costs of housing, healthcare and education have been rising at a much faster rate than wage growth, and if all of this has happened as we have steadily drifted to the right on economic policy, what do you propose that radically departs from what we have been doing but then also doesn’t use state spending? And what of the internet, computers, nanotechnology, touch screen technology, satellites, GPS systems, biotech breakthroughs thanks to NIH funding, all of which the state had a massive role? How about the things that brought us collective benefits from all the things NASA has done? Medicare, Social Security, infrastructure, public schools, clean water and air, among other things?

      “QE is the precursor to MMT.”

      MMT says that it is describing how things have operated since we went off of gold. So, I don’t know how QE precedes it, unless you can explain exactly what you mean by saying this. If you want to know why people get annoyed, it is because of posts like yours. You rant about MMT but don’t touch anything it says at all, don’t respond to any particular MMT economist. It is an ideological diatribe. I used to think that the critiques of single payer by its opponents were baseless, but damn. Glenn Kessler’s horribly dishonest “fact checks” on single payer and the Wall Street bailout after the crash at least try to touch on some data and some dynamics, even if what he is saying is overall wildly off.

      1. Oregoncharles

        ” because those negative impacts are also missing in prices. So, what do you propose, if not a more active role for state spending?”

        Obvious answer: incorporating those real costs in prices. Of course, that also would require state intervention, but the whole economy depends on it, between creating money and enforcement of contracts. You’re talking about a fundamental failure in market economics, that needs to be corrected. Not that it’s going to be easy. Carbon taxes are just one example.

        That isn’t a criticism of MMT, just to say that it won’t do the job by itself. Spending more just pumps up consumption, the last thing we need. That’s the prime need for taxes: to slow consumption and direct the economy.

        I’m leaning heavily on a distinction between “standard of consumption” and “standard of living.” Not the same.

        1. Grant

          “Obvious answer: incorporating those real costs in prices.”

          I don’t think it is obvious, because all of the means of doing so are problematic and we should acknowledge our capacity to include all relevant information in prices. One impact of global warming is ocean acidification. Explain how you price that. The species extinction rate is thousands of times the natural rate. How do you price the species that are dying off, and even if you could, what would it mean that one species was worth twice as much as another from an ecological perspective? There is no realistic way to price carbon, and even if there was a way to do so, how much would everything cost since carbon is embodied in everything? The problem of pricing these non-market impacts would become pretty readily apparent. The fundamental failure of markets cannot be corrected, we have to realize the limits of markets, the problems as far as pricing these things, and how to have an economic system that relies less on market information alone. Whatever you respond with, cap and trade programs, carbon taxes, contingency valuation surveys, they all have problems.

          “That isn’t a criticism of MMT, just to say that it won’t do the job by itself. ”

          I agree. I just want those critiquing MMT to actually critique MMT. The other things matter a lot, but MMT isn’t a great source for that.

    3. lyman alpha blob

      QE is an irresponsible use of MMT.

      MMT says sovereign governments are not constrained by money, only by available resources. The amount of money in circulation needs to have some correlation to the tangible goods and services produced using those resources.

      QE amounted to printing a bunch of money to make a bunch of worthless assets not necessarily linked to anything tangible seem valuable again so rich people wouldn’t have to take a hit.

      Anyone who says QE didn’t actually cause inflation hasn’t done much shopping lately. The only thing that didn’t get inflated were wages, and that’s only improving now, years after all the bailouts and QE, because of political pressure, which as others have noted is necessary to make the system work properly.

      MMT is not a magic wand.

    4. Gary

      Regarding MN’s comments, I find this sort of thing exhausting, a giant shotgun blast of dots that can’t be connected. Mr. Black is mean and grouchy and always picking on someone, so disregard what he says. The government is full of dishonest people out to get us, and so can’t be trusted. Someone further on in comments says, sensibly, problems can be handled either by government or by the private sector, so which one do you want? MN has no answer, as far as I can tell, and off we head toward Stalin reborn and we’re all going to end up slaves, comrades.

  9. chuck roast

    The Booth School. Interesting.

