A different blog post today. On November 29, 2019, I sat down with my friend Warren Mosler in Newcastle, Australia while he was on his more or less annual visit to see us. We decided to film a conversation we had about the origins of Modern Monetary Theory (MMT), how we came to it, the current state of MMT and future trends, including being part of the narrative surrounding the Green Transition. You will hear our concern about how the work we put in place at the outset is now being used in popular debates as well as other anecdotes. We consider the recent YouTube debate that Warren participated in in Italy and clear up the misunderstandings that followed that episode. We provide our own perspective on the way the GND debate is unfolding. I hope you find the 38 minute video that follows interesting.
Before Xmas, I published a two-part reply to Gregory Mankiw’s paper on Modern Monetary Theory (MMT) – A Skeptic’s Guide to Modern Monetary Theory (December 12, 2019). I was trying to get the response finished before the break and Part 2 had already become too long. So I decided to leave one issue that I didn’t get to address for a shorter third response once service resumed. I think this part of the response is necessary to set right on the public record. It exemplifies how critics need to work harder to actually understand what MMT is about. And while they try to claim that MMT is opaque and difficult to get to terms with, thereby sheeting the blame for their misguided renditions of our work back onto us, the issue I discuss today is very easy to come to terms with. It is front and centre and there have been many scholarly and other articles written about it. I refer, of course, to the Job Guarantee as MMTs response to the mainstream Phillips curve. The failure to appreciate where this sits in the MMT framework is not confined to mainstream economists. But this group know all about the Phillips curve literature and the place it holds in their macroeconomics. So there is no excuse not to understand it within a buffer stock framework and how MMT responds.
In – A response to Greg Mankiw – Part 1 (December 23, 2019) – I provided the E-mail correspondence that preceded the publication of – A Skeptic’s Guide to Modern Monetary Theory (December 12, 2019) – by Greg Mankiw. In this blog post, I provide a response to the specific points made in that paper and conclude that if it aims to be a fair ‘guide’ to MMT (even from a critical perspective) then it fails badly. So let me explain why I hold that view. Today’s post is long and will take some reading. It could have been a lot longer. But I intend to take a break from writing the blog until next week (the Quiz will appear as usual though), so you have plenty of time to read this longer than usual post. Normally, I would have spread it out over 3 or 4 parts.
On October 2, 2019, I received an E-mail from Gregory Mankiw. It was sent to me, Randy Wray and Martin Watts and asked us some questions about our textbook – Macroeconomics – which had been published by leading textbook publisher Macmillan in March 2019. The book has been selling strongly with a third printing already in the pipeline and a second edition coming, hopefully, later next year. Macmillan also publish Greg Mankiw’s macroeconomics textbook, which has been the dominant teaching book in undergraduate programs. I will take you through the E-mail correspondence that followed because it puts in context what Greg Mankiw decided to do next. Instead of continuing the correspondence on academic terms, which was a reasonable expectation at the time, given the initial approach and our replies, he decided to submit a paper – A Skeptic’s Guide to Modern Monetary Theory (December 12, 2019) – to the American Economic Association meeting in early January, which purports to be a ‘guide’ (meaning in English – a framework to convey an appreciation of something) to Modern Monetary Theory (MMT). After his initial entreaty and our responses in good faith, Greg Mankiw clearly decided that engaging with us on the terms he initially set out was not going to be in his interests and thus took another tack, without any further consultation or reference to his initial contact with us. I wasn’t impressed with that strategy. I was less impressed with the ‘guide’ that emerged. It says very little about MMT. It demonstrates how hard it is for someone deeply locked into a dominant but failing paradigm to think outside the ‘box’ for a while and try to understand that the ideas of a new and emerging paradigm cannot be meaningfully reduced back into the conceptual framework of the failing paradigm that the contender is seeking to usurp. I guess his strategy is understandable – after all – our book is now a direct competitor for his textbook and offers a new approach that has much stronger empirical correspondence. In that context, it is in Greg Mankiw’s self interest to attack our book in any way he can. The problem is that attacks have to have some foundation to resonate. Greg Mankiw’s attack is so lateral that he would have been better to have remained silent. Sure, he is playing to the mainstream groupthink echo chamber. But the echoes will die eventually as more and more people realise the mainstream is in its last death throes. This is Part 1 of a two-part response to Greg Mankiw’s paper. In Part 1, we review the E-mail trail that started all this. In Part 2, I will discuss his response.
It is Wednesday, so only some snippets, although as it turns out the blog post is quite long. I am also travelling a lot today. I have recently come across the complete archive of the PKT Discussion List, which was an E-mail listserv in the early 1990s that brought Warren Mosler, Randy Wray and myself together. In this blog post, I provide some of the interchanges that formed the basis of our subsequent partnership in developing MMT to where it is today. The discussion below is incomplete because I have not yet pieced all the archive together in a coherent way (it is quite fragmented in the form I currently have it in). But I think it might be interesting for you to see what was being said back in the 1990s. There will be more on this another day. No music today (ran out of time) but, tonight, my band is playing in Melbourne (see below) and live music is always better than YouTube videos anyway.
