William K. Black
March 14, 2019 Bloomington, MN
Fifth Article in a Series on MMT
Something extraordinary happened yesterday. Orthodox economists, frustrated by their inability to intimidate progressive elected officials, have launched a coordinated assault on MMT in hopes of making it politically dangerous for elected officials to embrace MMT. Yesterday brought three remarkable revelations about orthodox economists’ willingness to engage in naked intellectual dishonesty in their desperation to find something to discredit MMT.
The orthodox economic attack on MMT should be a ‘slam dunk’ – if orthodox economists were correct about MMT. There are two obvious ways to deliver the ‘slam dunk.’ First, orthodox economists preach that a theory’s predictive ability is the test of its validity. MMT scholars have been making predictions for decades, so orthodox economists should be able to produce a large number of falsified predictions by MMT scholars and declare victory. There is only one problem with this option – MMT scholars have an exceptionally fine predictive record and orthodox macro scholars have such a terrible predictive record that prominent economists deride “modern macro” as the “dark ages” (Paul Krugman) and a religion unsuccessfully posing as a pseudo-science (Paul Romer). .
The second way orthodox economists could ‘slam dunk’ on MMT scholars would be by quoting them (not contrary to context) and then presenting objective evidence or logic proving that the MMT scholars’ quoted statements were indisputably false. If, as the orthodox economists repeatedly assert, MMT positions are ludicrous, then this ‘slam dunk’ should not require orthodox economists to even work up a sweat. Orthodox economists religiously fail to cite and quote MMT scholars.
Actually, I have been hiding the ball on you. As a white-collar criminologist, I study the third ‘slam dunk’ strategy – the strategy orthodox economists actually use to discredit MMT – fraud. As white-collar criminologists, we emphasize that “accounting control fraud” is a “sure thing.” A strawman argument is a fraudulent debate tactic that becomes a sure thing if you get to be prosecutor, judge, and jury. The orthodox ‘scholars’ have found it impossible to quote MMT scholars writing something that is demonstrably false. It is child’s play (a ‘sure thing’), however, for an orthodox economist to create a strawman claim that is obviously, demonstrably false. The orthodox economist crafts the strawman to be demonstrably and obviously false. The orthodox ‘scholar’ then fraudulently claims that the strawman represents MMT scholars’ position.
The obvious needs to be stated. Creating a strawman is intellectually dishonest, unethical, and represent a “revealed preference” – it reveals that orthodox scholars know they cannot win an honest debate. If the facts and your predictive successes support your orthodox theory, you have no need to create and ascribe strawman arguments to smear rival scholars and theories.
Yesterday, dozens of orthodox economists, many of them prominent, collectively lost their minds and their integrity. They coordinated their actions to create a show trial that would have warmed Stalin’s spleen. The show trial purported to judge the validity of MMT. The sole ‘evidence’ allowed in the show trial consisted of two strawman claims written by orthodox ‘scholars,’ but falsely ascribed to MMT. MMT scholars do not simply not make the two strawman claims – MMT scholars say the opposite of the strawman claims. These are not new strawman claims, they are identical to the false claims Krugman has been making for eight years. In plain English, a show trial of orthodox economists proclaimed MMT false based on the ‘prosecutors’ crafting two statements the prosecutors falsely claimed represented MMT theory, even though MMT scholars have repeatedly written the opposite. Further, MMT scholars have been refuting the strawman arguments the ‘prosecutors’ drafted – for at least eight years.
Orthodox economists conducted a show trial to pronounce MMT guilty for being correct. The irony is that the show trial proved MMT scholars’ actual views correct. Every orthodox ‘judge’ that voted on the strawman claims agreed with MMT scholars that the claims were false.
The “Initiative on Global Markets” (IGM) reported the results of its show trial on March 13, 2019 – the day orthodox economists lost their minds and abandoned even the fig leaf of integrity.
Modern Monetary Theory
Question A: Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt.
Question B: Countries that borrow in their own currency can finance as much real government spending as they want by creating money.
MMT scholars do not make or support either claim (see articles 2 & 3 in this series) – so how did IGM manage to create two strawman claims, falsely ascribe them to “Modern Monetary Theory,” and report this show trial to the world as a universal condemnation om MMT by their panel of orthodox economists?
MMT scholars, for decades, have been explaining when, how, and why deficits can matter. For at least eight years, MMT scholars have been repeatedly refuting Krugman repeatedly advancing this false strawman argument. Whoever drafted these questions knew that they did not represent the position of MMT scholars and that MMT scholars disagree with both of the strawman questions.
