MMT for Austrians Part 4: Is Description Without Theory, Ideology or Policy Desirable? Is it Even Possible?

By L. Randall Wray

This will be the final part of this series. Next week we turn to the Job Guarantee/Employer of Last Resort.

The answer to both questions posed in the title is, I think, a big fat no.

I’m not going to go deeply into methodological debates. First, I’m no methodologist. Second I don’t think many readers here are that interested in such debates. And, third, it really isn’t necessary.

It is not possible to observe and describe without an underlying theory and ideology. Just take a look back at the questions and comments I receive. They are invariably value-laden. Why would I focus on money? More specifically on a very special kind of money—sovereign money? Why don’t I write more on privately created money—like bank money? What the heck is money, after all? Must it be something I can touch? Use? How? Many commentators want to skip money altogether and go to the “real stuff”—the physical assets that make up our physical wealth. And why does MMT (mostly) ignore the househusband who washes the dishes?

I must make all these choices and I’ve got to have a view as to what is important enough to try to understand. Take a gander and I think you’ll agree that every question or comment ever made had some underlying “purpose”.

Science is not value-free. Cannot be. Science—including economics—is inherently progressive. Why do you think that the far right wing wants to reject science in the areas of evolution, ecology, and female reproductive health? Because they well-understand that science is a progressive endeavor. And that includes the economics that is behind policy-making. So they must deny science in order to stop progress.

All of you now understand that sovereign government cannot “run out of its own money”; financial affordability is not the issue. That is a major scientific advance; it is inherently progressive. We’ve moved beyond the “magic” or “superstition” that Samuelson referred to. It’s all keystrokes and we can have as many as we want. We can use government to achieve the public purpose, and that is necessarily a progressive advance.

The debate then turns to “what should government do”. And, admittedly, we are still left with many questions about “what can government do”. Because there are things that would be progressive (say—end racism and sexism) that may not be possible to achieve, at least now, using government. Or, as I already said, progressive goals often conflict. This is why I think it is very useful to look at the public purpose and human rights as “aspirational”—it is easier to define and work toward progress than to define and achieve some end goal. We are always striving and never reaching that “mountain top”. That is OK, I think. Whatever progress we reach will never be enough—achievements cause us to reach for more.

Again, I do not want to wax philosophical, but whenever I hear a call for value-free economics, I immediately suspect a rat. In my experience the correlation is about 100%. Those who advocate economics as description merely hide their ideology and their policy goals. And they are almost always anti-progressive. I suspect they fear that if they put their goals on the table, they’d lose support. Hence, the refusal to admit their true mission.

However, I want to be clear on this. There is huge room for disagreement on the legitimate scope for the public purpose. And even if we all agreed on the public purpose, there is even greater room for disagreement on the best way to accomplish it. As I said, there are conflicts and uncertainties, and no final end point. All of that makes these discussions contentions. But we can’t really even discuss that if we have opponents who will not lay-out their views, hopes and goals.

So MMT is inherently progressive. We choose to focus on a rather small but what we believe to be an important part of human behavior—what we might call the “monetary” part of the economy. Now, I make that even more specific—the “monetary production” part identified for analysis by Marx, Veblen and Keynes. And most of the time we focus on modern times (modern monetary production)—although it is useful for our understanding of “where we are” to look at “where we came from”. These are big topics and there are many sub-topics within the scope.

One could, for example, limit the analysis to a description of an open market purchase of 10 year treasury bonds on March 6. But why did you choose that topic and that date? What point were you trying to make? If that’s all you’ve got, who cares? More probably, the observation and description is to demonstrate a point and to comment on the policy. Was the purchase a good idea? What impact did it have? Should the Fed have done something different? What was the Fed trying to accomplish? Was the stated purpose different from the apparent aim? How does that action fit into the Fed’s strategy? Without investigating these and other questions, the description is not helpful.

But even the choice to provide such a description is most likely “purposeful” even if the investigator has no interest in any such questions—for example to obfuscate and distract, a commonly used tactic.

