Update on May 25: “Intellectual horror show”
Brian Romanchuk has taken me up on my request for confirmation that MMT actually holds the position I had assumed it does on an important and currently-relevant policy issue. The position is that policy makers (and those seeking to influence them) should utterly ignore the path of the debt/GDP ratio when setting spending and taxation.
Here is Brian in his own words. For context, I had asked him — or really any other MMT advocate — if they could confirm they agreed with an assertion I was inclined to ascribe to them. Brian was very precise in his reply, scratching out bits he disagreed with and adding detail/correction as required.
I am pretty sure Brian’s response includes reckless policy advice, for which a public intellectual should be held responsible. (I too am responsible for what I say, but just do not rise to the level of public intellectual.)
How you get to that advice, how many agreeable academics you can cite in getting to it, the width of the mud moat you put around it, and how you might mischaracterize the views of those who disagree are — practically speaking — almost irrelevant. What matters is the advice, particularly if taken.
Brian had earlier told me that he was not convinced that the MMT perspective offered any additional “policy space”, but that it was nevertheless analytically insightful. That take seemed more benign. The passage above implies that the policy space is itself The Vasty Deep.
MMT comprises many ideas *, and I have tried to be clear that I do not disagree with all of them. Partly this is because they occasionally seem sensible if not unique to MMT (e.g. loans create deposits) or not worth arguing about (e.g. whether this or that idea can be traced to Keynes). Besides, my knowledge is very limited and this ain’t about me.
Moreover, MMT has been on the side of the angels recently, arguing during the teens that austerity was mistimed and misguided, particularly among “sovereigns” issuing their own currencies. To my mind, that was very constructive. And they get extra points for being so cocky! If you are right, cocky is a feature.
But to argue that spending and taxation decisions should be set utterly without regard to the path of the debt/GDP ratio seems reckless. And I would like to shine a light on that — most practically relevant — aspect of what MMT is currently pushing. They have been very loud on the point and the first step to correcting them is to get clear they own it. (In fairness to them, maybe they have always been clear. I did not want to assume.)
As for Noah’s original point about not needing to read anything you think is probably stupid, I see that among the scholars and voracious readers from MMT residing over at Brian’s blog five** clicked on what I had actually written. I am not even sure if those were among the guys who so loudly complained about my piece. Please keep us up on the importance respecting others’ views, guys. You are a light unto the world.
On the other hand, maybe MMT is just more discerning than I realized. It would be hypocritical to claim they need to read what they are already certain and agreed is stupid. Caring about the path of the public debt is stupid, apparently.
* Thanks to one of the less-hyperventilating commenters to Brian’s site for mentioning this paper by three prominent MMT advocates. It seemed like a fine paper, but just didn’t happen to address the main policy issue, as I see it, at least directly. My one quibble is that the authors complain, inevitably, about being misunderstood. That goes to why I prefer the stark question over the vast literature or “sacred texts”, as I have called them. A direct answer can avoid misunderstanding.
From Krugthulu, screenshot:
That passage really reminds me of MMT, as did Noah’s original post. I am not interested in the vast literature there and Noah has crystalized for me why I don’t need to be. *
I read Warren Mosler’s Innocent Frauds, and pointed out some nonsense there, to which I got, that is not part of the formal vast literature, it is just his popular work. But public intellectuals are responsible for what they try to convince the public of. And why would the content of the popular work vary from the formal? Opinions vary, but it is a red flag if they do so within one person.
But this debate can be simplified by getting straight to the central point, at least as I see it. MMT advocate do you agree with the following statement, which is an attempt to summarize what I think I have heard your peeps saying?
The public sector budget constraint is either non-existent or a trivial accounting identity with no practical implication. Accordingly, tax and spending policy should be set without any regard to the deficit and long-run trajectory of the debt/GDP ratio. Fiscal policy may occasionally need to be tightened, but the signal for that would be only an acceleration of inflation to an undesirable pace. Worrying about the trajectory of the debt itself is merely a reflection of a misunderstanding of how the payments system works, and is pointless.
Full disclosure: the question is meant to be a trap. But it is simple and pretty close to a yes / no. Maybe I could complicate it a bit by asking, if not, then how not? And precisely, without deflection. If not two papers, then one answer.
* Noah did not address MMT in his post, but reading it the school popped into my head and stuck. Amusingly, the very first note in his comments went to MMT and drew Noah out on it. Agree.