Wolfers Blames MMT for Orthodox Economists’ Ignorance of MMT

By William K. Black
March 14, 2019     Bloomington, MN

Number 6 in a Series of Articles on MMT

Justin Wolfers is an economist who is disgracing the university I love, the University of Michigan.  I had the great fortune to be born in Detroit and receive the first seven years of my higher education as an instate student at the University of Michigan.  I was able to graduate with virtually no debt.  Wolfers is also a native of Australia, which means he is familiar with kangaroos.  That familiarity is ironic because Wolfers is devoting his time these days to serving as the chief apologist for a kangaroo court of orthodox economists that convened to declare Modern Monetary Theory (MMT) anathema.

Kangaroo courts are sham legal proceedings which are set-up in order to give the impression of a fair legal process. In fact, they offer no impartial justice as the verdict, invariably to the detriment of the accused, is decided in advance.

The orthodox economists’ kangaroo court met that definition.  Here is what happened – and there is no factual dispute about it.  MMT opponents ignorant of MMT scholarship drafted two strawman questions.  (They were actually the same question, with unimportant changes in phraseology.)  The willingness of people who never read MMT scholarship to be fervent opponents of MMT demonstrates the severity of the scandal.  The kangaroo ‘poll’ drafters falsely claimed that MMT scholars would answer “yes” to both questions.  Indeed, the deliberate implication was that a “yes” answer to both questions defined MMT’s core precepts.  MMT scholars have repeatedly and unequivocally made clear for decades that the answer to both questions is “no.”  MMT scholars have repeatedly and unequivocally over the last nine years explained to Paul Krugman, the falsity of his recurrent ascription of the same strawman used by the orthodox economists’ kangaroo court to MMT scholars.  As I have demonstrated in prior articles in this series, Brad DeLong has documented Krugman’s repeated falsehoods, the repeated statements of MMT scholars refuting Krugman’s strawman claims, and the clear statements by MMT scholars as to what they actually believe, write, and teach.

The orthodox economists who were the ‘judges’ in the kangaroo court (they call themselves the “IGM poll”) that condemned MMT based their decision on a single piece of ‘evidence’ – Krugman’s repeated strawman claim that MMT scholars teach the opposite of what MMT scholars actually teach about budget deficits.  The MMT opponents resurrected Krugman’s repeatedly refuted strawman claim to serve as their sole ‘evidence’ against MMT.  The kangaroo court unanimously condemned MMT on the sole basis that MMT scholars believe “X” when MMT scholars constantly stress that they believe the opposite of “X.”  The MMT opponents that forged the ‘evidence’ and falsely ascribed it to MMT scholars, and the orthodox economists who acted as the ‘judges’ and unanimously condemned MMT meet the definition of a kangaroo court.

In fact, they offer no impartial justice as the verdict, invariably to the detriment of the accused, is decided in advance.

Orthodox economists disgraced themselves when they launched this kangaroo court.  In my fifth column in this series, I explained the three “natural experiments” that the kangaroo court unknowingly launched.  The first two experiments tested the knowledge and integrity of orthodox economists.  Each of the 37 kangaroo ‘judges’ who cast at least one kangaroo court verdict failed that test.  The 37 kangaroo ‘judges’ are elite orthodox economic scholars, not a random sample of orthodox economists.  None of the 37 elite kangaroo ‘judges’ displayed even minimal knowledge of the MMT precepts they were condemning or the minimal integrity even the most junior economist should have brought to the process.  No one of integrity aids a kangaroo court.

A kangaroo court is a travesty.  It is a lynch mob, but one that adds the cynical dishonesty of a “sham” presenting itself to the public as if it were a professional, ethical, and reliable citadel of justice.  A kangaroo court combines the worst elements of tyranny and fraud.  Its designers shape it to deceive the public and smear those it lynches as objectively ‘guilty.’  The first instinct of even junior professionals should be revulsion at kangaroo courts and those who ‘serve’ them.  That revulsion should lead to a fierce passion to destroy and discredit all kangaroo courts.