Finally, Stephanie Kelton has made the following analogy. Almost everyone is familiar with Milton Friedman’s work. He was a “positivist” who is often identified as one who abhorred “normative” economics. I do not want to debate whether that is a fair description of Friedman’s actual views. Instead I want to look at monetarism itself. The “descriptive” part claimed a correlation between money growth and growth of nominal GDP and can be summarized as “inflation is always and everywhere a monetary phenomenon”. But as we know, the measurement of GDP involves many choices and underlying those are theories and ideologies (why did we leave out of the measure washing one’s own dishes, but include the “shelter services” of living in one’s own home?). Likewise, what is money? And what is inflation? As if those were not problematic enough, monetarists then identify inflation as “bad” and propose policy that supposedly will prevent inflation (controlling growth of money supply—whatever that is!). Let us say the correlations do indicate causation (contestable) and that the central bank can control the money supply (contestable) and that inflation is a bad thing (contestable) and that the benefits of lowering inflation through such policy outweighs the costs (contestable). You get the drift.

And monetarism without inflation fighting and monetary growth rules just wouldn’t be monetarism.  There are other approaches that agree inflation is bad and the central bank should and can fight it—but they are not monetarist. You need the ideology, the theory, and the policy recommendations to get monetarism.

So I think that the notion that we can have a group of MMTers who avoid discussing theory, ideology, and policy is naïve at best, but much more likely is designed to hide the orientation of the participants.

Now here is the bigger point I want to make, although it will be brief.

I am continually amazed at how little trust Austrians (and conservatives more generally) have in our capitalist system. In their view it is a very fragile system, easy to disturb and perhaps even to destroy. A little regulation by government overcomes entrepreneurial initiative. A bit of a tax on the rich and the profit motive is suddenly thwarted. Give a handout to someone is starving and the whole damned workforce will just stop working to stand in breadlines. It is such a weak system that we have to be extremely careful to stand aside to let the poor little invisible hand operate. Even the slightest obstruction would be catastrophic.

I think they read way too much of the doomsday writings of Schumpeter’s Capitalism, Socialism and Democracy—where he fretted about capitalism’s future—or perhaps Marx’s theory of the falling rate of profit.

Me, I’m more down with the Marx and Engels of the Communist Manifesto—who marveled at the accomplishments of the capitalist system:

Meantime the markets kept ever growing, the demand ever rising. Even manufacturer no longer sufficed. Thereupon, steam and machinery revolutionised industrial production. The place of manufacture was taken by the giant, Modern Industry; the place of the industrial middle class by industrial millionaires, the leaders of the whole industrial armies, the modern bourgeois.

Modern industry has established the world market, for which the discovery of America paved the way. This market has given an immense development to commerce, to navigation, to communication by land. This development has, in its turn, reacted on the extension of industry; and in proportion as industry, commerce, navigation, railways extended, in the same proportion the bourgeoisie developed, increased its capital, and pushed into the background every class handed down from the Middle Ages.

…The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.

The bourgeoisie, historically, has played a most revolutionary part. The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It has pitilessly torn asunder the motley feudal ties that bound man to his “natural superiors”, and has left remaining no other nexus between man and man than naked self-interest, than callous “cash payment”. It has drowned the most heavenly ecstasies of religious fervour, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom — Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation.

…The bourgeoisie has disclosed how it came to pass that the brutal display of vigour in the Middle Ages, which reactionaries so much admire, found its fitting complement in the most slothful indolence. It has been the first to show what man’s activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades.

The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.

The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connexions everywhere.

…The bourgeoisie has subjected the country to the rule of the towns. It has created enormous cities, has greatly increased the urban population as compared with the rural, and has thus rescued a considerable part of the population from the idiocy of rural life. Just as it has made the country dependent on the towns, so it has made barbarian and semi-barbarian countries dependent on the civilised ones, nations of peasants on nations of bourgeois, the East on the West.

The bourgeoisie keeps more and more doing away with the scattered state of the population, of the means of production, and of property. It has agglomerated population, centralised the means of production, and has concentrated property in a few hands. The necessary consequence of this was political centralisation. Independent, or but loosely connected provinces, with separate interests, laws, governments, and systems of taxation, became lumped together into one nation, with one government, one code of laws, one national class-interest, one frontier, and one customs-tariff.

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature’s forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalisation of rivers, whole populations conjured out of the ground — what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?

We see then: the means of production and of exchange, on whose foundation the bourgeoisie built itself up, were generated in feudal society. At a certain stage in the development of these means of production and of exchange, the conditions under which feudal society produced and exchanged, the feudal organisation of agriculture and manufacturing industry, in one word, the feudal relations of property became no longer compatible with the already developed productive forces; they became so many fetters. They had to be burst asunder; they were burst asunder.

