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MMT and pluralism in economics

I am recording some promotional videos in London today for Macmillan Higher Education who will publish our forthcoming textbook – Macroeconomics on March 11, 2019. These will be the first of many short videos to support the teaching program outlined in the textbook. At last Friday’s very successful launch of the – Gower Initiative for Modern Money Studies (GIMMS) – I was asked a question at the end of the first formal workshop I presented, which I was unable to answer due to time constraints. The question went something like – “What do you think of the movements to instill pluralism into the teaching of economics?” The corollary was whether our forthcoming textbook adopts a ‘pluralist’ approach. The question implied that ‘pluralism’ was a desirable characteristic for a macroeconomics course to feature. In this blog post I discuss this question. It outlines what I might have said by way of answer to that question. But, given the medium, in a lot more detail than I would have provided at the actual event. Generally, we adopt a ‘pluralist’ approach. But it all depends on what we mean by that term. What we do not do is privilege the mainstream macroeconomics in any way. Too often, those who call for ‘pluralism’ in economics think it is appropriate to force students to learn swathes of the mainstream theory and practice as if it is knowledge. They think this is somehow a liberal approach to learning. Our view is that learning is about knowledge accumulation. Universities are not places where ‘fake knowledge’ should be disseminated. That is what propaganda is about.

The International Confederation of Associations for Pluralism in Economics (ICAPE), which was founded in 1993, “a consortium of over 30 groups in economics working cooperatively to maintain diversity and innovation in methods, approaches, policy analyses, and higher education in the profession”.

It considers “pluralism and intellectual progress” to be “complements” and “that each tradition of thought (Austrian, feminist, old and new institutionalist, Marxian, neoclassical, Post Keynesian, Sraffian, etc.) adds something unique and valuable to economic scholarship”.

By implication, they consider ‘pluralism’ to consist of a:

1. “a multiplicity of approaches to the scientific analysis of economic activity”.

2. “tolerant communication among different approaches”.

The Wikipedia page – Pluralism in economics – says that it is:

… a campaign to change the teaching and research in economics towards more openness in its approaches, topics and standpoints it considers …

Pluralism encourages the inclusion of a wide variety of neoclassical and heterodox economic theories—including classical, Post-Keynesian, institutional, ecological, evolutionary, feminist, Marxist, and Austrian economics,

In 1992, there was an advertisement placed in the May edition of the American Economic Review, one of the bulwark publications of orthodox economics (published by the American Economics Association).

The advertisement – entitled a “Plea for a Pluralistic and Rigorous Economics” – was signed by 44 economists and read:

We the undersigned are concerned with the threat to economic science posed by intellectual monopoly. Economists today enforce a monopoly of method or core assumptions, often defended on no better ground than it constitutes the ‘mainstream.’ Economists will advocate free competition, but will not practice it in the marketplace of ideas.

Consequently, we call for a new spirit of pluralism in economics, involving critical conversation and tolerant communication between different approaches. Such pluralism should not undermine the standards of rigor; an economics that requires itself to face all the arguments will be a more, not a less, rigorous science.

We believe that the new pluralism should be reflected in the character of scientific debate, in the range of contributions in its journals, and in the training and hiring of economists.

As time passed, student movements – such as the “autisme-économie” petition in France (2000) and the “Opening Up Economics” petition from PhD students at Cambridge, UK (2001) – formed to advocate ‘pluralism’.

The so-called ‘Cambridge 27’ call was representative:

We are not arguing against mainstream methods, but believe in a pluralism of methods and approaches justified by debate. Pluralism as a default implies that alternative economic work is not simply tolerated, but that the material and social conditions for its flourishing are met, to the same extent as is currently the case for mainstream economics. That is what we mean when we refer to an ‘opening up’ of economics.

Anyone with a familiarity of the evolution of the history of economic thought will know that in the Post World War 2 period (particularly in the period of neoliberal expansion – post 1980s), economists (micro and macro) gradually started to exclude consideration of schools of thought such as ‘institutionalism’ because it didn’t fit the growing antipathy towards government intervention and the growing emphasis on ‘free markets’.

This was an ideological shift.

The textbooks that were common, say in the 1950s, were more likely to present macroeconomics as a debate between schools of thought (hence the typical ‘Keynes and the Classics’ approach) rather than impose a unitary model for the pedagogy – a self-contained set of principles that is espoused without question.

Certainly, the more recent textbooks, such as Mankiw’s Macroeconomics, are clearly not ‘pluralistic’. That is, they do not present a debate between, equally privileged, but contrary conceptions of the economy.

There is now pattern where the New Keynesian approach is homogenised and presented as if there is no alternative explanation.

Just before the Global Financial Crisis (GFC) revealed its worst, Olivier Blanchard, the then chief economist at the International Monetary Fund (IMF), published a paper (August 2008) – The State of Macro – which reviewed the understanding that macroeconomists had of the real world,.

In his assessment, the “state of macro is good”.

He asserted that a “largely common vision has emerged” (p.5) in macroeconomics, with a “convergence in methodology” (p.3) such that research articles in macroeconomics “look very similar to each other in structure, and very different from the way they did thirty years ago” (p.21).

They now follow “strict, haiku-like, rules” (p.26).

He also noted that the dominant ‘New Keynesian’ approach in macroeconomics had “become a workhorse for policy and welfare analysis” (p.8) because it is “simple, analytically convenient … [and] … reduces a complex reality to a few simple equations” (p.9).

It didn’t seem to matter to these economists that in the “basic NK model is that there is no unemployment” (p.12), such that all fluctuations in measured joblessness are characterised largely by workers choosing whether or not to work as part of a so-called optimal choice between work and leisure.