The show trial represents a natural experiment of the competence and intellectual honesty of orthodox economists. The results of that natural experiment are spectacular – a large group of the world’s prominent economists failed the test of honesty and competence even though the test set such a low bar that they should have passed it without discernible effort. As always, show trials demonstrate conclusively the lack of morality and integrity of the ‘judges.’ Not a single member of the ‘judges’ in the show trial passed the twin tests of competence and integrity. They disgraced themselves and our discipline.
The form the IGM economist panel uses has a space for comments and a number of the panelists wrote comments. Not a single panelist wrote a comment objecting to the strawman questions falsely attributed to MMT scholars that made a mockery of the purported ‘process.’ Not a single panelist blew the whistle on this shameful show trial. There are two possible reasons: one bad, the other awful. It would be bad; and revealing, that not a single prominent economist on the panel knew enough about MMT to know that the questions were vile strawman claims. It would be awful; and revealing, if any of the panelists knew enough about MMT to know that the questions were strawmen – but still participated in the show trial and failed to blow the whistle on this scandal.
If no one on the ‘expert’ panel had even the tiniest exposure to the MMT scholarly literature required to spot the use of strawman questions to ensure that the panel discredited MMT, much less expertise in evaluating MMT, then IGM has to fix its system. It also needs to apologize to MMT scholars, elected officials, and the public. IGM must promptly withdraw formally their ‘verdict’ in their show trial.
Consider how IGM would have operated if it actually wanted to report the informed views of orthodox experts on heterodox theory instead of conduct a show trial. IGM would use questions drafted by the heterodox scholars that would accurately reflect the heterodox scholars’ theories. IGM would ask the heterodox scholars to provide an executive summary of key MMT principles. IGM would require its panelists to read enough of the scholarly MMT literature to make an informed judgment. Far better, however, would be to create an ongoing, collegial dialog among orthodox and heterodox scholars rather than these mock rulings by panels composed exclusively of orthodox scholars.
We are now running another natural experiment – how many of the orthodox ‘judges’ will admit their failures, apologize, and act to reduce the harm they caused? I write this article as an addendum to that natural experiment.
I urge the orthodox economists who disgraced themselves by aiding this show trial to seek redemption. Perhaps you were simply conned by the people who created the strawman questions. For that to be true, you must be exceptionally unaware of MMT – and willing to condemn it without doing any work. Apologize, but do not stop there. You should be enraged at those who made you complicit in this disgrace. Find out who created the strawman questions and who suggested the show trial and blow the whistle on their frauds. In your joint, open letter of apology, each of you should identify how many published articles or books by MMT scholars you read prior to condemning MMT. The next week will test your integrity and your zeal to restore it.
I urge journalists to ask each of the ‘judges’ to identify how many MMT scholars’ works they had read. My prediction is that the cumulatively, the ‘judges’ in this shameful show trial had read fewer than five works by MMT scholars.
Journalists should also ask every ‘judge’ in the show trial to cite and quote the work of at least one MMT scholar making the statements ascribed to us by twin the strawman questions. I predict that none of them will be able to do so.
Ignorance, of course, is not remotely a defense. If you have never read any of the scholarly MMT literature and someone asks you to be a ‘judge’ in a show trial obviously created to condemn MMT, you have an ethical duty to refuse and to try your best to prevent the show trial from disgracing our field.
While I always hope for redemption, my prediction is that most of the ‘judges’ that disgraced themselves and our discipline are proud of their role in the show trial. I believe they will claim they did a great service to the country by smearing MMT through fraudulent strawman claims. Orthodox economists are already citing the show trial ‘verdict’ as proof that MMT is false. Justin Wolfers, who often writes in the New York Times, tweeted his glee at the results of the disgraceful show trial. He described it as “evidence” (in a show trial designed to ensure that the ‘judges’ had zero evidence, and instead was based entirely on two fraudulent strawman statements). He then claimed that the “only real debate” was between the ‘judges’ that “disagreed” with the faux MMT strawman and the ‘judges’ that “strongly disagreed.”
Wolfers’ dishonesty spurred Paul Krugman to tweet a level of calculated dishonesty that exceeds the term “disgraceful.”
Prediction: MMTers will say this doesn’t fairly represent their views. Why? Because they say that about *any* attempt to represent their views clearly. MMT is an attitude, not a model; try to pin it down and they will move the goalposts.