I do not recognize in this Marxian ode to the power of the entrepreneur the Austrian version of the poor little impotent capitalist at all.

Do you really think that a Timmy Geithner as regulator would stand a chance against a Marxian capitalist? A true revolutionary who can “burst asunder” all the previous forces and fetters? The capitalist who during the first hundred years of capitalism “has created more massive and more colossal productive forces than have all preceding generations together”—the previous million years and more of human existence? Heck, in Marx’s view, the capitalist created the modern government to serve. And left to its own devices, capitalism gobbles everything in its path, eating its young for breakfast. In truth, it is the most powerful beast humans ever created.

And this was written 160 years ago! They hadn’t seen nuthin’ yet! The whole darned globe wasn’t enough. Now Newt is going to colonize the moon if he gets half a chance!

OK before the critics rush to accusations that MMT is Marxism, my point in this is to emphasize the potency of capitalism. It is a robust system, albeit one that is predisposed to insufficiencies of demand and to periodic financial crises. But I find the idea that a bit of regulation and taxes is going to destroy capitalism to be fanciful and unnecessarily pessimistic.

Now, why is it the conventional wisdom that capitalism is fragile?

First, it is obvious that at the level of the firm, each is struggling to get advantage. Government subsidies and tax exemptions help to provide a competitive advantage. It is really handy if local government will cover a portion of capital and labor costs. It is nice when Congress passes out the “pork” to favor local industries. And it is great if regulators will look the other way.

Second, also at the level of individuals, many entrepreneurs are of course cruel. They like to see their workers suffer, and they are willing to take lower profits if necessary to obtain the enjoyment. I can recall when the California employers of farm workers forbade the use of long-handled hoes—forcing laborers to bend over to work with short hoes. Much research showed that productivity was higher with the long hoes, but employers were indifferent. They justified the short hoes on the argument that migrant workers enjoy being close to the ground.

And so they protest mightily if government tries to regulate the size of the rod they use to beat their slaves and workers.

Never underestimate cruelty as a motivating factor for resistance to sensible regulation. Indeed, Keynes referred to the advantages of directing such cruelty to tyranny over balance sheets rather than over people.

And finally, as Keynes also argued, the problem is that modern capitalism suffers from chronic insufficient aggregate demand, compounded by excessive inequality and unemployment. This is why, he said, policy is unnecessarily devoted to trying to encourage the entrepreneurial spirit—through pro-business legislation, subsidies, tax incentives, and deregulation. This is why, he said, the supposed solution to capitalism’s ills are always said to be found in promoting private investment and other supply side measures. And take a look at the typical presidential campaign where “business experience” is said to be an important quality for a candidate. It is not enough to design every policy with the businessperson in mind, you’ve also got to put one in the White House.

But this can never succeed—because it is devoted to solving an imaginary problem–so it just promotes ever more catering to business interests—all with reference to the supposed advantages of “free markets” and “invisible hands”.

In truth, unguided capitalism cycles between explosive speculative frenzies and the following inevitable collapses. And without government bail-outs in the crash, the capitalist economy can enter a dangerous debt-deflation process that not only is devastating in its economic impact, but also unleashes dangerous, fascistic politics. But with such bail-outs, the incentive is to bubble-up the economy to new highs, fueled by ever more scandalous behavior operating against the public purpose.

In truth, government guidance makes capitalism stronger and can direct it to better serve the public purpose.

27 responses to “MMT for Austrians Part 4: Is Description Without Theory, Ideology or Policy Desirable? Is it Even Possible?

  1. Philip Pilkington

    Again, the Austrians et al have little faith in capitalism because they want utopia. Look at Peter Schiff for instance. He has zero trust in markets. He says that bubbles inflate everywhere: in housing, in oil even in the T-bill market. Jamie Galbraith called him on this once and have a look at his response (watch from 5.25 on):

    He says that we don’t currently live in a capitalist system! Wowzers! These guys are just cranks. They’re like the Marxist-Leninists that you meet and they tell you that the Soviet Union would have worked if only Lenin had lived for another year or Trotsky hadn’t been thrown out or space aliens had landed in Siberia or whatever.

    Austrianism isn’t a real political ideology. It’s just a palliative for cranks and losers. That’s why its so popular on the internetz.

