This week we continued our (unplanned) extension of commentary on Austrian economics. The post was featured on the home page of NEP as well as on the MMP. A large number of comments were provided, although few questions or comments that really needed response. There is no doubt that Austrian economics always provokes response—by lovers and haters. There is almost no in-between.
The purpose of my blogs has almost been lost—in part, my fault because I chose to respond to comments by Austrians, especially John Carney at CNBC—and that took us somewhat far afield. Since the very first discussion group I joined—PKT (Post Keynesian Thought) back in the early 1990s(?) I have found that Austrians punch way beyond their weight class when it comes to on-line discussion. In economics, Austrians don’t amount to much more than a handful of fringe individuals. I do not say that to put them down. I’m just reporting. Indeed, Austrians want to count themselves as outsiders and find a lot of affinity with heterodox economists. Austrians (with some justification) find themselves even more excluded from normal academic discourse than do even Post Keynesians or Institutionalists; in America they probably vie with Marxist-Leninists for awards as the most fringe group. But of course, they come at things from the far right rather than from the far left.Still, some of them are recognized as great scholars—I’m thinking in particular of George Selgin (history of private coinage; “free” banking”) and Walker Todd (history of the Fed). I count both of them as my friends and I’ve learned a lot from them. That does not mean I don’t disagree with them! But often Walker and I find ourselves in the midst of a conference where we not only are the “odd men out” but where we substantially agree on some topic or other. A good example is the tendency of Washington to come to the rescue of thieving banksters who are destroying our economy.
So what was my purpose? To argue that Austrians can safely adopt MMT. Our disagreement should be about the scope of the “public purpose”and the role of government in pursuit of the public purpose. I’m actually going to say a bit more about that in my next post. I’ve decided we need a part 4. That means I’m delaying for one more week our introduction to the Job Guarantee. I hope you will agree it was worth the wait. And I hope I can say something that Austrians find useful.
So, on Monday there will be one more, final, post on Austrians and MMT. I do not think I’ve yet succeeded in making my point. Love them. Hate them. It’s worth one more effort.
Getting back to commentary. The really truly surprising thing is that given how relatively unimportant Austrians are in terms of academics or policy-making (look, we all love Ron Paul but mostly because he does not matter—he’s that favorite crazy uncle who drinks a bit too much at family get-togethers and then says things we’d all like to say but never dared),Austrians dominate internet discussion groups. Here at NEP they do not, but any blog post at—say—Naked Capitalism or even HuffPost that hints that government might actually be able to do something useful will generate a nearly infinite number of responses challenging the blog. And while the responses are nearly 100% predictable, we still need to account for that. I’m not sure what to make of it.
A large portion of the responses appear to be by“professionals” (paid or unpaid, I do not know) who repeat almost word-for-word their responses across the world wide web. (In a very nice blog today, Pavlina Tcherneva has responded to an individual who posts virtually the same response anytime the JG is mentioned.) So, some of it is just “flacking”—repeatedly posting the same message and never accepting any response, always insisting on getting in the last word.
Back when we had the PKT there was a small handful of Austrians who literally killed the discussion group through such tactics—they’d post tens, dozens, hundreds of posts a day to dominate the discussion. And like “whack a mole” new ones would always come along and start all the same old tired critiques a new just when you thought you had settled some debate. These flackers usually appear to be—at best—only marginally educated. But that helps their cause a great deal, as they can always assert a sort of moral superiority against “elite” academics—the same sort of argument a Glen Beck or Rush Limbaugh makes against pointy-headed intellectuals. It works well, and wastes a lot of time as well-meaning participants actually try to teach them a bit of economics. It is almost always a waste of time.
All of this is a lead-in to tone of commentary. I have noticed at least two comments telling John Carney and Ramanan to take a hike. That is probably my fault. I want to be clear here. I do not want either of them to leave. I am engaging John because I think he is worth engaging. I enjoy his comments at NEP and also his posts on his own blog. Yes I’ve been strong, maybe harsh, in my responses to him. But I am glad John is engaging us. And note his most recent post sided with MMT against Austrians on interest rates. Nor do I want Ramanan to leave. Yes, I am tired of his flacking. It looks awfully suspicious—predictable, insistent, and barely rising above marketing. I gladly accept any real criticism he has to offer, although I would prefer that he would make his comment and then accept a response. When he goes on and on repeating the same thing a half dozen times on the same blog that gets mighty tedious. But, let’s all try to tone it down. Telling him to go away is taking it a step too far. I will try to be more tolerant and I hope Ramanan will try to use more self-restraint.
It’s hard to know which comments to respond to—most werejust comments on or extensions to things I wrote, that do not need any response from me. A few asked about the JG but that is the next topic. It seems that I can talk about two issues in a useful manner.
There was a huge dispute about the MMT position on “inside” credits and debits and saving and whether we ignore it. That is to say, within the private sector we’ve got individual households saving in the form of claims on other households and firms, and other households and firms going into debt running up deficits. Our point was that at the aggregate level that sector’s inside credits and debits and surpluses and deficits and financial saving all net to zero.
Adda government or foreign sector (“outside”) and now the domestic private sector can “net save” in the form of “net financial assets”, running a surplus that consists of accumulation of financial claims on the outside sector(s). What seems to have thrown some to a loop was our occasional statement that we can for some questions ignore all the “inside” saving of the domestic private sector;in that case, outside (net) saving (net accumulation of financial assets) equals the deficits of the outside sectors.
And so it is true that there are—in thatcontext—some statements that the private sector cannot save unless the government sector (or foreign sector) runs deficits. Yes, IN THAT CONTEXT we can say such a thing—we are taking the entire private sector as a whole and saying that it cannot “save” (run a surplus) unless some external sector(foreign or government) deficit spends. That does not mean that within the private sector there is not lots of saving and investing going on—with lots of individual households or firms running surpluses (saving) and others running deficits. But all of that inside stuff nets out.
Does that mean it does not matter? No. But how it matters depends. It requires more investigation. That is exactly what Godley and I did beginning in 1998.
Finally, yes there is also “real” saving going on and it can occur even without money. Once we net out all financial assets/liabilities we get down to real stuff. Does it matter? Yes. Why does MMT focus so much on money? Because it is MMT.
We have never been confused about any of this. Some readers have. There is an automatic tendency to presume that the fault is always at the hands of the writer, not the reader. Especially when that reader is not very well educated in the subject under discussion. So we had a group that either did not read much of what we wrote, or did not understand what we wrote, and got all up in a huff and formed a website based on the proposition that MMTers did not know what they were talking about. Can we just make up now? I don’t know. It isn’t up to me. I didn’t leave in a huff and puff.
There were various statements about that particular website and politics—whether it can be “politics free” or not. My view: of course not. There is no such thing as economics that is value-free. But I cannot speak for them. My view—as I stated in a previous blog—is that we must examine the public purpose, which must be a political consideration. I believe it is an inherently progressive subject. I do not see why Austrians would have a problem with that. There is room to disagree on what we include in the public purpose, and what portion of that has to be supplied by government. I think we made some progress in our discussion with John Carney—but clearly we’ve still got a gulf. I’ll try again in part 4.