Krugman has been working in his columns and tweets for the last two weeks trying to perfect the wording of this bit of cynical dishonesty. It is such a brazen lie that I dubbed it Krugman’s chutzpah. It is a Catch-22 – if MMT scholars ‘admit’ that Krugman’s dishonest strawman claims he falsely ascribes to MMT scholars are correct, we are admitting our theories are bunk. If we point out that Krugman, again, is falsely ascribing a dishonest strawman claim to us, then Krugman declares this act proves we are not scholars and have no theories. Whatever we do, in response to his lies Krugman defines us as the loser. He will now claim that the show trial, which used his strawman claims, proves he was correct.
For years (see articles 3 & 4 in this series), we were willing to ascribe Krugman’s strawman arguments to his ignorance of MMT. We repeatedly explained not only the falsity of his strawman claims – which in every case he ascribed to MMT scholars without ever providing a citation or quotation – but also our actual views. It has been clear for at least six years, however, that Krugman is deliberately deceiving his readers. We know this because he keeps ascribing falsely to us the same strawman arguments that we have repeatedly explained to him are false. The show trial used the identical strawman claims that we are on record consistently refuting. Krugman ascribes to us in these twin strawman claims views that are the opposite of MMT precepts. MMT explains that deficits can matter and goes on to explain when, how, and why the can matter. Krugman, and the orthodox show trial, repeatedly, without citation or quotation and ignoring our refutations, simply lie and say that MMT purports that deficits never matter.
We also know that Krugman is lying rather than ignorant because he slipped up in a March 26, 2011 column – nearly eight years ago – and admitted that he knew that MMT explained that deficits can matter a great deal if they cause a shortage of real resources.
As I understand the MMT position, it is that the only thing we need to consider is whether the deficit creates excess demand to such an extent to be inflationary. The perceived future solvency of the government is not an issue.
We enjoy that Krugman column because it documents another predictive success of MMT compared to Krugman’s analysis.
Krugman knew that his “prediction” that we would respond to the show trial by stating that the positions ascribed to MMT scholars in that ‘trial’ were strawman falsehoods that we have repeatedly exposed as lies for over a decade had a 100 percent chance of proving accurate. He has seen us rebut the same lie many times when he advanced the identical strawman falsehood repeatedly for nearly a decade. Any reputable scholar would respond to a strawman argument by pointing out that it was a strawman. A strawman argument is a classic logic failure.
Krugman has redefined chutzpah by claiming that if he lies repeatedly about his opponents’ argument by repeatedly advancing a strawman claim, and his opponents repeatedly refute his lie, his opponents have wronged him and he has won the debate. Every aspect of Krugman’s chutzpah is logically false, dishonest, immoral, and wackiness of epic proportions. As a criminologist, I emphasize an important research finding. The fraudsters’ key to success is typically audacity, not genius. Krugman’s audacity is breath taking. As a criminologist, I particularly love the audacity of making a “predict[ion]” he knows is certain to come true – MMT scholars will refute the lies and strawman questions that the orthodox economists who staged the show trial used to declare MMT scholars ‘guilty’ of claiming things are true that MMT scholars actual teach are untrue. Krugman will then claim his predictive success demonstrates his skills and the perfidy of MMT scholars
“IGM would ask the heterodox scholars to provide an executive summary of key MMT principles.” I have been searching for and trying to develop this type of summary for more than ten years. I think that part of the MMT problem is that if such a summary exists, few know of it. It would help those who are not economists to be able to cite such a summary with confidence.
All these critics will accomplish is to publicize MMT far and wide. People will read about MMT. Many of them academics who will grasp what they are reading. This will hasten the demise of the neoliberal myth and it’s replacement by MMT, which is a vastly superior macro. MMT professors are advising Democrats already. Of this I am certain.
Wow, this great. I’ve noticed the same thing, but you’ve pulled all this together given “the witches trial” you’ve mentioned.
What is a good, non-technical Intro to MMT? Although I have a Ph.D from UMass in Economics, I have not kept up with the literature, and was never a quant jock.
Dr. Paul Lockard
It seems you can’t beat “audacity” when it is applied consistently, and if nothing else, at least Klugman is consistent.
The point that is noticeable from the “show trial” and the relatively few comments provided, is that respondents can only compare the questions, whether false or not, to the existing financial/orthodox economic system.
It would seem fairly obvious that none of the so-called”experts” had any real knowledge about MMT and it wouldn’t have really mattered what questions were put to them, as they could only relate it to the way the current system works.
If the question did not conform to the current system then it would obviously be a flawed proposition.
There is a lot of vested interest in ensuring the current system is not challenged, and certainly not providing any openings for reform.