  2. “It is not possible to observe and describe without an underlying theory and ideology.”

    Two dollars plus two dollars equals four dollars. Is that ideology speaking?

    • That depends. There’s lot of background knowledge that statement is dependent upon.. Specifically, what’s a “dollar”? What are the implications of the term ‘dollar”? What does a dollar measure? Is the term ‘dollar’ connected in any way to a political system? Or a Government? If so, what is that nature of that Government? Is your view about that Government the same as the views of other people? If not, then how does it differ? I could go on with a hundred of these questions. But the general point is that “Two dollars plus two dollars equals four dollars” isn’t a statement of pure mathematics. It’s a statement about the world and it presupposes a wealth of background knowledge and is not an isolated statement. In fact, it’s part of a network of knowledge claims. and that network can be formulated in different ways by different people so that there really exists a family of such networks some of whose knowledge claims certainly render any single knowledge claim network ideological in nature, so that any claim in that network is penetrated by ideology to a degree.

      Now, it’s true that I’m using the term ideology in a broad and very general way here without the normal connotation of closedness to criticism that normally attaches to ideology. I think this use is OK, because all knowledge claim networks involve value presuppositions and are “ideological” in that sense. But using the term “ideological” in this broad way, I’m also obliged to distinguish between different kinds of ideologies according to the degree to which they’re open to critical evaluation.

      So, normally we use the label “ideology” to refer to knowledge claim networks that aren’t open to critical evaluation given the way people formulate them. That is, they’re tautologies, or their assumptions aren’t open to doubt, or they’re logically inconsistent so one can deduce any consequence from them.

      So, the question comes down to how are you formulating the knowledge claim network (KCN) that contains “Two dollars plus two dollars equals four dollars”? If you do t in such a way that the statement is a tautology, then it would have to be true in your KCN, but only because it is beyond doubt in your KCN because, further, you’re holding the presuppositions of your KCN as a self-evident truth.

      On the other hand, if your not holding the presuppositions as beyond criticism, then “Two dollars plus two dollars equals four dollars” can be questioned and might possible be untrue.

      Sorry if this reply is too philosophical and beyond common sense. But, unfortunately, “common sense” as useful as it is, is often both vague and ambiguous and frequently wrong. That’s we have other ways of thinking that go beyond it.

    • $2 + $2 = $4 is an accounting problem, not economics. The questions of “why” and “how” related to the equations are going to be inherently ideological. I.E “why should I want $4 dollars? because people are profit maximizing” or “what drives the accumulation of the $4 dollars?” all of those questions are normative in nature

  3. ph,

    The dollar as a unit of account has no meaning aside from its social context. And it’s the description of the economic system, in which we actually live, that becomes of the object of inquiry. This system does not operate outside of the social sphere, but rather it is embedded within it. So, to answer your question: yes, $2 + $2 = $4 is an ideological statement.

    For you, it’s nothing more than universal truth independent of society, and hence ideology. For me, it’s a simple account of a specific social relation, grounded in a historical context, wherein the dollar exists as the quantitative record of those relations. So, we are both informed by ideology. The question is, which one provides us with the tools to examine the real world? I think the answer is clear.

    • What if you replace the word ‘dollar’ with the word ‘potato’ ?

      “We are both informed by ideology. The question is, which one provides us with the tools to examine the real world?”

      You seem to be suggesting that “examining the real world” is impossible to do ‘objectively’ anyway, as we always come back to ideology. So we have no way of knowing whether what you say or what I say is correct or true or real or whatever, because all we are essentially doing is expressing an underlying ideology. Correct me if I’m wrong

      • Potatoes and dollars are quite different. One is an abstract credit – debit relation, while the other is a root vegetable.

        “You seem to be suggesting that “examining the real world” is impossible to do ‘objectively’ anyway, as we always come back to ideology. So we have no way of knowing whether what you say or what I say is correct or true or real or whatever, because all we are essentially doing is expressing an underlying ideology. Correct me if I’m wrong”

        I wouldn’t go that far. I am just taking the position that what we normally view as “objectivity” as understood from a methodological view is not possible to achieve, simply because there does not exists a “natural” order in which the social system plays out or tends towards, independent of humans. So the idea that we can examine that system in its purity – i.e. free from an normative biases flowing from a particular ideological bent, or whatever, is simply false.

