Revealed Biases: Why MMT Critics Continue to Rely on Strawman Arguments

By William K. Black

Economists of nearly every flavor believe in the concept of “revealed preferences.”  What matters is not what people say they will do in a hypothetical situation, but what they actually do.  Their actions speak more credibly than their words.  In this column I announce a related concept: “revealed biases.”

My colleagues, Randy Wray, Stephanie Kelton, and Mat Forstater, at the University of Missouri-Kansas City (UMKC) are among the leading theorists who have developed Modern Monetary Theory (MMT).  MMT has been the subject of hundreds of academic papers and presentations.  MMT has all the usual elements of an economic theory.  It emphasizes the history of the monetary system, it provides a technically accurate description of how money is created, it distinguishes between nations with sovereign currencies and those like the Eurozone nations that have abandoned sovereign currencies, and it distinguishes among nations with sovereign currencies who remove the benefits of sovereignty by taking actions such as fixing the foreign exchange ratio or borrowing in other currencies, it allows predictions to be made that can be tested for accuracy, and it suggests which policies.

MMT has had a very good run.  Its predictions have proven far more accurate than the austerians and my colleagues’ policy prescriptions have proven superior.  Paul Krugman has noted that the greatest error he made in his predictions about the crisis arose from his failure to understand how vast the difference is between nations with sovereign currencies (who borrow in their own currency and employ freely floating exchange rates) and other nations.  He hasn’t credited my colleagues and other MMT scholars for their insight about that point, but he has acknowledged that the MMT scholars proved correct.

MMT also has substantial support from the technical investor community.  The reason is that MMT takes money seriously and relies on a technically accurate concept of money creation.  These reasons are likely to strike the reader as strange – how could macroeconomics fail to take money and its creation seriously and why would it use models whose descriptions of money creation and transmission were false?  (I mean “false,” not “simplifying.”)  The short answer is that neoclassical economists love to (implicitly) assume critical aspects of economic life (e.g., “control fraud”) out of existence and instead make assumptions (about money, information, power, and transaction costs) that are obviously false.  Doing so makes their models “work” and supports the policy advice that fits their ideological dogmas.

Recently, thanks in large part to Stephanie Kelton’s creation of the UMKC economics blog, New Economic Perspectives; MMT has also attracted considerable public support.  The blog supplements our academic work and allows us to reach a broader audience on current issues.  The delays inherent in formal academic publication make it impossible to provide analytics and policy suggestions when they are most needed.

Creating a blog has been a common response by economists off all stripes to these inherent publishing delays.  The self-inflicted disaster in the Eurozone of creating a second, gratuitous Great Depression in much of the European periphery was done under the relentless claim of “TINA” (there is no alternative).  MMT cuts through TINA and explains why the second Great Depression was inflicted.  MMT presents superior policy alternatives.  MMT, therefore, has a substantial group of supporters in Europe, particularly in the periphery.

Heterodox economists at the University of Massachusetts (Amherst) and UMKC were among the earliest, most persistent, and most effective critics of the Reinhart and Rogoff (R&R) “study” that claimed that government debt caused economic growth to slow and that there was a “cliff” when government debt reached 90% of GDP.  Beyond that point “thar’ be dragons” – we all become Greece doomed to long term economic ruin by our profligacy.  Operating from different perspectives, both schools demonstrated that R&R chose the nations and years and weighting to include/exclude in a manner that drove their results (along with the data entry error found by the graduate student at Amherst, the justly-praised Thomas Herndon).  Once R&R’s gaming of data was corrected the 90% cliff disappeared and the most likely direction of causality was reversed (recession drive deficits, deficits do not drive recessions and slow growth).

R&R is one of the most destructive works in modern economics.  It was intended to shape policy and it did so.  It did so under the (implicit) premise that MMT must be false.  Exposing R&R’s errors represents a great success of different strands of heterodox economics.

The broader point is that MMT is testable.  R&R was testable, and it failed.  Critics of MMT are free to point out errors in MMT and to test its predictions.  They are free to examine the historical record and to discuss how money is created in a nation with a sovereign currency.  They are free to discuss how interest rates are set by a central bank in a nation with a sovereign currency.  We have unguarded quotations from Bernanke and Greenspan demonstrating that they know how money is created and interest rates are set.  They strongly support MMT.