Consider how much greater that revulsion and passion for justice should be if it is your profession that has been disgraced by creating a kangaroo court that forges the ‘evidence’ and condemns its opponents without even providing the pretense that their opponents are entitled to defend their views before the kangaroo ‘judges’ find them ‘guilty.’  Consider how much greater your humiliation and contempt would be if it was the most elite members of your profession that created and ran the kangaroo court.  How great would your passion be to destroy such a disgrace and to condemn those that created it and served as its lynch mob if you learned that the lynch mob was composed of the most elite members of your profession?

If you are an economist reading this, you know I jest.  The idea that elite orthodox economists have a passionate desire to destroy orthodox economic institutions of injustice and domination is, of course, hilarious.  We know that because our exposure and condemnation of the kangaroo court that disgraced the field of economics has created a third natural experiment.  The third experiment is how orthodox economists will respond to the disgrace, particularly those that run the kangaroo court and serve as its elite ‘judges’ (lynch mob).  I predict that the people who run the kangaroo court (U. Chicago’s business school), the unidentified people that took Krugman’s long-falsified strawman claims about MMT and used them as the forged ‘evidence’ presented to the orthodox kangaroo court members as their pretext for condemning MMT, and the elite kangaroo ‘judges’ will fail utterly this third test of integrity.

My prediction causes me pain, and I hope that all three groups falsify my prediction.  I will be delighted to admit the failure of my prediction if that happens.  I think that honest economists can be a great help to the world.  I teach economics, and I feel shamed for my discipline that its members created and ran a kangaroo court.  To date, the overwhelming reaction of economists to the kangaroo court is to condemn the victims of this lynch mob rather than the perpetrators.  The overwhelming reaction of economists has assumed that the forged ‘evidence’ of MMT’s ‘guilt’ must be correct.  The results to date of this third natural experiment are appalling.  The response demonstrates endemic economic ignorance among orthodox economists commenting on the kangaroo court.  Worse, it demonstrates how many economists lack critical minds that lead them to check out the facts rather than accept strawman arguments as gospel without kicking the tires.

A college freshman with a search engine could document within five minutes that it was indisputable that the kangaroo court forged the ‘evidence’ it used as its pretext to condemn MMT scholars.   In another five minutes, the freshman would know that MMT scholars repeatedly and clearly blew the whistle on Krugman’s strawman assaults on MMT scholars over the course of nine years – and that whoever runs the kangaroo court knowingly used Krugman’s dishonest strawman to ensure that the kangaroo court would unanimously condemn MMT.

I began this article by noting that one source of great pain for me is to have Wolfers, an elite orthodox economist from the University of Michigan, emerge as the chief apologist (and Krugman brown nose) for the kangaroo court.  No honest person can defend a kangaroo court, so Wolfers’ apology for the kangaroo court and Krugman – and his effort to blame the victim – plumb new depths of dishonesty.  Wolfers’ first tweet gleefully celebrated the kangaroo court verdict by calling its inevitable condemnation of MMT “evidence” that MMT was baseless.  It certainly is.  The kangaroo court’s combination of fraud and farce evidences a cynical and dishonest effort to smear opposing scholars while fooling the public through a “sham … set-up in order to give the impression of a fair legal process.”  It also evidences the willingness of the lynch mob to ‘convict’ MMT solely by forging “evidence” that purports to show that MMT scholars believe the opposite of what MMT scholars actually believe.

Wolfers then doubled down on his brown nosing of Krugman and quintupled down on dishonesty.  He began his tweet:

Justin Wolfers @JustinWolfers

Justin Wolfers Retweeted Paul Krugman

Lemme add to @PaulKrugman‘s prediction:

Krugman’s prediction had a 100 percent chance of success.  He predicted that MMT scholars would point out, and prove, for at least the fifth time, that his strawman was a lie.  Duh.  The hilarious, insane, disgusting second part of Krugman’s message was his announcement of a Catch-22 – it was illegitimate for MMT scholars to refute Krugman’s lies.  Krugman, and only Krugman, gets to make the debate rules and his first rule is that his opponent is not allowed to refute his lies, particularly his ‘weapon of choice’ – the strawman argument.  Krugman’s phony ‘prediction’ and his Catch-22 did not upset Wolfers.  Wolfers rushed to join in Krugman’s anti-MMT parade.