The mainstream macroeconomists, who have an abiding faith in the ability of the self-regulated market to deliver optimal outcomes – which we will refer to as the neo-liberal approach, had declared some years before the crisis, with an arrogance common to the discipline, that the business cycle is dead.

That is, the large swings in macroeconomic performance (recessions and mass unemployment and boom and inflation) that had dominated the attention of economic policy makers in the Post World War II period and led to fiscal policy (the manipulation of taxation and government spending) being the primary tool governments used to maintain full employment and price stability, were now being denied.

University of Chicago professor Robert Lucas Jnr gave an extraordinary address to the American Economic Association in January, 2003 where he claimed (Source):

… that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.

A year later (February 20, 2004), the then US Federal Reserve Bank Governor, Ben Bernanke claimed that as a result of the policy shift away from governments attempting to manage total spending in the economy by varying fiscal policy settings in favour of using monetary policy (interest rate setting by central banks) to concentrate purely on price stability and the pursuit of fiscal surpluses, the world was enjoying the Great Moderation (Source).

Allegedly, damaging recessions were a thing of the past and low inflation and steady growth were now the norm.

The public was led to believe that these mainstream economists had triumphed over the old interventionists who had over-regulated the economy, sucked the enterprise out of private enterprise, allowed trade unions to become too powerful, and bred generations of indolent and unmotivated individuals who only aspired to live on income support payments.

The business cycle was dead and economic policy should now concentrate on deregulating labour and financial markets and reducing income support payments to reduce the subsidy to unemployment so that the ‘market’ can work even more efficiently.

This was denial writ large. And then the GFC arrived.

But, the point here, is that this arrogance fed into teaching programs everywhere.

Students were taught these “strict, haiku-like, rules” and everything else was excluded.

Progressively, courses in economic history, economic methodology (philosophy of science), ethics, history of economic thought, Marxian economics, and more were dropped from curricula that students were required to satisfy in order to graduate as an economics major.

And it didn’t seem to matter that mainstream macroeconomics had become a degenerating research program – in the way philosopher, Imre Lakatos conceived a body of work that had lost any sense of explanatory capacity.

As Thomas Kuhn noted, practitioners within such a program grimly hang on to their theoretical core despite failure to explain real world events.

A degenerative research program maintains its hegemony in a number of ways, including control of teaching programs in universities; control of the hiring process within the Academy; control of key publication outlets; control of major research funding bodies; and a dominance in the linkages between the Academy, business and government.

Much of the control is implicit and accomplished through networks to get around external oversight such as, anti-discrimination legislation.

The late economist Jack Barbash discussed the way in which the economics profession protects its belief system from criticism and avoids, as far as possible, addressing real world problems.

I wrote about his contribution in this blog post – 5.4 into 1 does not equal 5.4 (August 21, 2012).

In an article published in the US Magazine Challenge (March-April, 1982) entitled The Guilds of Academe (JSTOR link for those with library access), Barbash wrote there is:

… no formally coercive apparatus … [but] … the equivalent of an ‘old-boy’ network” in operation.

This “network” ensures that advantages (publications, research grants, promotions etc) accrue to those who conform to the rules.

Socialisation begins in one’s student days where the masters of the paradigm control the curriculum; the grading systems; and who gets postgraduate scholarships to pursue doctoral studies.

The indoctrination intensifies when one enters the postgraduate stages.

In economics, the graduate student learns that “rigor is more important than substance” and “method is more important than result” (p.52).

Remember those haiku-like rules that govern an economics paper’s chance of publication success.

More insidious is that mainstream (neo-liberal) economics privileges the interests of capital.

To understand why there is so much resistance to abandoning the failed economic theories we need to understand that the mainstream economics paradigm is much more than a set of theories that economics professors indoctrinate their students with.

In his 2013 book – Austerity – Mark Blyth noted that that these mainstream economic theories:

… enshrine different distributions of wealth and power and are power resources for actors whose claims to authority and income depend upon their credibility …

This explains, in part, why there was such resistance to abandoning them, even though it was clear that they were bereft of any evidential standing.

Historically, the body of theory that now represents neo-liberal economics was first developed in the late C19th as an antidote against the rising influence of Marxism, particularly in Europe.

The message was getting through to workers that profits were the reward for ownership of capital not a reward for any contribution to production.

The capacity of owners of capital to take the surplus labour of the workers – for nothing – was then the central story.

It was patently unfair and increasingly violent protests were threatening the capacity of capital to maintain their hegemony over the vast bulk of the population.

Clearly a solution was needed.

Economists were recruited by industrialists to develop theory that made it look like competitive capitalism was a fair system because it rewarded productive input in proportion to the contribution of that input to final output.

Later this was refined as attacks on government policy aimed at redistributing national income.

All the time, the interests of those who own or serve capital were being advanced at the expense of the less advantaged.

So, such is the Groupthink in the academy and the fact that the mainstream macro theories were supportive of the interests of capital, that any number of ’empirical failures’, including the failure to see the GFC coming, failed to dent the primacy of this approach.

Teaching programs have hardly been changed since the GFC.

It is in that context that the call for ‘pluralism’ has been gathering in popularity, particularly among student groups, who are sick to death of being fed the mainstream nonsense.

How does MMT deal with pluralism?

In my three presentations at the GIMMS launch – the initial polemic to launch GIMMS and then at times during the two formal workshops I conducted – the first on an introduction to MMT and the second on the Job Guarantee – I mentioned that our new textbook did not take the usual ‘pluralist’ approach.