What is not acceptable is what actually happens.  There are minor variants on a theme – they attribute positions and beliefs to MMT scholars (and heterodox economics in general) that MMT scholars, and UMKC economists in general, do not hold.  The dismissals demonstrate nothing about MMT and heterodox economics, but they reveal a great deal about the dominant biases of neoclassical economists.  Their revealed biases are intense and crippling.  Their dismissal of rival views is so extreme that the neoclassical scholars gleefully emphasize that they are ignorant of MMT and other heterodox scholarship such as my work on microstructure – and proud of their ignorance.  Because they do not read our work, but rather wish to dismiss it as unworthy of being read they need to invent a basis for dismissing our work.  Because they do not know what we believe they have no constraints on what they falsely attribute to us.  Journalists love “good copy” and chose not to ask how it is logically possible for those dismissing our work to do so without reading our work.  The more outrageous the comment dismissing our work, the better the journalist likes it.

The latest example of this is a column by Annie Lowrey on July 4, 2013 entitled “Warren Mosler, a Deficit Lover With a Following.”  Warran Mosler is a member of the finance industry and a strong proponent of MMT.  Lowrey incorrectly attributes a facially absurd quotation to Stephanie Kelton stating that MMT scholars do not publish scholarly articles.  Kelton promptly corrected Lowrey.

The point I write to emphasize is related to this theme that MMT scholars are not real scholars.  Lowrey quotes Mark Thoma as follows:

They deny the fact that the government use of real resources can drive the real interest rate up,’ said Mark Thoma, an economics professor and widely followed blogger who teaches at the University of Oregon. After delving into the technical details of modern monetary theory for a few minutes, he paused, then added, ‘I think it’s just nuts.’

A preliminary caution is in order – given Lowrey’s attribution of a faux quotation to Kelton we need to keep in mind the possibility that she did equal violence to Thoma.  Two facts stand out if Thoma was quoted accurately.  First, his “delving” into MMT consisted of “a few minutes.”  What scholarly work of my colleagues on MMT did he read?  What passage did he find in his “few minutes” that he concluded was “nuts?”  That’s how one makes a scholarly argument about another scholar’s work.  “Dr. X writes ‘[insert longer quotation here that demonstrates X’s views and the context in which X expressed.]’  X’s claim that ‘[insert key phrase from the longer quotation quoted here]’ is in error because [provide rationale here].”  The reader will note that this is what I have done in critiquing Thoma’s dismissal of MMT as “just nuts.”  “Just nuts” is just ad hominem.

If MMT were really “just nuts” Thoma wouldn’t have had to rely on an ad hominem attack.  He would have quoted, for example, a passage from Wray’s new book discussing “the technical details” of MMT.  He would then explain why Wray’s version of the technical details was wrong, with a supporting citation.  It’s easy to show that people that get basic facts (“technical details”) wrong are wrong.

Thoma does not do that.  He invents a claim that MMT scholars do not hold.  Putting aside a technical non sequitur (discussed below), the claim Thoma invents is actually a direct, unattributed, steal from Paul Krugman.  Krugman drives us to distraction because he attributes, always without quotation from any MMT scholar, a claim that no MMT scholar has ever made.  The claim is that MMT scholars do not believe that the government’s consumption of real economic resources can contribute to inflation.  Krugman and Thoma have never cited any MMT scholar making such a statement because the MMT scholars have not made such a statement.  Wray and Kelton have repeatedly written and presented their explanation of why MMT does not predict that the government’s consumption of real economic resources cannot add to inflation.  They have also explained why the proposed stimulus programs in response to the Great Recession would not lead to material inflation.

It is outrageous that Krugman and Thoma persist in spreading this false, invented claim about MMT.  It is outrageous that the press accepts their assertions without any quotation from MMT scholars making such a statement.  Krugman and Thoma can invent this claim and repeat it endlessly while ignoring my colleagues’ rebuttals that MMT predicts exactly the opposite.  Krugman and Thoma can invent and repeat this claim, but they cannot invent non-existent quotations by MMT scholars.  If journalists, or their own professional standards, ever required Krugman and Thoma to meet the most minimal standards of scholarship and fairness their inventions and false attributions about MMT scholars would cease immediately.

Thoma’s invented claim implicitly demonstrates that he does not understand a series of “technical details” – the nature of the “real interest rate,” how the Fed sets interest rates, and the relationship of interest rates to governmental spending.  Wray explains these points in his response to Thoma.  It is ironic that Thoma makes a series of technical errors in an attempt to dismiss MMT as “just nuts” based on invented technical errors.