Wolfers’ Whine

If Wolfers were honest and not so eager to curry Krugman’s favor, he would have called Krugman’s “prediction” and Catch-22 rule preposterous.  Instead, Wolfers decided to add to Krugman’s chutzpah.  Wolfers claimed that any of the kangaroo court members who believed Krugman’s strawman claims about MMT scholars’ view – was a victim of MMT scholars!

[Krugman] may be right that MMT’ers think this question misrepresents their views. But if even the very smart people running the IGM poll don’t understand what MMT’ers are saying, then perhaps the problem is that MMT’ers aren’t being clear.

Wolfers is claiming that “the very smart people running the IGM poll” asked MMT scholars to explain MMT’s precepts for deficits and government spending.  The “very smart people” came away from that discussion so confused that they wrote questions for the “IGM poll” that claimed that MMT scholars’ believe deficits never matter.  In reality, MMT scholars teach that it is not true that “deficits never matter.”  Wolfers’ inference is obvious, if “the very smart people running the IGM poll” get MMT scholars’ views so wrong that the poll questions represent the opposite of what MMT scholars believe, then the fault must lie with the MMT scholars.  It logically follows that the MMT scholars must not be “very smart people” – and they must be so incompetent in explaining their positions that the “very smart [IGM] people” got everything reversed.

There are four fatal problems with Wolfers’ whine.  First, “the very smart people running the IGM poll” never communicated with any MMT scholar seeking an explanation of MMT.  In particular, the “very smart people” never showed any MMT scholar a draft of the two poll questions and asked whether the questions accurately reflected MMT precepts.  They never requested MMT scholars to submit questions for the ‘poll.’  The idea that MMT or virtually any economic theory is reducible to a single sentence is insulting.

Second, Wolfers has no idea who created the IGM poll questions and what their “intelligence” is – and he has no idea what MMT is or the intelligence level of MMT scholars.  The IGM poll site added a link recently providing “supplemental information” on MMT.  That link provides not a single citation to the MMT scholarly literature, nor a quotation from any MMT scholar.  That is a revealing and embarrassing failure.  The entire farce reeks of a classic kangaroo court.

Romesh Vaitiling is the only person identified as putting together this sham “information” on MMT.  The “supplemental information” link attributes the information to him, but without any description of who he is.  A link reveals that he is a member of the staff of a center at the London School of Economics.  His title is “Press and Public Relations – Support.”  He could not have written those words had he read even a single scholarly work by an MMT scholar.  The “supplemental information” sheet makes clear that Vaitiling has no understanding of MMT.  The first sentence of the sheet begins with this falsehood – the exact strawman that Krugman has been repeating for at least nine years despite recurrent explanations by MMT scholars of its falsity:

‘Modern monetary theory’ (MMT) – the idea that a country that is able to borrow in its own currency need not worry about government deficits and debt….

Note that as with Krugman’s repeated, identical falsehood, the “supplemental information” sheet on ‘MMT’ begins with the big lie MMT that quotes no MMT scholar and cites no MMT scholarship.

Third, the entire “supplemental information” sheet contains inks only to two op eds by MMT scholars.  It consists overwhelmingly of links to op eds attacking MMT, several of which repeat Krugman’s big lie.  It is a hit piece, not an introduction to the MMT scholarly literature.  Even as obviously stacked as it is against MMT, however, each of the op eds by MMT scholars makes clear the big lie at the heart of the kangaroo court.  Neither op ed by MMT scholars was intended to refute Krugman’s big lie about MMT.  Each op ed was addressed to explaining different nuances about MMT precepts and policies.  MMT scholars’ op eds, of course, overwhelmingly explain the nuances of what MMT theory says rather than explaining what MMT does not say.  There are op eds by MMT scholars designed to refute directly Krugman’s big lie, but the “supplemental information” sheet failed to cite or quote them.