By that I mean, it is common among previous ‘pluralist’ efforts to produce ‘heterodox’ texts, to privilege the mainstream approach as it is presented in the mainstream texts and then offer critical scrutiny of that approach – to broaden the students’ perceptions and to provide them with a ‘counter narrative’ to the mainstream pedagogy.

When we were conceiving of our own MMT pedagogy we considered that approach to be deeply flawed.

It was sort of trying to be ‘Mr or Ms Nice Guy’ – look how liberal we are – we don’t trash the orthodoxy but just criticise it. Students get to learn the orthodoxy but also some of its failings.

This implies there is some value in the orthodox theory and practice.

We disagree.

As part of our own strategy, we have been doing a lot of research in the area of social psychology and cognitive psychology (including the use of language and framing) and what becomes clear is that if one leads with a lie, the lie is immediately privileged.

By introducing the lie first, you immediately trigger the frames that support that lie and no matter how ‘factual’ you become in refuting key elements of that lie, the damage is done – the framing is reinforced and you get nowhere fast.

Those insights, which I have written about in the past, provide very powerful guidelines on how to present a pedagogy.

Past blog posts that are relevant here:

1. Framing Modern Monetary Theory (December 5, 2013).

2. The role of literary fiction in perpetuating neo-liberal economic myths – Part 1 (September 11, 2017).

3. The role of literary fiction in perpetuating neo-liberal economic myths – Part 2 (September 12, 2017).

4. The ‘truth sandwich’ and the impacts of neoliberalism (June 19, 2018).

My first refereed journal article with Dr Louisa Connors (more to come) came out last year in the Journal of Post Keynesian Economics – Framing Modern Monetary Theory (June 14, 2017).

That literature makes it clear that the way we frame our arguments and the language and vocabularies that we deploy is highly significant in whether our views are accepted or not in the public discourse.

So the question for those who call for ‘pluralism’ in economics teaching programs is: Should ‘non-knowledge’ be privileged equally with ‘knowledge’?

My answer to that question is clear: NO.

Non-knowledge should not enter teaching programs in any other guise as ‘history of thought’, to allow students to appreciate where an academic discipline has been in the past.

Juxtaposing ‘non-knowledge’ with what we would claim to be ‘knowledge’ is a flawed approach, no matter how dominant the ‘non-knowledge’ is in the current context of the economics profession.

Education is a process of expanding perception beyond crude superstitions and prejudices.

It is a way of exposing ideological dogma.

In that respect, I told the GIMMS audience that our soon to be published Macroeconomics textbook presents Modern Monetary Theory (MMT) as a mainstream approach – without compromise.

Where we think students should be exposed to existing mainstream macroeconomics we treat the material in a ‘history of thought’ manner and in self-contained HET-type chapters.

We never privilege the mainstream approach.

Why not? Simply because we consider it to be fake knowledge.

Its construction of the monetary economy and the capacities of the currency-issuing government within that economy does not correspond to anything in the real world.

Our goal was to present a macroeconomics that was strongly ‘congruent’ with the real world – to provide students with an accurate (if somewhat stylised) depiction of how things actually work in central banks, treasuries, commercial banks etc.

Congruency is about being consistent with the evidence.

We don’t claim that we are providing the ‘truth’. Rather, our body of work is a tentatively adequate depiction of the data generating process within the institutional framework that is operating.

That approach provides many insights that bear up when confronted with the data and which are in contradistinction to the predictions (or claims) of mainstream macroeconomics.

Some might claim, then, that our approach is monistic, which is the opposite (or denial) of pluralism.

I would disagree.

We present the specific MMT approach within a background of history, culture, institutional description and a very strong attributive environment recognising the past influences.

What we do not do is privilege the mainstream approach in any way.

We do not see it as a debate where the jury is out.

That is one of the shortcomings of the ICAPE approach – which thinks that New Classical Economics, Real Business Cycle Theory, New Keynesian economics offer “something unique and valuable to economic scholarship”.

We disagree.

They offer fake knowledge. We are not writing a religious liturgy. The textbook is about knowledge.


So if by ‘pluralism’, we mean that all ideas in the past and present should be treated with equal respect and privilege, we disagree.

We consider pluralism to mean a body of work that draws on past influences that are congruent and consistent but also adds new insights that might be temporally or institutionally dependent.

We should not ‘tolerate’ fake knowledge, especially as it has been used to advance policies that have deliberately forced millions of workers into unemployment, cut public sectors to the disadvantage of the poorest members of our societies, and redistributed income to capital.

This is a time for MMTers to be confident and not pay lip service to the mainstream macroeconomics, hoping that there will be some acceptance of our ideas.

Our textbook is 100 per cent MMT solid. And I make no apologies for that.

Remaining date in my current UK/European speaking schedule

I have several significant meetings in London tomorrow (which I may or may not disclose publicly – depending). Then I am off to Germany for the last event on this particular speaking tour.

Saturday, October 13 – Wurzburg, Germany. Makroskop event.

I am on a panel at 13:15 with Heiner Flassbeck and Martin Höpner – topic Exchange rate regimes

Location: Tagungszentrum Festung Marienberg, Oberer Burgweg 40, 97082 Wurzburg

The workshop runs from 9:00 to 18:00 with several speakers discussing aspects of currencies.

Contact: for details.

That is enough for today!

(c) Copyright 2018 William Mitchell. All Rights Reserved.