The other variant in the dismissal of heterodox economics and MMT comes from Krugman’s least favorite economist, John Cochrane.  Cochrane wanted to emphasize that unlike Thoma and Krugman he refused to waste even “a few minutes” of his time learning what we wrote.  Cochrane explained why to the journalist who wrote a profile of our department.

Cochrane speaks proudly for mainstream, also known as neoclassical, economics. Talking with me over the phone before the conference, he made clear that his condemnation was general: ‘I haven’t read their specific work. I’m busy, and I try to read what is considered interesting and valid.’ His position on heterodox economists was unambiguous: They’re kooks. ‘They are about two percent of academe and about zero percent of finance.’ He was dismissive of their prediction of the credit-bubble collapse. ‘Beware those who predict nine of the last two crashes, okay? They’re just not rigorous and don’t use modern mathematical tools. This business is a wide-open meritocracy. You have to distinguish between closed minds and a lack of quality. The perception is that this is 1969 stuff. Give me new data and new ideas.’

In 2012, without ever reading our work (because he his “busy,”), Cochrane dismisses our scholarship as unworthy of being read because he knows without reading it that it is “not rigorous,” that we are innumerate, and that our research “lack[s] quality.”  We clearly lack his analytical powers to discern everything about a body of scholarship without ever even looking at it.  In fact, we haven’t predicted non-existent crises.  The Chicago School, however, has unsuccessfully predicted nine of the last zero cases of U.S. inflationary crises over the last quarter century.

Let’s contrast Cochrane’s dismissal of all of heterodox economics with Cochrane’s attacks on Krugman in 2009.

I like it when people disagree with me, and take time to read my work and criticize it. At worst I learn how to position it better. At best, I discover I was wrong and learn something. I send a polite thank you note.

Yes, we too like it when critics “take time to read [our] work and criticize it.”  Cochrane proceeded to ridicule Krugman’s complaint that the Cochrane and his Chicago School colleagues “marginalized” their critics.

Krugman wants people to swallow his arguments whole from his authority, without demanding logic, or evidence. Those who disagree with him, alas, are pretty smart and have pretty good arguments if you bother to read them. So, he tries to discredit them with personal attacks.

This is the political sphere, not the intellectual one. Don’t argue with them, swift-boat them. Find some embarrassing quote from an old interview. Well, good luck, Paul. Let’s just not pretend this has anything to do with economics, or actual truth about how the world works or could be made a better place.

It gets worse Krugman hints at dark conspiracies, claiming “dissenters are marginalized.

Any astute reader knows that personal attacks and innuendo mean the author has run out of ideas.

Yes, “if you bother to read them,” rather than making baseless personal attacks and using innuendo.  After reading Cochrane.12 and Cochrane.09 I have one question: I know that Cochrane.12 is too busy to read our work, but why is he too busy to read Cochrane.09?  Or did Cochrane decide in 2012 to emulate the things he claimed in 2009 that Krugman did to him that he considered reprehensible?  I invite the reader to try to evaluate whether Cochrane’s hypocrisy exceeds his self-blindness.

Cochrane, Krugman, and Thoma share the characteristic that they have not even found “some embarrassing quote from an old interview” of a MMT scholar to attack.  The fact is that it is the heterodox scholars who have displayed vastly superior predictive ability that the theoclassical scholars and significantly better predictive ability than neoclassical scholars.  It was our success that prompted the title of the article profiling our department:

James Galbraith has an excellent article explaining who got it right.

It is precisely the predictive success of MMT and control fraud theory that distinguishes UMKC’s work from those advocating a return to a gold standard.  Proponents of that view have consistently made enormous predictive errors about imminent hyper-inflation.  Lowrey’s claim that the two policies are mirror policies of the left (MMT) and right (gold) is falsified by MMT’s predictive successes contrasted to the gold standard proponents’ predictive failures.  The left/right dichotomy is also false.  Many MMT proponents, including Warren Mosler, are conservatives.  Mosler despises banking regulators; I’m a former banking regulator.

It’s certainly good to have MMT discussed in the New York Times.  We now need to have it discussed with a focus on the scholarly work and predictive successes.  We need debates on the merits that focus on the ideas rather than personalities (or yachts and race cars).  We look forward to having our critics quote from our scholarly works and explain what specific positions they disagree with and why.  Such a debate would be a great service to the Nation and the Eurozone.