        This should not be construed to mean that I’m adopting some kind hyper relativism, in which it’s impossible to arrive at some kind of warranted truth, only that our analysis of historically social processes needs to consider a range of ideological factors that affect both how we perceive the problem, and how they have actually informed the historical unfolding of the situation through politics, etc.

        Unfortunately, my response has to brief. Let me know if I’ve left something unclear, and I’ll make an effort to expand my point further, if necessary.

  4. It might be worth adding that there are different political positions within the MMT camp. Bill Mitchell vs Warren Mosler for example.

  5. Capitalism has thus far failed to prevent situations where the rich root for events that would worsen the lives of the 99 percent. For example, the trader who stated on BBC that he dreams of another recession:

  6. Wasn’t the ‘trick’ of the monetarists to make clear that it can be effective to farm out some long-term policy to technocrats at a central bank. That leaves democratic legitimacy for the more short-term-minded politicians, while having ‘independent technocrats’ following a set of rules that everybody agrees are good for the longer term.

    MMT seems to stimulate the discussion of moving the boundaries between monetary and fiscal policy. But for that it is probably necessary to define a new division between the democratically legitimate politicians with their short-term interests, and whatever is the modified job for the ‘independent technocrats’ at a central bank.

    .. this is exactly the problem of the current ECB: they have well-defined rules what they can do. But these rules don’t give them the authority to take certain emergency measures being taken by e.g. the US and UK. How to balance the need for democratic legitimacy, with not allowing politicians of the day to print whatever amounts of money they like for their short-term goals, thereby killing off long-term confidence in that money?

  7. Excellent article. It is all ideological because the role of Public Pupose is contending with two aims. Firstly, how to optimize delivery of goods and services to allow human beings to be purposeful agents. Secondly, how to optimize net savings in relationship to optimizing demand.

  8. “It might be worth adding that there are different political positions within the MMT camp. Bill Mitchell vs Warren Mosler for example.”

    (i) Broad church.
    (ii) Presentation is not substance.

  9. ” and whatever is the modified job for the ‘independent technocrats’ at a central bank.”

    Resign generally. Since they are not really required.

    The stabilisation mechanism just needs to be baked into the system design.

    And that is what MMT proposes – enhance the automatic stabilisers so that they can defeat any slump quickly, but still allow malinvestment to resolve itself.

    Businesses must be allowed to go bust without causing devastating impacts to real people. Otherwise businesses have leverage over lives and that leads to bad decisions – like bailing out bust banks.

  10. “Science—including economics—is inherently progressive.”

    i) It may be wise to remember what is the good one targets with progress: generalized prosperity / well-being.

    ii) Now, why is it that “science is inherently progressive” ?

    If inherently is taken to mean honestly, the answer is: because science does not lie.

    That’s the reason why an “economist” who honestly entitles her or himself to be a scientist will never pretend to develop “value-free” or “a-political” models.

    That’s the reason why those that create their own prosperity at the expense of the majority’s prosperity cannot use science as they must deceive and lie.

    Of course they will pretend to be using science.

  11. “The capitalist who during the first hundred years of capitalism “has created more massive and more colossal productive forces than have all preceding generations together””

    This is a myth, a capitalist-serving romantic description good to obfuscate the minds of the populace; and a quite unscientific one.

    The “more massive and more colossal productive forces” were created by labor and knowledge.

    And the “massive and colossal productive forces” remain as of today massively ineffectual and inefficient – courtesy of capitalism.

  12. Pingback: On the ‘Fragility’ of Capitalism « The Dismal Operator

  13. Hi Randall

    I have four really basic questions regarding MMT. Any response would be much appreciated:

    1. Do you think that MMT might be compatible with small government and low taxes, or is it inherently biased towards big government and high taxes? (I’m assuming that MMT would always involve some form of the ELR if it were to be fully implemented).

    2. Does MMT require a degree of nationalisation (i.e. of banks/ corporations) and strict regulation, or is it compatible with no nationalisation and a more hands-off approach to regulation?

    3. Would you say that MMT economists have different political and ideological positions, or are you all more or less the same?

    4. Do the main MMT economists have different understandings of what MMT is or of how it could be implemented?


  14. Prof Wray wrote:
    “Science—including economics—is inherently progressive. Why do you think that the far right wing wants to reject science in the areas of evolution, ecology, and female reproductive health? Because they well-understand that science is a progressive endeavor. And that includes the economics that is behind policy-making. So they must deny science in order to stop progress.”

