Why MMT is so popular

2 October, 2017 at 21:46 | Posted in Economics | 6 Comments

i-knew-about-mmt-before-it-was-coolNow we can see why MMT is so popular … We are in an MMT world, where we should be using fiscal policy and not worrying about the deficit, but policymakers don’t understand that. I think most mainstream macroeconomists do understand this, but we are not often heard. The ground was therefore ripe for MMT.

Policymakers following austerity when they clearly should not annoys me a great deal, and I am very happy to join common cause with MMT on this. By comparison, the things that annoy me about MMT are trivial, like a failure to use equations …

Simon Wren-Lewis

Hmm …

So SWL has joined Paul Krugman and become a​ MMTer at the ZLB?

But — really — how can it be annoying when people “fail to use equations”?

Think I rather stick with Paul Romer:

Math cannot establish the truth value of a fact. Never has. Never will.

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6 Comments

  1. No matter what theory one employs to attempt to describe monetary policy the FACT remains that interest on the debt in most countries has a huge fiscal impact and is used to justify NOT spending on needed services, programmes and infrastructure thereby supporting the austerity agenda. In Canada, the interest payment is $25 billion currently and the auditor-general has noted that back in the 90s, of the $541 billion debt all but $38 billion (since 1867 — not a typo — 1867) was accumulated interest. The $38 billion was the accumulated shortfall in programme spending. This becomes a transfer of tax dollars to the well-off money-lenders. Does this not also support the growing inequality?

    In Canada before the Neoliberal Age of Austerity began, we did not have these huge transfers to the well-off and utilized the nationalized Bank of Canada to fund some of the shortfalls and infrastructure programmes.

  2. The linked article says:

    “The GFC exposed the Achilles Heel in the Consensus Assignment, because interest rates hit their lower bound and could no longer be moved to stimulate demand.”

    I guess I disagree that demand management should be a goal of public policy. I want to consume less as I learn more and discover I need less; but such behavior contracts demand and violates the fundamental economic (normative) assumption that more is better. I feel that economists are telling me I should want more and more, but I want to define myself. I don’t want economists trying to manage my demand. Why can’t they mind their own business?

    • I’ve seen that complaint before. It’s not actually valid, and for the following reasons.

      The income and consumption of each person is related to their output per hour and total hours worked per week. Taking the former first, economists (or at least most of them) believe in trying to increase output per hour. But so does everyone else: no employee objects to the hourly wage increase that has come from the huge productivity improvements that have happened over the last 200 years, do they?

      As to hours worked per week, most economists believe in leaving that up to individuals. If someone wants to work part-time and accept a lower standard of living than would come from full time work, no economist objects to that choice.

      • “The income and consumption of each person is related to their output per hour and total hours worked per week.”

        The problem is that most work is selling oversupply to unwitting marks. The world finance sector is conservatively ten times the “real” economy; world capital is around $1 quadrillion and world GDP is maybe $80 trillion. Financial sector workers spend their days obfuscating wanton money creation to satisfy the money demand of their friends. In such a world of oversupply, we should guarantee basic access to vast persistent surplus, via a basic income …

  3. “Sent skall syndarrna vakna” as we say in Sweden.Give them give them 10 more years and maybe they wake up from their Academic Doldrums-Chambers, Lars, ha ha ha !!! It takes times “innan poletten ramlar ner hos vissa” you know 🙂 !

  4. swl has terrible taste in math

    MMT could use some math, but not the kind swl would likely prefer.

    I have joked that someday an MMTer will discover Martin Shubik and on that day, everything will change.


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