    It was not so long ago that the Booth School Friedman/Hayek acolytes AKA the “fresh water” monetarists were dog-fighting the “salt water” Neo-Keynesians of MIT and Harvard led by Krugman. How do we escape the Great Financial Crisis? And what a battle they had!
    But, confirming their phylum porifera, Larry Summers and the “salts” allowed themselves to be squeezed into fiscal half-measures and the resultant desultory recovery from the GFC. Well, they both now have a new battle on their hands with a foe that refuses to count yet more epicycles of the planets but proposes a new, simpler astronomical theory.

    Back in the day we called their actions “obscurantism” but nobody was listening. My greatest wish is that microeconomic theory and marginalism are booted to far regions of the universe and become a part of Business School curriculum.

    Let the Macro wars begin!!

  10. BoulderMike

    Can anyone provide a definition of what MMT is? I really don’t understand and it seems to be a hot topic here. Thanks!

      1. BoulderMike

        Thanks, I am starting to read and from what I can see MMT explains the “mechanics” of the economy, and doesn’t explain the “morality” or “ethics” of the economy.

        From one of the articles:
        So, the government cannot run out of dollars; that doesn’t mean the government should “spend like a drunken sailor” or that we don’t have to pay taxes; it does mean balanced budgets are unnecessary. It also means government deficits can play a supportive role, allowing the private sector to build up its saving.

        OK, fine, but isn’t the issue the equity of how the mechanics are carried out? Meaning, sure the priviate sector is building up it’s saving, but who is benefiting, how is it being distributed? To me it seems as though deficits are OK if they are benefiting society as a whole, in a fair and equitable way. But, I think most here at NC would agree this clearly isn’t happening.

        So, all I am saying here is MMT is just an obvious definition/explanation of the mechanics of a modern economy, and does nothing to explain how it is being applied to the real economy, and whether the economy is working for all of us, or just the wealthiest. In the end, it seems like MMT has been co-opted by the .01% for their benefit, at the expense of the rest of us. For example, they could give us M4A and it wouldn’t cost them personally $1, except for lost revenues in the health care companies they own or have ownership in.

        1. BoulderMike

          For anyone interested, and thanks to Mel for the links, here is a summary of MMT that really makes sense to me, especially about taxes being used to create a more equitable distribution of wealth. Now I understand why NC believes in MMT. If put into practice it would surely produce a more fair and equitable society.:

          summary from Bill Mitchell in 2015:

          Basic Concepts from the Billy Blog, Sept 18, 2015

          “1. A sovereign government is never revenue constrained because it is the monopoly issuer of the currency.

          2. Therefore it does not have to issue debt to cover the excess of its spending over taxation.

          3. Issuing debt is unnecessary and should for the most part be abandoned as it is unnecessary ‘corporate welfare’.

          4. Taxation is only functional if it deprives groups of purchasing power. It does not raise revenue in order to allow the government to spend.

          5. Equity considerations matter and guide us on which groups to deprive of purchasing power via taxation and in what magnitude.

          6. Government deficits (surpluses) are equal (dollar for dollar) to non-government surpluses (deficits).

          7. If there are external deficits and the government continues to balance its fiscal position (only spends what it raises in taxes) then the private domestic sector will run continuous deficits equal to the external deficit and thus incur ever increasing levels of debt.

          That is an unsustainable state.

          8. Continuous government deficits are likely to be required if the non-government sector desires to save overall and maintain sustainable levels of private debt.

          9. Running a fiscal balance as a rule can never be sensible economic policy and can never be a position that the ‘left’ should take in the economic debate.

          10. The ‘left’ should espouse full employment, decent wages, equity in income distribution, public goods, environmental sustainability, regulation to advance well-being, etc and understand that continuous public deficits will likely be required to advance those aspirations.

          You can see that if you start of with a false premise with respect to the constraints facing a currency-issuing government how quickly one descends into a flawed analysis no matter how admirable the overall values of the author might be.”

        2. AlexHache

          You could also say it’s a pity physics doesn’t tell us whether sending billionaires to Mars is better than feeding the poor, but then that’s not the point of physics.