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    This Post Has 44 Comments
    1. Geometry is usually presented initially along lines that strongly parallel Euclid. Modern Geometry requires a different approach with different postulates and is more rigorously abstract. This approach is less intuitive, but expands upon the Euclidian base and I think it is effective. Learning how ideas and knowledge have expanded can deepen understanding.

      Your statement,”We present the specific MMT approach within a background of history, culture, institutional description and a very strong attributive environment recognising the past influences.” sounds like a great approach.

    2. Good.

      Reading Mankiw’s book first when I started on this strange, confusing yet fascinating auto-didactic journey into Macroeconomics meant I had to spend a lot of time unlearning things.

      I wish I’d read say Mosler’s book first.

    3. Dear Bill, I very much await the new textbook. I really can’t comment on the treatment of ‘mainstream’ economics until I read it obviously. I just want to say that I have actually learned and understood a lot more mainstream economics from reading your blog than I knew previously. And also understand a lot more about where it is wrong. You are one great teacher. Better than the ones I got my stupid economics degree from. Better teacher even of the ‘mainstream’ stuff. And I am happy to have learned or relearned it from you even if only to be able to criticize it or contrast it with what MMT says.

      The format you have used here on the blog seems to be- teach what MMT shows, teach what mainstream says about it, show why they are wrong and why you are right. That is a great format for someone who needs to ‘re-evaluate’ out of their previous economics learning. So that worked great for me. But oh what a waste of time and effort it was learning some of that crap to begin with. Hopefully your new format can save new econ students from that ‘opportunity cost’.

    4. Isn’t one of the main problems that, in American universities, professorial chairs are generally sponsored by private individuals and generally these individuals have amassed considerable wealth. It doesn’t take much imagination to see where their values might lie and the values they might want to see promulgated.

    5. One way to guarantee that MMT is “pluralistic” would be to adopt a “semantic view” versus a “syntactic view” of MMT. This arcane terminology is, well, arcane. But the distinction it makes is not hard to understand. A syntactic view of MMT would say that there is one set of primitive concepts and axioms for MMT and that we only need to discover what that one set is (and then formal syntactic argumentation will take care of the rest). A semantic view of MMT would say that the basic concepts and principles of MMT may be *modeled* in perhaps multiple ways (that may not even be pairwise consistent) and that the theory in the end is just a collection of such models. Any one such model will adopt its own basic concepts and principles, but there is not necessarily just one way to do this. What grounds a semantic view of MMT and saves it from unhinged arbitrary relativism is (1) that these multiple models should be to some extent commensurable, and (2) that one or more of these models are “data” models (cast in terms of actual concrete procedures for obtaining actual concrete evidence of whatever it is MMT is about).

    6. Very much anticipating the March date; I have fishpond(dot)com aligned.
      I read Mark’s ‘Austerity’ soon after it was published, and this really lead me to MMT reading, as it stopped short of a rounded explanation; (he’s a ‘political-economy’ guy, so…), insightful as the book was.
      I remember Hokey Joe was our fearless Treasurer at the time, so it was sure ‘on topic’.
      Your blog, and the output of others, accessed via Twitter, is a beacon. I’m buoyed, as I imagine many others are, at the intervention we non-economists can make, (yes, mainly politely, Bill… most of us) on social media, particularly when challenging the ‘budget-balancing centre-left’… (Daniel DeVoss’s term, not mine, but perfect).
      Labor wonks’ reticence (or Labor-sympathetic ones), at even acknowledging one way or the other as to their views on MMT can surely not last much longer. (looking at you, Australia Institute…).

    7. F. Thomas Burke:

      Yes, I agree that this is a useful way of thinking. IMHO part of the problem with grasping and explaining the JG is that it is something that is more associated with the “intended model” than other facets of MMT. If you are going to use the syntax and concepts of MMT and economics – and use and apply them to the real world, associate them with natural language terms and meanings, rather than just play some formal game, then the JG is a logical, syntactic, formal consequence of adding enough additional axioms to sufficiently describe the “intended model” of human societies.

      that the theory in the end is just a collection of such models. Imho, that is getting a bit too close to the bad, confused and confusing usage of the word “model” by economists that larry here and Axel Leijonhufvud have pointed out. “Theory” should be syntactic, “model” semantic.

    8. Will your other textbook (the expanded from the one already published) still be published? How does the one with McMillan differ from those two? Thanks

    9. I have been spreading the truth of MMT on 2 sites for over 5 years on one and 1 year on the other.
      Recently I was doubted and it came down to inflation. That is deficit spending like MMT allows would lead to inflation or even hyperinflation.
      I explained that the inflation of the 70s was causes by OPEC raising the price of oil and the Fed. Res. response made the pain worse because it raised the interest rate to stop the un-stoppable rise of prices caused by the basic resource (= oil) going way up in price.
      I was challenged and my reply was to ask them to provide a theory of why the inflation of the late 60s and early 70s was caused by the Gov. spending too much and having massive deficits; but Pres. Reagan’s more massive deficit spending of the 80s did not result in large inflation. I got crickets. Not even one person came forward with a “mainstream” theory of why the deficit spending of the 80s* did not result in inflation. It was 3.75 to 6 times more deficit spending in half the time. [We should cut the size in half or so because of the inflation of the 70s.]
      . . I think MMT can easily account for the lack of inflation in the 80s. I’m still looking on this site for Bill’s theory of why the inflation of the late 60s and all the 70s occurred.
      .* . For those who don’t know, when Reagan was sworn in the total US national debt stood at $1T, and when he left it stood at $4T. So, the deficit spending from 1845 until 1980 had totaled $1T. So, the deficits of the 60s and 70s could not have totaled more than $500B to $800B spread out over 16 years compared to Reagan’s deficits which totaled $3000B over 8 years.

