For some of you this post may seem superfluous and that is fine. For those of you that have an interest in Modern Monetary Theory (MMT) and have zero background knowledge in economics I recommend starting at the link above that says Index. As noted in the About link, it is mostly a deconstruction of Bill Mitchell’s work into what I believe to be more manageable pieces. There are only two significant categories, LayPerson and Economics – the Economics category is the more advanced post. You should have little trouble following the category Economics if you read the blog posts in sequence. Admittedly, you may have to read some posts twice to understand them fully.
For the people that have had some economics training or some form of economics background, I recommend placing your mouse cursor over the Resources link above and selecting MMT for Economists from the drop down lists. I give you fair warning though many of the propositions you hold to be true will be challenged along the way, the very foundation of your economic thinking may be challenged.
The FAQs or Frequently Asked Questions are still very much a work in progress and you are welcome to add your own. Other things you might like to see are Audio Visuals listed on the Video tab and the drop-down section Fiscal Sustainability Teach-In. Yes they are two distinct links. The latter are individual videos whilst the former are playlists you might like to view and review.
The Resources and Other tab also provide links to written pieces on Modern Monetary Mechanics often called Modern Monetary Theory but it is only a theory in its recommendations or prescriptions, not the description of how modern money works today. And of course there are a few links to check out under Links in the right side-bar towards the bottom of the page.
Feel free to comment on making changes to the above so it can be more easily understood.
MMT considers that the aggregate demand impact of interest rate changes are unclear and may not even be negative (for a rise) or positive (for a fall) depending on rather complex distributional factors. For example, remember that rising interest rates represent both a cost and a benefit depending on which side of the equation you are on. Interest rate changes also influence aggregate demand – if at all – in an indirect fashion whereas government spending injects spending immediately into the economy.
This is the reason why MMT proponents do not give priority to monetary policy over fiscal policy.
SOURCE – BILL MITCHELL
I was involved in a conversation as to whether MMT was left-wing or not. My standard comment is that it is neither left- or right-wing it just is. Is, in this case, is a framework for describing and understanding the mechanics of monetary systems and the consequences of various policy choices.
The left- or right-wing elements then enter the frame when we discuss the objectives that a government should pursue and how it might go about achieving those objectives.
So it might be construed as being a right-wing position if a person advocates running a budget surplus even though the private sector is clearly attempting to run a surplus and the external sector is in deficit.
The person advocating that position would, if they understood MMT (and hence the way the monetary system operates), have to admit that they preferred higher unemployment, more inequality and increased poverty rates to the alternative and that is why they advocated that economic policy stance.
They would not be able to engage in sophistry about reducing the burden of debt on grandchildren, or saving up for the future, or taking the pressure off interest rates or any of the other nonsense that the right-wingers deploy to hide what their underlying value positions are when they advocate surpluses under the circumstances noted above.
A left-wing position would clearly not tolerate unemployment above the frictional level and so would advocated increasing deficits under the circumstances noted above.
So MMT is not a statement of values but could underpin an extreme right-wing, free market approach or the polar opposite, or … plenty of positions in-between.
As soon as we get over that myth – that MMT is left-wing – the sooner more serious debate can occur.
SOURCE – Bill Mitchell
My brief summary is that MMT pretty much coincides with traditional Keynesian views in the context of a liquidity trap, but that I reject the claim commonly made in popular presentations of MMT, that increased government spending doesn’t imply increased taxation.
SOURCE: Market Monetarism: A First Look
It is unfortunate and disappointing that this is the clearest exposition by Professor Quiggin and his thoughts on MMT after previous discussions on MMT by his own admission was a “misreading of MMT” by others and confining the topic to the sandpits after having had his say on the subject.
Quiggin and MMT’s dispute over increased government spending seems to be an intertemporal one. The disagreement seems to be more about WHEN the increased taxation occurs. NOR IS IT CLEAR what is meant by “increased taxation”. Is it an increase in tax rates? Is it an increase in tax collected as done by the existing effective tax rates? If the latter there is no disagreement, that is just the function of automatic stabilisers.
MMT rejects the liquidity trap (and IS-LM) & consequently rejects that MMT only applies in a liquidity trap. DeLong seems willing to see if MMT applies beyond the Zero Lower Bound (ZLB) but only as a look towards the future.
As previously noted in this blog – The real point of departure for MMTers and traditional Keynesians appears to be bound up in the loanable funds theory of the interest rate (the former rejecting and the latter accepting it). From that follow all sorts of differences re: fiscal sustainability. Thankfully Philip Pilkington has a reasonably clear take-down of it and acknowledges the reason it persists is that it works in theory, if not practice. And MMT economist Scott Fullwiler explains fiscal sustainability from an MMT perspective.
The full series can be seen on the original post.
The WordPress.com stats helper monkeys prepared a 2013 annual report for this blog.
Here’s an excerpt:
The concert hall at the Sydney Opera House holds 2,700 people. This blog was viewed about 41,000 times in 2013. If it were a concert at Sydney Opera House, it would take about 15 sold-out performances for that many people to see it.
Click here to see the complete report.