Google search “levy wp778” and the first link should bring you to a huge list of MMT resources (circa 2014). Wray and Tymoigne’s MMT 101 (Levy Institute working paper 778) is a good start.
Here is a very brief, very low level, very incomplete introduction to MMT.
Here is a complete and very accessible treatment.
There is a summary of MMT and how it contrats with the mainstream narrative. It is in one of Bill Mitchell’s blog posts entitles How to Discuss Modern Monetary Theory. The table that summarizes is near the end of the post. Hope this helps.
Tip Parker, if Warren Mosler’s book The Seven Deadly Innocent Frauds of Economic Policy is not concise and simple enough for you, why not try this summary from Bill Mitchell in 2015:
Basic Concepts from the Billy Blog, Sept 18, 2015
“1. A sovereign government is never revenue constrained because it is the monopoly issuer of the currency.
2. Therefore it does not have to issue debt to cover the excess of its spending over taxation.
3. Issuing debt is unnecessary and should for the most part be abandoned as it is unnecessary ‘corporate welfare’.
4. Taxation is only functional if it deprives groups of purchasing power. It does not raise revenue in order to allow the government to spend.
5. Equity considerations matter and guide us on which groups to deprive of purchasing power via taxation and in what magnitude.
6. Government deficits (surpluses) are equal (dollar for dollar) to non-government surpluses (deficits).
7. If there are external deficits and the government continues to balance its fiscal position (only spends what it raises in taxes) then the private domestic sector will run continuous deficits equal to the external deficit and thus incur ever increasing levels of debt.
That is an unsustainable state.
8. Continuous government deficits are likely to be required if the non-government sector desires to save overall and maintain sustainable levels of private debt.
9. Running a fiscal balance as a rule can never be sensible economic policy and can never be a position that the ‘left’ should take in the economic debate.
10. The ‘left’ should espouse full employment, decent wages, equity in income distribution, public goods, environmental sustainability, regulation to advance well-being, etc and understand that continuous public deficits will likely be required to advance those aspirations.
You can see that if you start of with a false premise with respect to the constraints facing a currency-issuing government how quickly one descends into a flawed analysis no matter how admirable the overall values of the author might be.”
Here’s a chart I drew showing the evolution of selected economic schools, with MMT being the focus: Evolution of Selected Economic Schools.
I also wrote something of a The National “Debt” for Dummies — not intended to be condescending but rather to be easy to understand: The Socrates Show, with guest Pete Peterson.
The best textbook presentation of MMT economics that I have seen is Eric Tymoigne’s Money and Banking.
—> Dr Paul Lockard. Perhaps via @billyblog , (link to his bilboeconomics there, large back catalog blog posts). Others via Twitter; Scott Fulweiler. Deficit Owls…others. #MMT is an overview start.
In the past year or so, a number of people have written non-technical introductions to MMT. I’ve compiled those I’ve found at http://wecanhavenicethings.com/introductions/
Should you be inclined, I’m interested in ideas for better organization of this growing body of material.
Here is a good place to start. This tweet thread contains many MMT resources, links to scholarship, and mini-lessons geared towards the layperson:
Dr. Paul Lockard, read the 7 deadly innocent Frauds of Economic policy by Warren Mosler linked in the resources on the right.
Also I found the teaching models at Bill Mitchell’s site very helpful
Scroll to the bottom and read the first 3
A simple business card economy
Barnaby, better to walk before we run
Some neighbours arrive
Hope these help.
Dr. Paul, at the top of this website above the “New Economic Perspectives” logo is something called “MMT Primer” written by Randall Wray. It is a good non-technical introduction to MMT thought.
Paul, a good layman intro is Mosler’s 7 Deadly Innocent Frauds that you can download directly from Warren’s site. For a more complete text, the recently released macro textbook from Wray, Mitchell, and Watts is a good resource.
One of the founding books was:
Wray, L. R. 1998. Understanding Modern Money: The Key to Full Employment and Price Stability. Northampton, Mass.: Edward Elgar.
The transition to this book from Randy’s previous book marked his entry into what is now known as MMT:
A full citation for the current published version of the online MMT primer by Wray is
Wray, L. R. 2015. Modern Money Theory: Debt, Deregulation and Financial Crises. New York: Palgrave Macmillan. Second Edition.
These are additional suggestions for relatively official versions for people curious about MMT and its meaning.
You may be interested in this link,https://www.academia.edu/5675274/A_Primar_for_Monetary_Sovereign_nations