    10. Cool, Some Guy.

      What I would say to FTB is that taking a purely syntactic view of MMT is not possible yet because the theory has not been finitely axiomatized and, as far as I know, there are no intentions to do so. Which I think is a good thing, as the theory is still being developed and refined. It is not a finished project. Nevertheless, it is important none the less to distinguish between substantive propositions and definitions, as the latter have no truth-value, in one important theory of definition. This can be quite a complicated matter.

      With respect to Bill’s comment about privileging falsehoods, I think he is right. When we learn physics, we are first introduced to Newtonian mechanics. This is simply because when velocities are slow and distances small, Newton’s theory is a good approximation. So, Euclidean geometry and Newtonian mechanics have a decent empirical approximation in the real world, such as the running of your car around town. When it comes to GPS, however, if you ignore relativistic time considerations, your sat nav will not guide you to the right place. This is because the passage of time on the satellite differs by a small amount with the passage of time on the Earth. While the users of the sat nav do not need be be familiar with relativistic equations, the programmers of the satellite and the sat nav do. What is known as neoliberal economic theory has no application at all to the real world, even an approximate one. Hence, it belongs in a history section of a textbook.

      Paul Romer, in the fall of 2016, put up two blog posts discussing What is Wrong with Macroeconomics. He named names. One of the named, Thomas J Sargent, decided that he would critique Romer by indicating that he hadn’t read the paper and wouldn’t read it but nevertheless could claim that Romer had clearly showed that he hadn’t done any real science for about 25 years. I found Sargent’s comment jaw dropping though I don’t expect I should have.

    11. larry,
      A cricket is an insect sort of like a grasshopper or locust. But, it is usually black.
      The phrase means, “I hear no sound.” I.e., there was no reply.

    12. As a small ‘p’ politician from New Hampshire, what I see is a fundamentalist point of view that has stopped the US in its tracks. There are no ‘policy’ debates at the national level. There are no practical programs at all. It is a vacuum that sucks anything of intellectual value down a black hole. The new macroeconomics of Mitchell et al, once publicized, will replace the nonsense (fake knowledge) quickly in my view. Democracy will re-exert its power at the ballot box.

    13. In my view there’s a distinction to be drawn between eclecticism and what ICAPE defines as pluralism. Eclecticism implies a judicious selection from the cafeteria of previously-advanced ideas of those which one judges to have greatest explanatory power, and which one therefore chooses as a basis from which to develop one’s own ideas. The essence being that that is the only criterion for adoption, as opposed to conformity with some pre-existing body of dogma or ideology (ie any closed system of thought such as neoclassical economics).

      It seems to me that (in my own terms anyway) it’s actually eclecticism which Bill is espousing. Whereas pluralism, as ICAPE define it anyway, is at the same time less and more discriminating: it just says “Everyone’s welcome, regardless of whether their ideas are crap or not. Let it all hang out. But when the party’s over the grown-ups will return quietly to the serious business of plugging their own dogma, undeterred by raucous catcalls from troublemakers incapable of recognising true value when they encounter it”.

    14. @F. Thomas Burke

      I’m not confident of having fully grasped the distinction you make between “syntactic” and “semantic”.

      But insofar as I have it appears to me that Bill’s stance falls squarely into the syntactic category.

      Would you agree? Because if so you seem to be suggesting that Bill change his approach to another – as I read it radically different – one.

      Have I got that right? If so, why would he want to do that? I’m puzzled (put that down to geriatric causes, and humour me please).

    15. so, the macroeconomics textbook basically gave the treatment of any self-respecting biology textbook towards creationism in explaining the origin of species.

    16. Chris. Dream On. I listen to public radio all the time. Not one whisper of MMT – over years. And their claim to fame is their even-handedness. Wealth and power have been, and will continue suppressing this with everything they have.

    17. Your comment that knowledge is an accumulation of learning does injustice to the discriminating use of these terms. Dr. Fernando Flores, ex finance minister of Chile and teacher of linguistics at Berkeley some years ago distinguishes knowledge as information that is stored in the brain while learning is information stored in the body. When you learn something, like driving or typing, it becomes an automatic physical response.

    18. robertH,

      The distinction between the “syntactic view of scientific theories” and a “semantic view of scientific theories” was pretty well established by Suppes and van Fraassen (and others) in mid-20th century. The earlier syntactic view is that of Hempel and logical positivism (that a science is a single theory constructed logically (syntactically) from a single set of axioms and empirical “atoms”). Suppes developed the semantic view inspired largely by how scientists actually do what they do (where science is a patchwork of piecemeal *models*, each being an interpretation (semantic) of its own homegrown mathematical language).

      I am not sure what Bill is after, but his take on pluralism seems to me to be consistent with the semantic view, i.e., there is not just one MMT model. It should be recognized that MM theory, like any other scientific theory, consists of a *plurality* of models of different kinds and levels of macroeconomic systems.

      One crucial question for me is whether MMT is actually a scientific theory. An affirmative answer to that question, for me, only requires (1) that at least some of its constituent models are specifically geared to presenting actual empirical data, and (2) that more abstract MMT models are commensurable in their own ways with one or more of these “data” models.

      If you want MMT to be accepted in governmental circles, then you have to do the science and show, the way scientists do, that MMT is demonstrably better than any competing theory. Standard questions like “but won’t that cause hyperinflation” or “how are you going to pay for it” need to be answered not by abstract debate but by scientifically demonstrating MMT’s answers to such questions — e.g., that hyperinflation will not be the result, or that the question itself rests on misconceptions if not fallacies. Etc etc.