Here’s the deal – it is intellectually dishonest to create and repeat these strawman arguments based on inventing positions that one ascribes to MMT scholars that are often the opposite of MMT actual positions.  We were willing to assume in the interests of comity that the initial positions falsely ascribed to MMT scholars were the product of not having read and understood the MMT scholarly literature.  Krugman and Thoma had, at best, spent “a few minutes” reading MMT scholars’ work and they misinterpreted it.  At this juncture, dozens of MMT proponents have written to make clear to Krugman and Thoma that they are misrepresenting the position of MMT scholars.  There is no excuse for any repetition of the strawman claims.

Here are the simple rules for Thoma, Krugman, and Cochrane going forward.  They are the same rules we operate under when we criticize other scholars’ work.

  1. At least skim Wray’s most recent book on MMT.
  2. Read at least one article on “control fraud” (or any of my six recent testimonies before Congress and the FCIC on the ongoing crisis).  Alternatively, at least skim my book.  George Akerlof and Paul Volcker liked it enough to provide on-line blurbs, so it would be a good investment of your time.
  3. Respond with whatever critiques you have.  What do you agree with and what do you disagree with?  Quote specific passages from our work that you disagree with and consider material.
  4. We’ll respond.  We’ll all learn from the process and can work together to seek better public policies.          

39 responses to “Revealed Biases: Why MMT Critics Continue to Rely on Strawman Arguments

  1. sunflowerbio

    Bill, if MMT critics follow your four rules, they might have to give up their revealed biases, or perhaps return their race cars. Wie schada.

  2. I’m a conservative?
    I despise bank regulators?
    And no attribution to my published papers that remain the source code for all of mmt?
    Didn’t you just do the same to me you are accusing others of doing?

    • John Rosenfield

      Would the Huffington Post treat you with more respect than you received from the NYT, and could the reporting about MMT have less bias? I posed a similar question in a comment in Dr. Kelton’s last post.

      P.S. I enjoyed the lecture that you gave several months ago at the Columbia University School of Law.

    • We love your cars Warren.
      When are you putting the comments back on ?

    • “I’m a conservative?”

      In world wide terms you’d probably be placed into the conservative grouping. You have to remember that the US Democratic party is to the right of most conservative organisations in world wide terms.

      If we were accusing you of being a Republican we would have used the term ‘nutter’ 🙂

      And of course it goes without saying that I hate these groupings with a passion. It is entirely possible to be in favour of good business and good social provision at the same time. So the standard groupings no longer have any real meaning.

      The world has moved on and needs a more nuanced approach.

      • Warren isn’t a ‘conservative’.

        • Thomas Bergbusch

          By international and poly sci definitions, Warren Mosler is definitely a liberal, like almost all Americans, Democrats and Republicans alike, and certainly U.S. libertarians and most U.S. greens. Apart from a few southern old money types, and maybe say some New England Brahmins, there are few representatives of conservativism in the U.S. at all, merely right-wing liberals, centrist liberals, left-wing liberals, and some extremely right-wing liberals. Now, there is no denying the strengths of the U.S. liberal tradition, highlighted say by James Galbraith in his recent speech to ERT employees in Greece, but the lack of a conservative tradition (whether in the form of traditional Toryism or red-toryism, which is essentially the origin of social democracy in Canada and Europe) sometimes hurts the US because of the atomistic nature of U.S. political thought — so much attention is given to individual rights (in one direction or another) that public goods are often considered unimportant, or even anti-American — hence the problem of instituting universal healthcare and such. Now, I am not saying that the U.S. liberalism does not have avenues, sometimes even finer ones, by which public goods can be protected (I mean without some grand appeal to U.S. nationalism), it is just that the road to protecting them is always harder. Part of the brilliance of Mosler’s inventive solutions to the U.S. healthcare cost crisis, with its use of individual healthcare accounts, is to find market-based and other “liberal-individualistic” solutions to resolving what is fundamentally a problem of insufficient public provision. It strikes me as far more natural for the state simply to absorb the cost of providing this public good, but Mosler’s incentive-based solutions are particularly attractive to liberal America.

          • golfer1john

            Very interesting comment.

            In 1776, the founders of the US were considered “liberal”, mainly in their philosophy, but also in their politics. Compared to the European monarchies of their time, they were quite radical. Today, those who adhere most closely to the beliefs of the founders are considered “ultra-right wingers”.

