John Quiggin wrote a review of the MMT textbook -- "Modern Monetary Theory: Neither modern, nor monetary, nor (mainly) theoretical." Although the title has a negative tone, the review is relatively positive. The main complaint is about the gap between "academic MMT" and "popular MMT." I have noted this distinction in the past, and I have limited sympathies with his viewpoint. However, I am unsure how anyone can attempt to police the comments of enthusiastic supporters across a wide variety of internet platforms (like blogs!).
The review is of the textbook Macroeconomics, by William Mitchell, L. Randall Wray, and Martin Watts (Amazon affiliate link). For brevity, I will refer to the text as MWW.
(With the worst of my paperback formatting issues behind me, I am turning to my MMT primer. I intend to have a chapter discussing criticisms of MMT, and this article could potentially show up in there.)
Academic versus Popular MMTModern Monetary Theory came to prominence on the internet, courtesy of blogs (of which mine was a late entrant). Bill Mitchell was an early adopter of the blog format, and I would interpret this as a deliberate strategy to do an end run around the stagnation of modern academic economics. (Bill Mitchell discussed the adoption of the blog format during one of the MMT academic conferences I attended; the previous statement was my interpretation of what I remember him saying.)
By taking MMT to the internet, it rose in prominence. (Although Warren Mosler raised the profile of MMT within finance; I found out about it through a firm he was a co-founder of.) The downside of internet popularity is that adherents can get somewhat too enthusiastic, and risk pushing a distorted version of the theory. The Peak Oil movement ran into this problem. In that case, one may note that critics were recently sniggering that Peak Oil was wrong -- even though oil production has very likely peaked. (I am guessing that is the case, but have not validated the data.)
In the case of MMT, the popular distortion of the theory is that taxes are allegedly completely unnecessary. Although I used to see comments to that effect some years ago, I have not seen the argument made recently.
In his article, John Quiggin points to this quote by the pastor Delman Coates: "I don’t want my community to have to wait until we tax Jeff Bezos and Amazon in order for us to have dignified jobs, Medicare for All, and a Green New Deal, or to have our roads and infrastructure rebuilt in America." The problem with this example is that it is a discussion of political strategy, and not a statement that taxes are unnecessary.
It should be noted that for almost the entire period of MMT internet prominence, most anglo developed countries faced severe under-utilisation of labour resources; in that environment, it made no sense to be concerned about inflation control. Meanwhile, it is entirely possible that activists do not view inflation control as the primary concern for macro policy -- which means that there is far more "fiscal space" available. Given that background, it is hard to see why anyone would have expected MMTers to emphasise inflation control.
"Motte and Bailey"John Quiggin's complains that academic MMTers fostered this incorrect view.
The result in many cases is a ‘motte and bailey’ rhetorical strategy in which MMT advocates make strong statements which sound as if they match the popular view, but retreat to a less interesting but more defensible position (the ‘mottte’ in the medieval castle that gives rise to the analogy) when challenged.However, he notes that MWW does present the standard Functional Finance view (which he views as part of standard (Old) Keynesianism. However, he complains:
On the other hand, the authors miss the opportunity to set their own followers straight on this point. While the errors of orthodox economists are pointed out in the sharpest terms, the criticism of the idea that taxation is unnecessary is brief and anodyne. The result is that we are likely to see a continuation of ‘motte and bailey’ rhetoric for some time to come.This complaint is very hard to answer, and it is unclear how substantive it is. Macroeconomics is a textbook, why should it spend considerable space eviscerating a view that is obviously contradicted by the rest of the book? "Some people interpreted these statements incorrectly, here is a three page section explaining why not to do that!" is not a standard feature of the prose of textbooks that I am familiar with.
The other issue is that there is a double standard. Modern Monetary Theory academics are being expected to police statements by members of the public made on the internet, whereas the most ignorant statements made about fiscal policy tend to be made by people who cite conventional Economics 101 textbooks.
If we had a time machine and went back to 2011, I think there would have been more examples of what Quiggin is complaining about. In 2020, I find that complaining about what some people might have said on the internet at some point in time is the least of humanity's worries.
Right now, to what extent we can tear ourselves away from other unfortunate developments, the publication of Stephanie Kelton's book should be the main event of discussion. That is explicitly a popular book that discusses fiscal policy from a MMT perspective, what is the message within it? I really do not see the value-added of re-litigating internet comments from a decade ago.
The Rest of the Review...The rest of the John Quiggin article discusses how MMT is a continuation of existing Keynesian theory (at least Old and Post-Keynesian theory). Note that this is actually what MMTers themselves have said.
As such, the rest of Quiggin's article may be of interest to readers that are new to MMT, but since they overlap what I will have written elsewhere in my primer, it is unlikely to make it into my book. I should note that he makes statements that are likely to be disputed by MMT academics, but I have limited interest in playing academic priority games at this point in my life.
(c) Brian Romanchuk 2020
Thanks for this thoughtful response. In response, I can only say that most of the comments I got to my review showed extreme reluctance to admit that higher taxes could ever be needed. I don't think the popular MMT view has disappeared.ReplyDelete
The people who emphasise raising taxes have been losing elections for decades now. I certainly wouldn’t make taxes the centerpiece of my activism.Delete
John, if you could stop skirting around your belief that federal receipts do not fund federal spending because that fiat currency is its issuer's liability, I would find your inability to let pass wayward denials of the need for taxation inexplicable.ReplyDelete
This comment has been removed by a blog administrator.ReplyDelete
This comment has been removed by a blog administrator.ReplyDelete