    19. To clarify further, what is a “model”?

      The fairly large-scale pictorial model that Alt develops in _Diagrams and Dollars_ (2014) is just one model for MMT, but I personally found it helpful and informative.

      Mosler’s model of fiat money in _Soft Currency Economics_ (1996/2013) (where, in order to eat and live in the house, children must earn business cards from Dad by doing chores, etc.) is equally informative, though it pertains to just one limited aspect of MMT.

      Other kinds of MMT models center around articulating mathematical (algebraic) relations among key macroeconomic variables. Here’s the core of a mathematical model for “Consumption”:
      C = C0 + cY = C0 + c[C0 + I + G]/(1 – c) = [C0 + c( I + G)]/(1 – c)
      from Mitchell, Wray, Watts, _Modern Monetary Theory and Practice: An Introductory Text_ (2016).

      Other examples of models no doubt abound in the MMT literature. Can they all be understood as models for one and the same axiomatic language for MMT? I doubt it, but it doesn’t matter. No other science requires any such thing, so neither should MMT. MMT is just a pluralistic motley plethora of models like those above that somehow are getting at a common subject matter, in different ways that one hopes are mutually coherent and that are answerable to actually macroeconomic data (also couched in “data models”).

    20. @Chris Herbert,

      The right-wing opposition to rational public policy reforms, hell, even opinions based on evidence is coordinated and extremely well-funded politically. Conservative agents aren’t interested in talk or good-faith arguments and they’ve got an army of think tanks, business schools, Fox news/talk radio and evangelical pulpits across the USA. Check out PBS POV recent “Dark Money” episode:

      NPR’s Planet Money did an episode on MMT on September 26th

    21. Bill Another elegant and relevant critique of the orthodox fiction that passes for Economics. Yes I agree it’s time to rewrite the narrative with macroeconomic reality coming in first before neo- liberal fiction. Thanks for your honesty and integrity. Good luck with your upcoming talks.

    22. @ F. Thomas Burke

      Thank you for that lucid and succinct exposition. Most illuminating – at least I think so :-)

      (And thank you too for not being in the least condescending).

      I shall now proceed to digest its implications (to the best of my these days, alas, all-too-limited ability).

    23. “If you want MMT to be accepted in governmental circles, then you have to do the science and show, the way scientists do, that MMT is demonstrably better than any competing theory.”

      Rubbish. They accept the ideology of whomever is paying them the most coin. What’s true / factual doesn’t even come into play.

    24. @michael galvin

      The article you put the link to is little more than a last grasp at legitimacy by the IMF and the Euro currency – both of which have absolutely no relevance.

      If the authors so worried about debt / insolvency he should be advocating the end of the Euro not an expansion of it.

    25. F. Thomas Burke says:
      “To clarify further, what is a ‘model’?”

      I’ll offer a couple more models. One is Beardsley Ruml’s, at the time Chairman of the NY Fed, with his blunt declaration:- “Taxes for revenue are obsolete”, in his eponymous 1946 article.

      Another is the (more likely) source Abba Lerner with his “functional finance” paradigm (in contradistinction to the neoclassical “sound finance ” one) and his “employer of last resort” proposal which the JG emulates and expands upon.

      FTB:- “Other examples of models no doubt abound in the MMT literature. Can they all be understood as models for one and the same axiomatic language for MMT? I doubt it, but it doesn’t matter. No other science requires any such thing, so neither should MMT. MMT is just a pluralistic motley plethora of models like those above that somehow are getting at a common subject matter, in different ways that one hopes are mutually coherent and that are answerable to actually macroeconomic data (also couched in “data models”)”.

      Very cogent but not – so far as I can see – germane to Bill’s article. Because its angle of attack was different, namely to take up the challenge (implicit I think in the question raised by a member of his audience at the GIMMS study-group) to Bill’s response, to the supposedly non-sectarian character of in particular ICAPE’s initiative, as being less forthcoming than was to be desired. He does so by arguing (convincingly I think) that to categorise the ICAPE-type approach as pluralistic, hence ipso facto unconditionally to be welcomed, is a misuse of that term.

      Categorising MMT as semantic – however apposite it may be in itself – does not resolve or negate the underlying fundamental clash. I don’t see how any of the MMT thinkers could ever accept New-Keynesianism and MMT as being “mutually coherent” or assent to any such laughable proposition as that NK might be “answerable to actually macreconomic data”; rather – as evidence for which one only needs to read this article – they dismiss out of hand any such possibility. Rightly, I would have thought.

      FTB:- “Standard questions like “but won’t that cause hyperinflation” or “how are you going to pay for it” need to be answered not by abstract debate but by scientifically demonstrating MMT’s answers to such questions — e.g., that hyperinflation will not be the result, or that the question itself rests on misconceptions if not fallacies. Etc etc”.

      An MMT wonk (which I’m not) would be best-equipped to respond to that observation. But I’ll offer a comment, which is that it seems to me that the scientific demonstration that you require is already present multiple times in the MMT literature. If you disagree it can only be because you regard that work as in some way not meeting your specification of what constitutes “scientifically demonstrating”.

      Personally that wouldn’t worry me, because I’m a heretic who has never regarded economics (or any other “social science”) as scientific. But IMHO – given that it satisfies the demands of logic and/or stands up reasonably well to relevant practical testing – that in no way diminishes its utility in or applicability to the real *political* world we live in.

    26. Martin, I don’t know, but I would hope so. He is amazingly arrogant. The question then becomes: does he have anything to be arrogant about?