            Since 1776 there has emerged the Communist and Socialist politics and philosophies, which are, with respect to individual liberties, quite close to the monarchies of the 18th century. And those are considered the “left” wing.

            In the 20th century emerged totalitarian rulers the likes of which had not been seen since the Middle Ages.
            Some (e.g., Stalin, Mao, Pol Pot) are labeled “leftist” and others (e.g., Hitler, Noriega) are labeled “right wing”, but there is little difference in their political styles: they ruled by force with no regard for human life or individual rights.

            It’s a wonder we understand anything of what is said about political views today, especially anything in an historical context older than the last election.

            I think MMT will succeed only if it can transcend these labels. If it is a “Progressive” movement, it will remain ever marginalized. It has to show that it poses no dangers to the individual liberties that Americans hold so dear. Government created our economic system, and is responsible for its operation. When it causes pain, namely unemployment due to leakages, it is the responsibility of government to mitigate that pain. Likewise, if it were to cause pain due to inflation, it would be responsible to mitigate that pain. MMT explains in quite logical detail how to achieve both. It is not liberal or conservative, it is scientific.

  3. Bill, I wish you would not mince words so much.

  4. If shadow banking makes up approximately 70% of the financial industry, then MMT is almost besides the point as EVERYTHING is rigged.

  5. William, you seem to have left out the end to this sentence (second paragraph):

    “… it allows predictions to be made that can be tested for accuracy, and it suggests which policies”.

    It suggests which policies what?

  6. charles fasola

    The above is a complete waste of your valuable intellect. It all wreaks of child like behavior. Those of us who spend our valuable time here are not doing so in order to learn who is the biggest fool, who is right and who is wrong, whose ideas are based in reality and whose is creating a fantastic, alternate one. We already know! And you sir do not need anyone’s patronizing commentary or praise. I read this blog because the information and ideas disseminated by it are valuable. It contributes greatly toward educating myself about economics in general and the actual workings of the current financial system; both within the private and public sectors. You are already more important to us than that. I’m spending time here because I know you are correct.

    • Charles, what about the people who are here for the first time because of the NYT article?

  7. They deny the fact that the government use of real resources can drive the real interest rate up,’ said Mark Thoma,

    That presumes that government spending is wasteful and PERHAPS it is sometimes UNLESS it counters an injustice in the “private” sector such as a government-backed usury cartel that drives people into unpayable debt sans net government spending, even on such wasteful things as World War II.

    But no JG is needed; simply recognize the injustice of the current system, reform it and provide restitution beginning with a universal bailout with new fiat, at least until all deposits are 100% backed by reserves.

  8. golfer1john

    “After delving into the technical details of modern monetary theory for a few minutes, he paused, then added, ‘I think it’s just nuts.’”

    When I read this, I interpreted it to mean that Thoma spoke for a few minutes about the technical details, then paused and made his “nuts” statement. Not that he read about MMT for the first time.

    It may be logically possible to construe the sentence as you did, but I think my way is more reasonable.

  9. John Hemington

    Here I would, at least partially, like to echo the comment of Charles Fasola above. It reeks of having one’s nose rubbed in the dirt one too many times by ideological theologians of the neoclassical variety. Unfortunately, it is an all too common experience in academe where the building of golden silo temples becomes an end in and of itself. I saw this scenario years ago in my undergraduate days watching the denizens of the social sciences denigrate one another and otherwise refuse to communicate any useful information.

    As one with no background whatsoever in economics prior to 2007, I read Steve Keen’s Debunking Economics (I and later II) and learned more about the academic field economics than I could have learned with a Ph.D. from most universities – and I continue to learn from reading MMT materials from those of you at UMKC, reading the works of Warren Mosler, Michael Hudson, studies from the Levy and Field Institutes, etc. However, the last thing heterodox economics needs is the distraction of an ongoing “pissing contest” between and among those who mostly agree about how things economic actually work in the real world.

    And, strangely enough, this probably includes these kinds of empty disputes between heterodox economists and neoclassicals such as Krugman, Thoma and Cochrane – among others. I thought that Keen spent way too much time and energy in his public tiff with Krugman. If someone isn’t going to conduct a reasoned discussion or debate or even bother to read what you have written, all such a debate can do is make the heterodox side appear foolish and insecure, instead of providing real-time education to an abysmally under-educated public on the topic of economic reality.

