Deus X wrote:
You're right...I can. But I don't have time to write you a dissertation.
I don't think time is the limiting factor.
Modern Monetary Theory (MMT) Critique
"The following provides a brief critique of a relatively new monetary theory called “Modern Monetary Theory” also known as MMT.
MMT has become an increasingly popular economic theory in some left-wing circles in recent years in part due to its eye opening description of public finances. I am sympathetic to many of the views espoused by MMT and I would argue that they have many useful insights. I’ve written about how MMT is an important theory to understand, but I would also argue that MMT takes a basic Post-Keynesian & Marxian framework and adds a bunch of “modern” understandings that result in inconsistencies. I think they use these inconsistencies to try to form a “new paradigm” for public finances that misconstrues reality. In my opinion, this new paradigm is unnecessary and results in some overreach in the areas describing the monetary system. The following 4 critiques (as well as my own brief comments below) are useful and elaborate on those inconsistencies.MMT, The Emperor Still Has No Clothes
, Thomas PalleyThe Monetary and Fiscal Nexus of NeoChartalism
, by Marc LavoieMMT and the Real World Accounting of 1-1<0
, by Brett FeibigerA Critique of MMT
, by Steve Waldman
Here’s a shorter version of what I believe are the primary inconsistencies and problems in MMT. This is a brief rebuttal, but covers the main points of confusion. I’ve tried to focus on points of operational errors where I feel MMT misunderstands operational realities of the monetary system. This hopefully results in an objective analysis as opposed to a politically biased policy focus..."
MMT Claim #1: A sovereign currency issuer need not fund itself via taxes or bond sales.
Reality: Any endogenous issuer of money must “fund” itself.
MMT Claim #2: Unemployment is caused by the deficit being too small.
Reality: Unemployment is caused by a lack of private investment.
MMT Claim #3 : “taxes drive money”
Reality: Many things “drive money” and taxes are not likely an important
MMT Claim #4: State money sits atop the hierarchy of money in the monetary system.
Reality: Most modern governments have outsourced money creation to
the private banking system placing it in the dominant settlement and
Final Critique: MMT is not Empirically Tested
My final and probably most important critique is that MMT is not an empirically tested theory. In fact, it is more a set of beliefs than a set of economic principles. This probably explains why its followers are so militant in their belief. They believe more than they can prove. We see this across several facets of MMT including:
MMT cannot prove that “taxes drive money” and cannot even begin to show what level of taxation would drive demand for money. It is nothing more than a claim that they cannot test.
MMT has no coherent theory of inflation. They claim that they will control inflation through changing of taxes combined with a Job Guarantee, but they cannot show what those levels would be or how they would actually implement such a policy in any coherent manner. Most worrisome is the fact that MMT appears to have no empirically coherent theory for containing high inflation. Despite repeatedly noting that inflation is the true constraint for a sovereign currency issuer they do not have an empirically tested theory for containing inflation. Instead, they claim that the Job Guarantee will anchor prices and claim that reducing deficits will sufficiently contain inflation. These positions are entirely theoretical and have only thin empirical evidence to support them.
The Job Guarantee is a totally untested program in any developed country. MMT cannot show that the JG does what they claim. Instead, it is supported mainly by faith and untested claims.
There is legitimate reason to critique MMT based on its internal operational inconsistencies and the lack of empirical evidence supporting so many of their claims. I find MMT to be a useful theory, but one that we should approach with skepticism.
Every time there's a discussion of economics, you throw your MMT argument into the discussion as if it's the magic bullet. Then you denigrate anyone who disagrees. Read the whole article for clarity. I've given you the basics here.