What Is MMT? (Short Version)

One of the unusual things about Modern Monetary Theory is that many non-MMTers have a hard time understanding what it is. Although it would be reasonable to argue that this reflects communications issue by MMT proponents, I am not entirely comfortable with that characterisation. I had no issues picking up the theory, and the same could be said for the relatively large number of activists who have come from non-economics backgrounds. Many of the complaints about understanding MMT come from people who either work in finance or have a background in economics – which raises a question why they are having these difficulties.

Note: This is an unedited introductory section from my manuscript. It will be the second section, and designed to offer a minimal introduction to MMT. The rest of the book will give more details, but I want readers to at least have an idea of what MMT is in case they just jump to the MMT criticism chapter.

A Pair Of Weaker MMT Critiques...

I ran into a pair of MMT critiques recently. Since I am writing a chapter on MMT criticism, I want to see whether I can use them as material. Unfortunately, I am not sure whether either qualifies as being of enough interest to qualify for inclusion into my book. This is slightly surprising, since one of the articles was the John H. Cochrane review of The Deficit Myth that free marketeers were gushing about. I am noting these articles and making a quick response as a placeholder.

The "Noble Lie" Critique Of MMT

One relatively common complaint that I have seen is that Modern Monetary Theory should be ignored because fiscal policymakers cannot be trusted to control inflation. This might be called the “noble lie” critique: we need to avoid discussing MMT as policymakers might make “undesirable” decisions.

(Note: This is an unedited excerpt from my manuscript MMT primer. This comes from a chapter of MMT critiques.)

NAIRU, And Other Will-O'-The-Wisps

The discussion of the role in unemployment is a key theoretical divide between Modern Monetary Theory and mainstream approaches. Theoretical conclusions determine the suggested policy response of governments to unemployment. The structural changes to the labour market made by policymakers in the 1990s were based on following a theory.

(This is a rather lengthy unedited excerpt from the manuscript of my MMT primer. It has references to other sections of the manuscript.)

New Book: The Case For A Job Guarantee

Yet another MMT book is out in North America: The Case for a Job Guarantee, by Pavlina R. Tcherneva (Amazon affiliate link). The book does a very good job of covering the ground of what the Job Guarantee is, and why it is needed.

Although online discussions of MMT typically revolve around "printing money" and "whether MMT is new?," the Job Guarantee is a core part of the theory, and often skipped over.

This article is not meant to be a formal review, nor do I explain the Job Guarantee. I am in the process of writing a MMT primer, and I will use this book as the basis for sections on the Job Guarantee.

Looking At Some MMT Criticism

Work is proceeding on my "MMT primer" manuscript. One chapter I am working on (in parallel with the labour market analysis) are a discussion of what I view as serious objections to MMT as a theory. Although I want to finish off that chapter later, I am adding to it as I run into interesting criticisms. I discuss a couple of recent entries in this article. Although I do not want to derail my book with lengthy discussions of MMT critiques that are coming from every random direction, I also want to have at least some quotations of critics so that my comments are not viewed as attacks on straw men.

[Update: here is a link to this Daniel de Voss article on Twitter wars. The complaints about MMT are weak, providing examples for my complaints about low quality criticism. I certainly will not want to crowd my book with low quality targets like that, but it is fun to read.]

Labour Market Structural Changes

My view is that changes in structure in the labour markets that started in the 1980s – but kicked into gear in the early 1990s – explain the structural breaks in the behaviour of the developed economies that took place in the early 1990s. The advantage of these changes has been the decline in inflation. Although neoclassical economists attribute this change to the switch to inflation targeting (as will be discussed in Section 2.5), I do not think we can assume away the changes to the labour markets. The disadvantage of these changes has been the persistent sluggishness in developed economies.

(Note: This is an unedited section of a manuscript that discusses MMT and the upcoming recovery. Although most people focus on fiscal policy stories when discussing MMT, labour market analysis offers a much greater contrast to neoclassical thinking. The section following this one delves into that aspect more deeply,)