Along with Eric Tymoigne, I will be on the “pro-” side of a “pro-/con-” Modern Monetary Theory (MMT) panel at the online part of the annual Canadian Economic Association (CEA) conference (on May 30, the live conference is in early June in my old hometown of Winnipeg). As a non-academic non-economist, if I were smart, I would keep my head down and offer fairly cautious remarks from the perspective of an educated outsider (with obvious biases). Whether that happens when I start opening my mouth remains to be seen (“No plan survives contact with the enemy”).
(I sort-of discussed this topic in an earlier post, when the panel was not yet finalised. I just want to discuss the journal article debate point in more depth.)
My main thesis is that for academic macroeconomic theory, if economics were not dysfunctional, the “MMT debate” would take place in academic journals.
Academics spend their waking hours obsessing about producing journal articles — either for themselves, or getting their graduate students into journals so that they can start a career in academia (or at least finish their doctorate and get a job in something resembling the real world). I am an ex-academic, I know how the game works — and by all accounts, the “publish or perish” imperative grew since 1998 since I hung up my academic skates.
An outsider, one might think that if academic professional output is measured by journal articles, you would then predict academics to read journal articles. Well, the answer to that prediction is: lol, lmao. (That is exactly the sort of thing I have to avoid saying in the conference, I am venting on the internet now to get it out of my system.) When looking at MMT-neoclassical “debates,” one is stunned by the almost total absence of neoclassical authors citing of primary (journal) articles written by MMT proponents.
My book Modern Monetary Theory and the Recovery has a chapter on MMT critiques. Since 2013, I have been responding to critiques of MMT, and that chapter represents a survey aimed at non-academics: it is not a survey of a wall of articles, rather the “big ideas,” where I picked a few examples that illustrate trends that I saw in multiple papers.
The references in that chapter were arguably too skimpy, but my reaction to 90+% of MMT critiques is pretty close to that shown by John Candy in the classic SCTV “Nutcracker Suite” skit (lead-in starts at 18:40, reaction later). As my mom taught me, if you have nothing nice to say about a paper, say nothing at all.
We can divide the academic response to MMT into two main categories: other post-Keynesians, and neoclassicals. I will discuss them in turn.
The Post-Keynesians have been conducting a debate in their journals in a manner that I would expect as an ex-academic. The major good faith critiques of MMT that I discussed in my book generally showed up in the post-Keynesian/MMT debates. The most important one — the “external constraint/currency value” debate — is likely to be a core part of the panel I am on (for reasons explained below).
An important facet to this debate is that MMT is a branch of the broad post-Keynesian tradition, and everyone involved is highly critical of neoclassical theoretical methodologies. If a neoclassical wanted to be internally consistent, if they want to use a Post-Keynesian critique of MMT, they need to accept that the arguments may not match their neoclassical beliefs.
However, the readers of my book may have noted that I was somewhat hesitant in laying out the details of the debate. In my book, I tried to not rustle too many feathers, but the reality is that I viewed the debate to be dysfunctional — however a different kind of dysfunction that neoclassical academic macro displays. I am biased, but I feel that some Post-Keynesian critics of MMT were not entirely reliable, and some of the debates seem to be somewhat pointless literary disputes.
Marc Lavoie offers a five way top level split of schools of thought in Post-Keynesian theory (page 43 of Post-Keynesian Economics: New Foundations) — and MMT is not even one of those top level groups. An outside observer might take this observation to entertain the possibility that Post-Keynesians might be fans of self-destructive doctrinal disputes. The issue here is not the lack of discussion of journal articles, rather the way in which the discussion is happening.
I have covered a lot of neoclassical critiques (and constructive articles) on my blog over the years. Not a lot of them made it into my book, partly because there were not as many published when I did the bulk of the work on the manuscript. The underlying problem with these critiques is the journal article point that I raised earlier.
I saw three main classes of (broad) academic articles (not counting op-eds written by academics in the business press). Most of these were working papers published by academics or academic-adjacent types at central banks or think tanks.