    What we need instead, is a really simple, concrete and easily comprehensible method of explaining how money, credit, debt, banking and time factor into the world in which each of us must conduct our daily activities. Name calling and hurt feelings add nothing to this process. You in the MMT community know this well and have been attempting to come up with a process for accomplishing this – but it isn’t there as yet. Most people have been thoroughly indoctrinated in neoclassical commodity standard thinking; and folks like me, who are not economists but who care about the future of humankind, need your help in formulating a way to explain reality to people who are too busy trying to survive from day to day to delve into the depths of economic theology of whatever variety.

    To put it bluntly, you are never going to be able to convert the neoclassicists into accepting heterodox theories since their entire career and reputation is premised on not understanding contrary ideas; so continued attempts to do this simply wastes your valuable time and knowledge. The only hope for attaining real change is to convert those who have not already become career-dependent on neoclassical ideas – including the many non-economists, like me, who instinctively know that the economics of the current power structure are wrong and self-defeating. Some schools are already on their own deciding that economics is irrelevant to the education of their students and are eliminating their departments entirely, rather than replacing them with heterodox scholars. To succeed, it’s got to be a bottom-up revolution if schools are once again ever going to teach the economics of reality – not the other way around.

    • Unfortunately only people that really matter are those who advice policy makers. They almost all come from so called mainstream schools. That’s why what mainstream economists teach in these schools is very important. And, some of them, like Paul Krugman, are slowly opening up their minds to MMT. There is no need to be too pessimistic.

    • John, occasional pissing contests invigorate the room.

    • John Hemington,


      Speaking of bottom up.

      Small is powerful. It would be ideal to have a large majority of Americans supporting MMT. However, it is unlikely in the near to medium term (next 5-10 yrs). Attempts to expand the base of MMT support could include targeting those subgroups most likely to have political and managerial control, as well as being direct beneficiaries of MMT policies. MMT could target economic advisors to: the Governors Association, mayors associations, city planners, teacher and other professional unions, etc.

      How difficult would it be to develop scenarios based on the outcomes of being monetarily sovereign? For instance, carried to its logical conclusion, a monetarily sovereign nation has no need for a bond market which raises funds for public sector spending. Bond markets creating debt, would only operate in the private sector, and to maintain the term structure of interest rates.

      Public sector debt could be substantially eliminated. How many mayors and governors would want to hear more about how that happens? Grassroots pressure has its way of rising to the top. What MMT may need is a slew of really simple examples of how states and cities climb out of the debt hole by supporting MMT implementation at the federal level. Armed with MMT facts and hopefully a working understanding of MMT, these, now, debt burdened managers, could pressure their Congressional Representatives & Senators to support the real world of money and fiscal operations.

    • Gary Goodman

      I think Bill and others recognize that MMT needs to do more than be factually correct and have fantastic predictive powers. Classical Economics WAS “political economy”, meaning that it was about real outcomes for real people.

      The backlash of the Marginalist Rev against Classical Econ and Socialism was a political attack for political reasons IMO: class war, shrouded in math and apriori truisms.

      Economics today seems obviously to me largely a political struggle. If not, MMT would have already won. If not, prestigious economists would not be risking their credibility as experts to hurl attacks on MMT and heterodox. If they were pure scientists, they would be making the transition, at least after 2008.

      • golfer1john

        “Economics today seems obviously to me largely a political struggle. If not, MMT would have already won. ”

        Yes, indeed. What economists do you see on TV these days that are not present or former political appointees, beholden to the party of the President who appointed them? They are no more than political hacks, having sold their souls and no longer having the luxury of changing their minds when the facts change.

        MMT hasn’t had that problem yet. Hopefully it will someday.

  10. A bit off topic . . . and in response to William Black’s claim that Cochrane “speaks for the mainstream”, this recent article by Cochrane in the WSJ on the subject of bank regulation is definitely not mainstream, and it’s brilliant:

  11. financial matters

    In addition to Wray on the technical details and Bill Black on control fraud I would add a good dose of rentier reform per Michael Hudson’s work.

  12. I read the Cochrane article (at Ralph’s suggestion) and I do not think it was brilliant. Why? Because any article that can talk about the financial crisis without mentioning the fraud, the accounting control fraud and the predation of the banks is not even worth reading. The article is muddy rather than brilliant.

    • The recent bank crisis, in the US and Europe, was a typical instance of what banks have done over and over again thru history: made silly loans, borrowed too short and lent too long. Obviously there was fraud mixed up with that, but then fraud takes place in non-bank organisations as well: Enron, Bernie Madoff, etc.