    I am always reminded of the quote from Stephen Colbert, “Reality has a liberal bias.” There are two ways to do science. The first is to look at the evidence and then ask, “what does this mean?” The second is to ask yourself, “what answer do I want?” and go looking for the evidence to support your predetermined answer, ignoring all evidence to the contrary. Only one of these ways is correct. Doing science the first way has taught us about things like evolution, global warming and MMT. The second gives us things like Intelligent Design creationism, vaccine deniers, birthers, moon landing hoaxers, and supply-side economics.

  15. Paul Krueger

    I’m wondering exactly how far one can stray from the ideological foundations of MMT before finding yourself on the outside looking in. It seems to me that unless you want to abandon science altogether, you have to allow for an evolution of ideas. I’ll give you a couple of examples. I accept that taxation provides currency with some of its value to people, but it seems to me that this isn’t the whole story. There are other reasons why people, companies, and foreign governments value money which increase the demand for it above and beyond what would occur if paying taxes were the only reason to value it. I accept that those other values are derivative of the base value provided by taxation, but I am of the opinion that those derived values contribute at least as much toward the demand for money as taxation does and likely more so. I also think that understanding those other sources of value has implications for how the government should act, but that’s a longer story. That seems to me more like an extension of MMT theory than something that violates a fundamental ideology.

    Going a bit further, I find myself with some serious reservations about the job guarantee story; not because I am in any way ideologically opposed to the notion of full employment, but rather because I think the definition of “full employment” that is being used is not as complete as I’d like to see it. I’d prefer to see full employment defined as providing a job that utilizes each person’s abilities in the most productive and personally fulfilling way possible and provides compensation or other incentives that are in line with that level of contribution. I understand that this definition raises a whole host of additional challenges and constraints for any job guarantee plan. So, does my definition of full employment and the critique of your JG plan based on that definition mean that I can no longer describe what I believe as MMT?

    It still seems to me that there is a core model of the way the economy works that is independent of the ideology describing how it should work and of normative theories that build on the model in a way that is consistent with the ideology. You apparently don’t want “MMT” to be used as a term that only encompasses the core model, so what term would you use to describe the foundation that consists of sector analysis, stock-flow consistent models, and the notion of functional finance (with perhaps some difference of metrics from those typical of other MMT’ers)?

    I owe MMT so much for all that I have learned about economics over the last couple of years and for what I continue to learn. I’d like to think that there is room within MMT for exploration of extensions, clarifications, and reflection of insights gained from both real-world experience and other academic disciplines. Making it broader and relevant to more people can only make it stronger I should think. That doesn’t have to mean dilution of core values, but probably does imply an evolution of them. Is that possible within the bounds of MMT as you define it?

  16. Pingback: Links 3/14/12 | Mike the Mad Biologist

  17. Paul, I think MMT is best characterized as an approach to economics. It commits to certain values and is ideological in that sense. But MMT isn’t about getting rid of all disagreement, evaluation, testing, refutation, evolution, and change. Instead, I think it’s about testing and the growth of knowledge.

    The question which arises about when some leaves MMT and adopts a different approach? I think this happens when a person denies certain basics. For example, I don’t think one can deny that economic policy should be for the public purpose in a democracy and still claim to be following an MMT approach. I don’t think this is so much a matter of ideology, as it is a matter of definition and labeling that people need to use to distinguish MMT from other approaches.

    So, it’s not like anyone is throwing you out if you don’t believe in public purpose. It’s just that MMT economists are saying that a core part of MMT is its adoption of the overall goal of contributing to public purpose, and if you want to aim at something else than you’re diverging from MMT in a critical way.

    Moving to FE at a living wage, with PS. They are core to MMT, because MMTers think they are two very important aspects of PP. Someone can argue that and say that as a Matter of fact FE/PS doesn’t contribute to PP as much as other goals. I think if you could show this then MMT ought to change its knowledge claim network. If it doesn’t then it’s more ideological than scientific and you probably wouldn’t want to be associated with anyway.

    Assuming that FE/PS remains as critical sub-goals contributing to public purpose then the next question is whether the kinds of JG programs advocated by MMT would produce that result. If not, then again, I think MMT would be obliged to change, or would have to accept an identity as a closed ideology rather than a scientific approach.