      It is worth noting that the Swedish Bank has awarded a prize when the Nobel committee has temporarily suspended their awards due to a scandal. Nothing like solidarity.

    27. Martin Freedman says:
      “I wonder what Sargent now thinks about Romer’s “science” given he was just awarded the “Nobel”! Does that diminish his own “Nobel”?”

      What a grisly farce “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” (to give it its actual name) is!

      The title is actually the giveaway. Firstly (in my opinion, and in others’ much more authoritative than just little mine) the claim that economics is a science – which it takes as a given – is spurious.

      Secondly, the creation of the prize is a transparent ploy aimed at causing said spurious claim to become implanted as fact in the public’s mind, by linking it with the Nobel Prize proper (thereby incidentally detracting from the lustre of that prize – not that that would have worried an evangelical economist).

      Nobel had been so misguided as not to include economics among the disciplines for which the prize named after him was to be awarded. That (pointed?) omission must have really rankled with the apostles of the “economics is a science” creed, and Sveriges Riksbank’s little ploy was their way of posthumously “correcting” (ha-ha!) Nobel’s unfortunate – doubtless absent-minded – lapse.

      Enough to make a cat laugh.

    28. The US apparently has the best politicians money can buy but money has bought our mediocre politicians in Australia as well and I suspect most of the democratic and undemocratic world. This is not a truth versus fake knowledge problem in the main, even in the academic world, it is about the corrupting influence of money and power, greed and how this has overwhelmed our fragile institutions and democratic processes. Winning hearts and minds as Bill and others are trying to do may be the only option left but this is going to take a while and we may all slide off the edge first.

    29. Left Foot Forward has a short piece about the Gower Initiative on the net. Bill gets a mention about two-thirds of the way down and a commenter included one of Bill’s talks from the PK conference on What is MMT. The link is:

      The author makes this startling comment. “MMT is starting to gain traction in mainstream media outlets, and there are excellent podcasts, videos and websites to kick-start a sociological re-evaluation of money.” I personally haven’t noticed any such traction, but maybe I haven’t been viewing or reading the right media. I find the comment odd in another way, but maybe that’s me.

    30. I agree completely. A physics textbook in 2018 does not give equal weight to pre-Copernican physics. New Classical Economics is a historical case study, not a state-of-the-art framework for making sense of real economic outcomes.

    31. robert, while I agree with much of what you say in your model comment, you didn’t actually answer the question. There are a number of ways of distinguishing between a model and a theory and the matter isn’t helped by the fact that there is such a thing as Model Theory.

      One way of distinguishing between a model and a theory is to state that a theory is a linguistic structure and that a model is not. A theory is a set of propositions (or sentences) that are true or false (with the exception of definitions). A model is a non-linguistic structure in which a theory is true. Such a structure could be entirely conceptual. If a theory is false, it has no model. A theory with empirical bite has the real world, or some aspect thereof, as one of its models. A theory with no real world empirical bite can not be considered to be scientific.

    32. larry says:
      “robert, while I agree with much of what you say in your model comment, you didn’t actually answer the question”.

      Sorry Larry, but I can’t find anywhere in FRB’s post a question I was supposed to answer.

      Can you perchance be referring to this question “To clarify further, what is a ‘model’?” But that wasn’t addressed to me; I had requested clarification and FRB chose to provide it (“to clarify further”, as he says) by conducting a dialogue with himself as an indirect way of instructing me. He first poses that question and then proceeds immediately thereafter to answer it, for my edification.
      And (for the avoidance of doubt) exactly the same goes for another question posed a few sentences later:- “Other examples of models no doubt abound in the MMT literature. Can they all be understood as models for one and the same axiomatic language for MMT?”

      I’m afraid it would have been quite fruitless to address any questions in this (somewhat abstruse) field to me, since up to this point I’ve been ignorant even of its existence – let alone being equipped to discuss nuances in the terms it employs. The only honest answer would have had to be:- “I’ve no idea.”

    33. well!!! are we making some headway here? If I`m not mistaken, please allow me to be “Etonian”. ( I`m not but sorry) Asad Zaman ( Pakistani Professor and Economist ) is “one of us” ; is now an advisor to Pakistani Prime Minister Imran Khan. The Australians, English and some others here will understand when I say: We have some reverse swing going here boys!

    34. Alan Dunn:
      It’s not rubbish. You objectively demonstrate to the voters at large that MMT is the better theory, and you make available sound arguments if not sound bites for politicians to wield if they want to be elected by folks who see the superiority of MMT. Then stand back and watch, and roll with it. That first part is not easy, but no one promised that it would be easy.

    35. Oh! and with Bill`s permission, Check out Steven Hale`s new book. Economics For Sustainable Prosperity. I`m reading it right now. Expensive but worthwhile I think. Then there is “Declaration of Dependence” Scott Ferguson. I have it but will get to it after Steven`s book…… and! please do not forget to pre-order Macroeconomics by Mitchell, Wray and Watts……. NO! I am not being paid as a salesman..:-)

    36. larry says: “One way of distinguishing between a model and a theory is to state that a theory is a linguistic structure and that a model is not. A theory is a set of propositions (or sentences) that are true or false (with the exception of definitions). A model is a non-linguistic structure in which a theory is true. Such a structure could be entirely conceptual. If a theory is false, it has no model. A theory with empirical bite has the real world, or some aspect thereof, as one of its models. A theory with no real world empirical bite can not be considered to be scientific.”