          1. BoulderMike

            Yes, but what is the point of physics if it isn’t put into practice? Physics explains the behavior of things and relationships. At least that is my primitive understanding of it. And, I believe, Physics is a “natural” science. I am not sure MMT is the same thing. I believe it is more a set of beliefs or goals, and not at all a “natural” science. Anyway, I honestly confess, even as an MBA in Finance, with a concentration in Economics, to being baffled by a lot of this. In the end it should be about working towards a moral, ethical and fair society. But, I fear, humans are too defective to achieve that. I wonder, stupid as I may be, if we can print unlimited amounts of money and run unlimited deficits, then why not just print more and give everyone what they need? I guess that the Billionaires think, well if we print a trillion more we could help people, or we could give ourselves more money (that we don’t really need of course), and in the end they say. “Let’s just give ourselves even more money and let everyone else die”. Pity.

            1. eg


              To repeat myself …

              Arguably the MMT half is only the economics — the half necessary to falsify the “but we can’t afford X”

              Necessary, but not sufficient, because the other half is not economics, it’s politics — the will to demand that what fiscal space is actually available (as revealed by the economics of MMT) is used for public purpose

              That the two are necessarily in conjunction is right in the very old fashioned name originally given to the field: “political economy”

              That the neoclassicals rejected the “political” half of their own field to disappear down a rabbit hole of marginalism, micro and mathematics divorced from reality (rational actors, efficient markets, ubiquitous and perfect information) and without serious examination of their assumptions reveals their program to rig the game in favour of “them that has” over everyone else.

  11. Kurt Sperry

    As near as I can tell the NEP link suggests reading Randy Wray’s “Modern Money Theory” as an introduction to MMT, which is, I’m sure, a good starting point. The problem is of course that nobody not already favorably inclined towards MMT is likely to ever invest that much time/effort into understanding it. I wish there were a piece that can be read in 10-15 minutes *maximum* (5 minutes would be far better) that would provide a useful introduction to MMT and I’ve never found that succinct intro I need to share the idea with people who aren’t already warm to it. And if the answer is that that is an unreasonable/unrealistic ask, then I doubt MMT has any near-term mainstream future.

    1. AlexHache

      On the other hand, can you explain neokeynesianism or monetarism in 5 minutes?

      I think more and more people are willing to take the time to understand what MMT is about, which is not that hard anyway.

  12. shinola

    I read the 4th installment and this article and, while I agree with the MMT concepts, I think perhaps Mr. Black might want to work on his writing style/presentation.

    Maybe it’s just me, but he’s starting to come off as some cranky old guy with an axe to grind – particularly in regards to Krugman. After reading the 4th installment, the 5th just seems like more beating of the same dead horse.

  13. Solar Hero

    For those keeping score at home, yes we have reached the “MMTers are too shrill!” devolution of dialogue!

    1. ChristopherJ

      Agreed, but our opponents ignored us for so long. so there is pent up tension and frustration.

      As non economists have now joined the debate and are asking what about MMT, our opponents can no longer ignore us and have to respond.

      As Krugman and the academic economists cannot come up with one simple explanation of why MMT is wrong, they cleverly use a strawman argument. This is designed to infuriate those who are proposing that we spend government money for the people (which is the root of MMT).

      And it does, which is why Bill sounds shrill. Didn’t you get it the first time I explained it?

      Hard to sound reasonable when your opponent lies and the lie is really brazen, sneaky, even.

      But we should continue to try.

      1. Anarcissie

        Well, if MMT is correct — and it seems to me obvious, a sovereign can imbue money with as much value as he/she/it likes up to all the resources under control — then you should feel all calm and magisterial about it. I suppose maybe some of the skeptics may be looking ahead to political problems. Because some MMT fans do use MMT as a component of policy proposals, even if MMT is not a policy proposal: for instance, it is said ‘We can have the Green New Deal without borrowing or taxing the money needed to pay for it.’ If a lot of the new money maybe allocated to projects whose value payoff is long-term, then some of the money paid to workers, etc., will be floating around with no present value to correspond to it, and inflation will ensue. If this happens, then the sovereign will have to tax the people to control the inflation, and the people may not like that, because someone told them that taxation wasn’t necessary. Actually, they’re simply being taxed after the fact, as with a bond issue, rather than before the fact. So that aspect of MMT-inflected policy and planning probably ought to be explained early, rather than being saved for gotchas later in the inevitable debate.