    Note that is saying this I’m keeping in mind the ongoing debate over Modern Monetary Realism. Since their original statements MMR advocates have affirmed that they agree that the overall goal should be public purpose. But they differ with MMTers on whether FE/PS is necessary to fulfill public purpose. I think they’re holding to this view even though they haven’t shown that FE/PS isn’t part of public purpose. They also contend that the JG will not help to achieve FE/PS in the context of other MMT policies.

    From my point of view, both their claims about PP and their claims about FE/PS need to be tested. If they had raised those as key issues in MMT and then worked to test them, I’d still classify them as MMTers who are testing out some core ideas. However, what they’ve done instead, is to advance some criticisms of the MMT idea of PP and its connection to FE/PS and also the connection between FE/PS and the JG, without benefit of testing and then after receiving criticism on this and other issues have moved on to declare a new approach.

    That’s their right, but it is formulating a new approach based on different core conjectures, rather than sticking with MMT, testing its core assumptions and then calling for the evolution of MMT based on evidence actually refuting some of its core ideas.

    Above you’ve stated some core ideas proposing that some changes in MMT be considered. I don’t think that puts you outside of MMT looking in. It just means you’re working along with us to develop the MMT approach over time in an open way. On this:

    “It still seems to me that there is a core model of the way the economy works that is independent of the ideology describing how it should work and of normative theories that build on the model in a way that is consistent with the ideology. You apparently don’t want “MMT” to be used as a term that only encompasses the core model, so what term would you use to describe the foundation that consists of sector analysis, stock-flow consistent models, and the notion of functional finance (with perhaps some difference of metrics from those typical of other MMT’ers)?”

    My answer is contained here: and I call that part of MMT some subset of this section of my post:

    “MMT Solutions: Descriptive Components (Generalizations, Theories, Models, “Facts,” etc.) offered by the Developers Aimed at Understanding and Solving Problems”

    However, whatever part of this section you select, it still won’t be value free, because it will presuppose problem, concept, variable, theory, and solution section all of which presuppose decisions involving values.

    • Paul Krueger

      Joe, I appreciate the detailed reply and the link. I like your breakdown of the MMT knowledge claim network and I’ll look at that in more detail later. I agree that what I was thinking about probably fits into your “Descriptive Components” category. I’m NOT looking for a “value free” model; I’m not even sure I’d know what that would be. But there is, I believe, a distinction between descriptive and normative models that can be made and I think that’s reflected in your different categories as well. The first can be both logically and empirically tested while the latter seem to require something more like a leap of faith that people will act and react in a manner consistent with what is expected by the model. I suppose I want to say that there are many more implicit and usually unstated assumptions that underlie such models. That doesn’t mean that nobody should create such theories, just that they are inherently less credible and require a different form of support and validation than purely descriptive theories do. Explicitly making that distinction when describing the theories would help the reader I think.

      I also want to clarify that I’m not trying to defend MMR positions, even though I share a few (but only a very few) of the same intuitions that they have about things. I tried to suggest to them in one blog response that I thought, as you seem to, that their issues could and should be further examined within the context of MMT research. But by then they seemed to be committed to breaking away, which I find very unfortunate. I also tried to engage them on some of the other ideas they proposed which seemed odd to me, but gave that up as a lost cause. That’s not necessarily their fault, but I was incapable of seeing the significance of something that obviously seemed very significant to them. Coming to a mutual understanding is hard work and requires that the parties have some level of mutual respect so that they don’t immediately assume that the other side consists of idiots and write them off. Unfortunately it seems that the mutual respect that must have once existed between MMT and MMR people is at least severely diminished which makes coming to a common understanding problematic.

  18. Dang! I thought these were supposed to be responses to Wray’s post, which was terrific. There is a great paper written in 1942, Michal Kalecki on the Political Constraints of Full Employment (see Alan Harvey’s Demandside 4/23/13 podcast) where the author methodically explains the entrepreneur’s drive and need to keep unemployment high. In part it is due to the deep fear of the worker and the need to keep him subdued and controllable. The “cruelty” Wray describes it is the ugly side of human nature that seems have found a natural home in modern “capitalism” You will also hear in this podcast just how old MMT really is – its simplicity and plain-spoken style is utterly refreshing.