Recall that Krugman’s big lie, adopted nearly verbatim by the U. Chicago kangaroo court, is that MMT claims that federal budget deficits never matter.  The “supplemental information” sheet provides a link to Stephanie Kelton’s March 7, 2019 op ed in Bloomberg.  The specific language of the first question claims that MMT says that the federal government never needs to “worry about government deficits.”  The supplemental information sheet proves that the people who put together the kangaroo court ‘poll’ knew that Stephanie Kelton, one of the world’s most prominent MMT scholars wrote to emphasize that MMT scholars had no such belief.  Indeed, the title of her op ed makes that clear.  “How to Tell When Deficit Spending Crosses a Line.”  There is no “line” that governments must not ‘cross’ if governments never need to “worry about government deficits.”  Kelton went on to explain when a government needs to worry about a government deficit.

As every economist knows, inflation — not a budget deficit — is the tell-tale sign of an economy that is under pressure from excessive spending. If prices aren’t accelerating, you don’t have an inflation problem. And if you don’t have an inflation problem, you don’t have a spending problem.

The “supplemental information” sheet also links to a March 1, 2019 op ed by Scott Fullwiler, Professor of Economics at the University of Missouri, Kansas City; Rohan Grey, a Doctoral Fellow at Cornell Law School; and Nathan Tankus, Research Director of the Modern Money Network in the Financial Times.

In a major step forward, the broad consensus of these pieces in a series of outlets has been to agree with my colleagues and I that the only limit on government spending is inflation.

First, when we suggest that a budget constraint be replaced by an inflation constraint, we are not suggesting that all inflation is caused by excess demand.

***

Third, when we do advocate using tax increases to address inflationary pressure, we are not suggesting that Congress attempt to raise taxes in real time after inflation has already emerged. Indeed, our approach is precisely intended to avoid a situation in which Congress merely spends without paying attention to inflation dynamics until it is too late. Thus, we argue varying tax rates and other inflation offsets should be included in the budgeting process from the outset.

The “supplemental information” sheet shows that the kangaroo ‘judges’ of the IGM ‘poll’ agreed with Kelton’s point.  I quote the entire passage of the ‘supplemental information’ sheet’s discussion of the comments made by the judges.  Note that they agree with Kelton – the real constraint on deficits is avoiding harmful levels of inflation.

Among the short comments that the experts are able to include when they participate in the survey, Oliver Hart at Harvard made the same remark in response to both statements: ‘This kind of behavior can quickly lead to inflation or even hyperinflation once the economy is close to full capacity.’ So too did Steven Kaplan at Chicago, who answered both statements: ‘At some point it becomes untenable and the country becomes Venezuela or Zimbabwe.’

On the first statement, Kenneth Judd at Stanford commented: ‘A government may be able to do this once but doing this systematically will make it impossible to sell bonds in the future.’ Robert Shimer at Chicago noted that: ‘The real value of the money supply is bounded above. At some point, this must create inflation.’ And Markus Brunnermeier at Princeton cited precedents for that outcome: ‘See numerous historical examples: Germany in 1920s, Latin America…’.

On the second statement, Eric Maskin at Harvard observed: ‘There will come a point where the currency is so debased that further spending becomes difficult if not impossible.’ And Larry Samuelson at Yale added a further reference to history: ‘Creating money can finance a great deal of spending, but incidents of hyperinflation, collapse and other crises indicate there are limits.’

Every orthodox economist polled agreed with the position the MMT scholars expressed in their op eds – unrestrained budget deficits could trigger serious inflation, which is when deficits matter.  Note also that that the author of the questions reported, but did not understand the significance of, the following comments by one of the ‘judges.’  “Oliver Hart at Harvard made the same remark [about inflation] in response to both statements.”  He made the same comment about inflation in response to both questions because both questions are different ways of phrasing the same question – do federal deficits never matter?

The Kelton and Fullwiler, et al. op eds and the ‘judges’’ comments on the poll questions demonstrate the key points.  First, the two ‘poll’ questions were slight variants of the same question – do you believe that deficits never matter?  Second, the poll says that MMT answers both questions “yes.”  Third, every MMT scholar would answer “no” to both ‘poll’ questionsFourth, the people that created this kangaroo court knew from reading the two op eds by MMT scholars that they were falsely attributing statements to MMT scholars that MMT scholars oppose.