      Cochrane’s points relate to the FUNDAMENTAL THEORY of banking, i.e. he deals with the above “silly loan” and “borrow too short” problem, and he makes some good points. The same points have been made by others, incidentally, e.g. Laurence Kotlikoff, and this lot:

      Certainly fraud needs addressing (in banks and non-bank organisations) but that’s a separate issue.

  13. I find it strange that Anne Lowrey’s NYT article “Warren Mosler, Deficit Lover With a Following”
    …..( has no COMMENTS section

    but the accompanying NYT article “Warren Mosler, A Reading List”
    ( does contain COMMENTS section.

    If Stephanie Kelton and Warren Mosler had responses, those responses do not appear with her actual NYT website article on Warren Mosler. I found that Anne Lowrey next current article “A Surge in Part-Time Workers” has plenty of COMMENTS under the web article

    Can someone explain why no COMMENTS are available on her actual piece about Warren Mosler?

    Did NYT hastily add the second article so MMT could add some rebuttals to her article but isolate those rebuttals/comments to only those that wished to find out more about MMT and Warren Mosler?

  14. I think you really should ask the NYT.

  15. Gary Goodman

    “Economics is about the allocation of scarce resources,” Mr. Mosler said. “If there’s a food shortage, you have a real problem in divvying up the food. Right now, we have a dollar shortage because of mistaken notions about how the monetary system works. How does that make any sense?”

    Does anyone here besides me believe it’s valid or important to suggest that “scarce resources” in serious and practical terms has ruled the economic roost for MOST of human history, but is NO LONGER VALID? The importance of Deficit Spending and Demand Enhancement by the govt sector was understood in the early 1900s. By the Very Important Super Rich.

    Scarcity of food was, of course, the pervasive scarcity. Scarcity of manufactured goods as well, before factory improvements and automation.

    During the decades of the rise of the Industrial Age, before the Infotech Age that followed, as mass production grew and accelerated, various historians (Kolko, even Adam Curtis: Century of Self) describe a different economic problem: over-abundance related to large scale investment in industry.

    20th Century production was facing off against 19th Century consumption habits. Consumerism & shop-til-you-drop was not yet inculcated in the masses. Conspicuous Consumption (Veblen) was not yet a hobby of John and Jane Doe. Foreign nations had not yet been fully invaded and globalized by any combination of Intelligence and Diplomats and U.S. Marines, for new “Open Door” markets. Corporations had not globalized on any scale like today. There was no Internet for global sales. Railroads did help contribute to mass production too, by making mass sales more viable.

    As the result, domestic SALES could not keep up with production. Coxey’s Army was on the march to OCCUPY Washington D.C. J.P. Morgan and colleagues were agitating more quietly. Business and Labor faced a crisis of insufficient Demand …. like today.

    The solution proposed and implemented around the turn of the 20th Century in the USA was Demand Management by the federal govt, especially on behalf of the Super Rich. Government Spending and intervention was requested and implemented, to keep up Sales and to protect Profits. They also wanted regulations that would reduce reckless competition.

    Instead of Govt “confiscating” SCARCE resources via public purchase — and the anti-Govt types complain — Govt began to make money ABUNDANT in order to buy up the extra-abundant unsold output of the American private sector. The Welfare State of Corporate Welfare (“entitlements?” absolutely) preceded the expansion of Social Welfare so-called “entitlements” by at least 30 years.

    None of that scarcity problem really holds true anymore, for most products and services. Though Labor is always considered inherently a “scarce resource”, we have plenty of surplus labor today in industrialized nations.

    True enough, there could be some scarcity of materials and resources to allow every adult to own a private car, but the real scarcity is probably roads, parking lots, and fuel.

    In other words, per Kolko (and even Rothbard), some of the main PURPOSES of MMT and JUSTIFICATIONS are around a century old, even while the USA was on that self-imposed Gold Std and Fixed Exchange, before MMT was actually true, before FDR had abolished the promise to pay bearers of U.S. Dollars in gold upon demand.

    I think a LOT of people don’t appreciate, THAT kind of “Socialism” is how Capitalism actually works, and how it worked during the various long “Golden Ages” of American growth, especially the Cold War period of “Keynesian” spending by the Pentagon.

  16. Thanks to all the MMTers for fighting the good fight. It’s a long uphill slog but I’m confident the dinosaurs will eventually see that the fincial climate is changing.

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