The initial wave of articles were reviews of either The Deficit Myth, or the Mitchell/Wray/Watts undergraduate textbook Macroeconomics. This literature was characterised by an almost non-existent citing of MMT authors. For example, Mankiw did a review of Macroeconomics that I discussed earlier. Mankiw labelled his review “A Skeptic’s Guide to Modern Monetary Theory,” yet it had exactly one reference to MMT authors (the textbook), as compared to 8 neoclassical citations (including two of his own works). As I painstakingly noted, there was only a pitiful few scraps of content within the article that can be traced to MMT: everything else was a discussion of neoclassical theory.
There was a later wave of articles that actually attempted to look at MMT debates, and threw in a wave of citations. (My feeling is that these were done by less senior people who felt that they at least had to make it look like they made an effort to research the topic.) Of course, a significant portion of the citations refer to earlier neoclassical critiques. (This literature is a feature of “publish or perish” incentives: take an existing article, add something to it, and rush it out to publication.) Certain Post-Keynesian MMT critics figure prominently, sometimes without reference to responses by MMT scholars. The most significant citations/discussions of MMT are based on a handful of popular works (including The Deficit Myth), and possibly some of the responses to Post-Keynesian critics. However, citations to journal articles which set out Modern Monetary Theory tend to be either thin on the ground or non-existent. That is, the discussion is of MMT revolves around Post-Keynesian critics possibly unreliable versions of MMT, or primers aimed at a broad audience or possibly undergraduates.
Another genre is an attempt to capture “MMT” in a neoclassical model. Although one can argue that this is at least the start of a something resembling scholarly debate, the elephant in the room is that Post-Keynesians (including MMT proponents) argue that the methodological basis of neoclassical economics is incorrect. It also raises the question: how can you build a mathematical model of a “theory” without really knowing what is in that “theory”?
To the extent that there could be an improvement, the neoclassical academics would need to address the detailed points found in a particular journal article written by a MMT proponent. Unfortunately, people want to believe that they can debunk the entire school of thought in one shot, going after one article is not as exciting.
Omran & Zelmer Paper
Farah Omran and Mark Zelmer have an article at the C.D. Howe Institute “Deficits Do Matter: A Review of MMT.” Since Mark Zelmer is on the “con-MMT” side of the debate (along with McGill Professor Chris Ragan), this is obviously of interest. I can at least prepare something in advance and not just end up with random rants.
An initial point is that the article title is misleading to those of us who have waded through a lot of bad MMT critiques. Instead of characterizing MMT as saying “deficits don’t matter,” they say that MMT says they do matter, just in a different way than usually thought. In fact, the article is one of the most sympathetic treatments I have seen from mainstream economists who are also critics.
I will probably be dissecting the ideas in their article for awhile. Their focus is on policy recommendations, and not academic theory (which is somewhat orthogonal to my earlier complaints). As anyone familiar with the Canadian establishment would guess, the main concern about MMT are the lessons that we (allegedly) learned from the Early 1990s Canadian Fiscal Crisis. Since the Canadian dollar was supposedly collapsing at the time, the previously-mentioned “external constraint” pops up. I will have to look at their potted history of the crisis more carefully, but in case it is not obvious, I am deeply skeptical about the stories I have seen by other establishment figures about this “crisis.”
I am highlighting this a “bleg”: I would be happy if anyone familiar with academic treatments of this topic by heterodox critics of the establishment story could point me to some references. I have my own opinions (no kidding), but I could give a thin veneer of scholarship if I can at least mention someone else in my comments. (I had one interesting paper, but lost it — oops.) That said, I think I need to do an end run around this topic, since I will be so far out of line with the establishment consensus that I would be seen as more credible if I announced that The Holy Vehm orchestrated the crisis. There is no way to re-litigate the Canadian early 1990s experience in the time given. In order to build suspense among my readership, I will hold off detailing my secret end run strategy in a later article.
Expect more articles on “Canada in the 1990s, and What It Means for MMT?” in the coming weeks.