        1. ChristopherJ

          Thank you, Anarcissie.

          As taxes cannot be spent, taxation is simple confiscation so that you cannot spend the money into the economy or use it to purchase assets.

          We can all see the best use of taxation: to confiscate wealth that has been stolen from us. And, this is why the elites and the orthodox economists who serve them are worried that MMT is becoming something that they have to debate rather than ignore.

          1. Anarcissie

            As has been widely noted hereabouts, MMT is already practiced, although it is surrounded by rigmarole in discourse. Some of this might be cleared up if someone would write an economics text that began by defining or demonstrating fundamental entities or principles. If they like math so much it should be easy to follow the style. In another venue, I did suggest this, but the economists present didn’t even laugh me off.

  14. Oregoncharles

    This would be a lot better if he hadn’t waited till the very end to actually make his case, herein:

    ” MMT explains that deficits can matter and goes on to explain when, how, and why they can matter. …
    “As I understand the MMT position, it is that the only thing we need to consider is whether the deficit creates excess demand to such an extent to be inflationary. “”

    Oddly, but I guess appropriately, the refutation is saved for Krugman’s own words.

    But it gets damn frustrating waiting for Black to state the real MMT position.

    I still see a weakness, which I haven’t seen covered: how do you know beforehand when you’re approaching a resource restraint? I suppose genuine full employment would be a sign, but we don’t seem to have valid employment numbers. If the only way to know is to overshoot, you create an inflation ratchet.

    Plus: does the theory distinguish between social resources and natural ones? Because we hit the natural restraints years ago, when natural stocks started plummeting and the world started heating up.

    1. skippy

      “But it gets damn frustrating waiting for Black to state the real MMT position.”

      What part about NAIRU is confusing.

      1. Oregoncharles

        I seem to have reached acronym overload, “NAIRU” would be the first response.

        Black’s case is that the critics misrepresent MMT’s real position – posing a “straw man.” But he never actually states the position they’re misrepresenting, except a bit indirectly in the lines I quoted, and not where he needed to, when he first makes his accusation. A direct quote from an MMT theorist would have been called for. A series of linked examples would have made the case stronger.

        He’s assuming the reader knows what MMT is; that is not a safe assumption, even here on NC. At the least, there are new readers from time to time.

        1. skippy

          Structural under – unemployment used to fight the inflation hysteria* in a deflationary period aka keeping them keen and hungry or malleable.

          Understand some as new readers would be unfamiliar with NAIRU, yet not you, and as we know – NC is not written for a casual audience.

  15. skippy

    I don’t know where the orthodox get the MMT’ers have gone shrill rhetoric from … could share a few thousands of hours debating AET et al sorts only to get endless drive by praxeology or broken window placards. Not to mention the thousands of hours spent reading decades of neoclassical white papers only to find the entire thing is premised on methodological or atomtistic individualism – there’s the reality everything else is based on – word count is just what they now decry:

    ““Why can’t MMT produce a spreadsheet? Oh yeah because then the world could clearly see whether their argument is correct. Rather than hiding behind arcane language and riddles.”

    This same commenter made statements about the IS-LM as fact during a conversation, too which when presented my rebuttal was off Lars site, did a quick volume and amplitude adjustment [back peddle] by amending their first response with they believed Lars “interpreted” Keynes wrong.

    This is the same type of rhetorical gaming used, not unlike inferring some sort of diminishment of humanity when a JG is talked about as a buffer stock … and … then NAIRU is completely absolved of the same standards used.

  16. Knute Rife

    Bill ought to take a look at what the Alt-Reich gold/crypto-currency bugs are saying about MMT. Even more of a distortion than the crowd examined in the article, except that the current crop making policy is more likely to listen to, say Jim Rickards and Porter Stansberry than Krugman et al.

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