I am travelling most of today and so no standard blog post. For a fair part of the day I also will not be able to moderate comments so there might be some delay. But thanks to the great work by Christian Reilly and Patricia Pino at the – MMT Podcast – my talk at the Brighton Labour Party Fringe Event with British Labour MP, Chris Williamson, was captured for all to hear. It means the event will survive the moment. To give context to the audio that the MMT Podcast has made available, I offer some commentary in this blog post. The comments and the audio should keep people busy until I am able to get back to normal writing. Now in New York City and looking forward to meeting the gang at the – MMT Conference – which runs this week.
This is Part 2 (and final part) of my series on printing money, debt and power. The two-part series is designed to draw a line through all the misconceptions and errors that abound on the Internet about the Modern Monetary Theory (MMT) treats deficit spending and bond issuance. The social media debate about MMT is at time nonsensical, thriving on falsehoods and fantasy. I get many E-mails after some robust Twitter exchange between some self-proclaimed expert who has found the latest fatal flaw in our work. Often these characters have just stumbled across MMT for the first time and, full of dissonance, wade into the discussion without thinking for a moment that we have been working on this Project for 25 or more years and, just may have, come across these points before. In other cases, the critics just make stuff up to make themselves sound erudite. In the process, well motivated readers get confused. In the first part I dealt with the ‘money printing’ story about MMT. Today I want to discuss the issue of bond issuance and whether MMT economists are Wall Street stooges who want to perpetuate the interests of the financial sector over all else. Seriously!
There are continual Twitter type debates and Op Ed/Blog-type articles going on about whether MMT says this, or that, or something else. The critics are refining their attacks by hammering on about “printing money” and hyperinflation, and, more recently that MMT ignores ‘power’ (whatever that is). The latter leads them to conclude that MMT is thus a naive approach and is inapplicable to a political agenda aiming at changing things for the better. These debates (if you can call them that) are also a very American-centric sort of to and fro, which exemplifies the tendency of the US to think the world and all ideas stop at its borders. In this two-part series, I seek to clarify some of the points that are raised (not for the first time) (-:, which, in turn, demonstrates how poorly constructed these attacks. I know it is often said that attackers haven’t read the literature. But in these situations it is a fact. In part 2 tomorrow, I will also touch on why I think some MMTers are becoming defensive in the wake of these attacks. So, in Part 1 I consider the ‘money printing’ story. Specifically, is MMT just about ‘printing money’? The answer is obvious – profoundly no, but we need to understand where these types of allegations come from (which swamp!).
I am working on a manifesto (‘White Paper’) linking Modern Monetary Theory (MMT) with a Green New Deal (GND) concept. I will announce an important strategic coalition I am forming to advance this agenda in the coming period and some great events to present the framework. As part of that process, I have been sketching some of the important guiding principles that I consider to be essential if a massive socio-economic transformation like the Green New Deal (or whatever we want to call the strategy) is to be successful. Lessons from history are a good starting point to understand why things go awry. In that respect, the largest national infrastructure project that Australia has embarked on for decades – the National Broadband Network (NBN) – is a object lesson in how not to conduct government policy when nation building. The Green New Deal is about nation building – creating a framework of infrastructure, education, skills development, employment, distributive mechanisms and more to take nations into the next century while reversing the environmental degradation that industrialisation and mass consumerism has wrought. The central role of the government as the currency issuer will be paramount. The whole transformation will not be successful while policy makers hang onto mainstream macroeconomic views about government financial capacities, which manifests into obsessions about achieving fiscal surpluses. This is why an understanding of MMT is central to any proposal to advance a GND. Without that understanding, we will always encounter the nonsensical issues that have plagued the NBN development and left it in a state of chaos and near-redundancy, when it should have underpinned our technological network for decades to come.
This is Part 2 (and final) in my discussion about what the financial markets might learn from gaining a Modern Monetary Theory (MMT) understanding. I noted in Part 1 – that the motivation in writing this series was the increased interest being shown by some of the large financial sector entities (investment banks, sovereign funds, etc) in MMT, which is manifesting in the growing speaking invitations I am receiving. This development tells me that our work is gaining traction despite the visceral, knee-jerk attacks from the populist academic type economists (Krugman, Summers, Rogoff, and all the rest that have jumped on their bandwagon) who are trying to save their reputations as their message becomes increasingly vapid. While accepting these invitations raises issues about motivation – they want to make money, I want to educate – these groups are influential in a number of ways. They help to set the pattern of investment (both in real and financial terms), they hire graduates and can thus influence the type of standards deemed acceptable, and they influence government policy. Through education one hopes that these influences help turn the tide away from narrow ‘Gordon Gekko’ type behaviour towards advancing a dialogue and policy structure that improves general well-being. I also hope that it will further create dissonance in the academic sphere to highlight the poverty (fake knowledge) of the mainstream macroeconomic orthodoxy.