      I disagree. You are stating essentially a neo-syntactic view of theories. Namely, “a theory is a set of … sentences” etc. That is a 1970s conception of theories. (And what is the difference between a sentence being true, period; a theory being true in a model; and a theory being true, period?)

      Any model worth its salt has some linguistic discipline at its core (a chosen terminology; a choice of interpreted variables; chosen means of expression: verbal, diagrammatic, graphical, pictorial, etc.; etc.). A model asserts what it it takes to be true in the terms of such a language. That one language may be used to design multiple models; and a given model (or model-type?) might be couched in terms of different languages. Okay then, a *theory* is a set of *models* (in the semantic view of theories). Models may be distinguished sometime by which sentences are “true” in them, but such sets of sentences are not “theories” in this semantic view of theories.

      So what does this have to do with the blog post? Initially I only meant to express support for Bill’s tough-minded approach to pluralism. MMT is already pluralistic in the sense that it is a *theory* — that is, it is a “plurality” of models concerning a common macro-economical subject-matter — not in the wishy-washy sense where essentially anything goes. Neo-Keynesian theory (NKT) is a different theory — a different set of macro-economic models. Which is the better theory?

      How would you possibly know? Well, find and set up some *crucial test* experiment or observational study so that the evidence may point to the better theory. Do as many of these crucial tests as possible, and make them understandable to voters at large and politicians in particular.

      If MMT is in fact the better theory, that is how it will win the day — because it is a scientific theory, and that’s how science works when you have competing theories allegedly about the same thing.

    37. RobertH:But I’ll offer a comment, which is that it seems to me that the scientific demonstration that you [Burke] require is already present multiple times in the MMT literature.
      Right, I was about to say the same thing. It has been done already, many times.

      F. Thomas Burke: Neo-Keynesian theory (NKT) is a different theory — a different set of macro-economic models. Which is the better theory?

      How would you possibly know? Well, find and set up some *crucial test*

      As above, it has been done. But this is not really the point. (Understanding “MMT” widely) Non-MMT fails long before this point. Discussions about theories and models miss this point. As Robert Solow said about Lucas & Sargent, it is like getting trapped into a discussion about battle tactics at Austerlitz with someone who thinks he is Napoleon.

      For a more modern example: Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both. This form of “crowding out” is just accounting. (John Cochrane).

      This isn’t accounting or economics of any sort or anything but insane raving, like that of a bearded streetcorner lunatic. A child has enough experience of the world to see it is lunacy. Mainstream literature is filled with such reductios ad absurdum and absurd logically contradictory (non) definitions – that are not recognized as absurdities, but preached by such charlatans as trademarked Scientific Truths from Scientists.

      As Wray says, there really isn’t any alternative to MMT.

      The method of modern mainstream economics is to proceed “. . . from premises which are not stated with precision to conclusions which have no clear application … [This creates] a mass of symbolism which covers up all kinds of unstated special assumptions.” (Keynes, criticizing a particular case of now general practice)

      MMT is just (macro)economics that doesn’t do this. That tries to actually make workable definitions and not surreptitiously change them in midstream, tries to not sneak in unstated assumptions that (the usually circular) argument is grounded on. Tries to avoid ancient fallacies of logic, tries to reason with some mathematical and logical rigor rather than importing a lot of (often fake, often irrelevant) mathematics as a tool to bamboozle an audience that you are Being Scientific.

      Mainstream economics just doesn’t even try to do those things. I think that there probably is a bit more scientific value to it than Bill does – monkeys and typewriters – there is a LOT of neoclassical work. And I think actually some of the most obscure and ultramathematical work, may be particularly useful. But the right attitude to take is to use it like astronomers use ancient astronomical observations or historical texts – to try to fit it into a true, modern theory, but basically to entirely dismiss the underlying theory simply because it makes no sense. Nobody ever really understood it, they just kidded themselves they did.

      Again, mainstream Doesn’t Even TRY. It doesn’t understand what Trying means. In Pauli (or Bacon’s) famous words, it is “not even wrong.” So Bill is very wrong when he says “In economics, the graduate student learns that ‘rigor is more important than substance’ “. They don’t learn that at all. They learn neither rigor nor substance, but repetition of formulas, understanding the meaning of which is avoided at all costs. What they learn is logically obscene anti-rigor that would make any rigorous thinker vomit.

    38. ” Some Guy says:
      Saturday, October 13, 2018 at 11:05

      @ Some Guy

      A “rant”? Perhaps, but if so for my money among the deadliest-aimed, most economically-phrased and at the same time comprehensively devastating I’ve ever read. I’m envious.


    39. “This is a time for MMTers to be confident and not pay lip service to the mainstream macroeconomics, hoping that there will be some acceptance of our ideas.” As a young man, I lived through the heady days when civil rights yielded pride of place to black power. A movement that had sought acceptance by others became a bold assertion of self-sufficient strength and dignity. I loved them both, Martin and Malcolm, but perhaps it’s time for MMT to change its strategy from the former to the latter.

    40. Sharply perceived differences between theory and model don’t really stand up to any scrutiny, as is becoming apparent in the effort to provide machine support for reasoning. Instead it should be seen as a continuum, with logical framework languages: such as first order logic, higher order logic, type theory; at the theory end and with scientific and applied mathematical computational libraries at the model end. If a human can parse and process it, it is probably of a “linguistic” nature, possibly with a seemingly exotic symbol alphabet.

      MMT is certainly on the model end of this continuum, the use of all of arithmetic is something of a give away.

      Is it a scientific model? I would think it is more of an engineering model. Here I think of it encompassing accounting practice and banking operations which are clearly engineered systems.

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