The “supplementary information” sheet notes, but its author does not understand the significance of the fact that the kangaroo court results were unanimous – “this kind of unanimity of opinion is rare.”  It is almost impossible to get intellectually honest economists to agree unanimously about the validity of nearly any major controversial economic theory.  It is easy to produce unanimity only if you attribute falsely to a group of theorists an economically illiterate statement that they do not believe.  The kangaroo court poll answer was unanimous because both questions purported that MMT believed a claim that was economically illiterate.  Why would MMT scholars believe a claim that was preposterous?  Why would the kangaroo court assign to MMT scholars a claim that MMT scholars have consistently explained was false?  The kangaroo drafters of the questions knew the MMT scholars would have voted “disagree” on the questions.  The unanimity of the voting was a warning sign that the ‘poll’ was a kangaroo court exercise.

The fourth fatal flaw in Wolfers’ whine is that it implicitly admits his ignorance of MMT scholarship combined with his willingness to insult MMT scholars in order to seek Krugman’s favor.  He could not have read any MMT scholarship to make the two tweets he did about MMT scholarship.  So why was he commenting on MMT?  He knew from Krugman that MMT scholars would point out that the kangaroo ‘poll’ questions falsely reversed MMT scholars’ actual views.  That should have warned him immediately to read at least one MMT scholar’s work and determine whether the kangaroo ‘poll’ questions reflected our views.  Krugman’s tweet, which prompted Wolfers’ second tweet on MMT, should have warned Wolfers that MMT scholars had repeatedly corrected his repeated efforts to tar us with a strawman claim he invented to smear us.

Wolfers could have used a search engine to learn the truth within five minutes.  Wolfer’s research would have also proved that MMT scholars clearly and repeatedly refuted Krugman’s lies.  Wolfers would then have known with certainty:

(1) He had praised a kangaroo ‘poll,’

(2) The ‘poll’ question restated Krugman’s big strawman lie,

(3) Krugman’s ‘prediction’ that MMT scholars would point out that the kangaroo ‘poll’ simply repeated Krugman’s big strawman lie was an act of cynicism because he knew with certainty that we do not allow Krugman’s big strawman lie to be repeated without refuting it, and

(4) Krugman’s Catch-22 that says it is illegitimate for MMT scholars to refute his repeated lies was indefensible and obscene.

Wolfers either read, or deliberately stopped reading, tweated responses to the kangaroo ‘poll’ by MMT critics who have read MMT scholarship on the twitter feed.  He would have learned two critical facts.  The ‘poll’ questions falsely ascribed to MMT scholars views we have consistently opposed.  The ‘poll’ was a kangaroo court.  Alternatively, Wolfers could have read the “supplemental information” sheet, clicked on the two links to op eds written by MMT scholars and confirmed the same critical facts.

Every day that passes since the announcement of the scandalous kangaroo poll without U. Chicago, the ‘judges,’ and those like Wolfers and Krugman who ballyhooed the ‘poll’ apologizing for this travesty is a day that adds to the disgrace of each of these people and institutions.  The forces of orthodoxy in many disciplines have used strawman arguments and sham ‘judicial’ panels to condemn and even murder the heterodox over thousands of years.  Orthodoxy launches these purges when formerly ignored views begin to receive broader attention.  Academics rely on strawman arguments and kangaroo courts only when they cannot win an honest debate.

While MMT scholars are the victims of this latest travesty, we would be happy to be part of transforming this scandal into a real dialog about how economics can aid rather than obstruct our Nation’s ability to solve our worst problems.  We can provide full employment without harmful inflation, provide superior health care at a lower price, and fix rather than assault our planet’s ability to sustain life.

A Special Appeal to Darrell Duffie and Austan Goolsbee

My deepest pain, however, is that I know two of the elite economists who agreed to be the faux judges in this kangaroo court.  I personally call on Darrell Duffie and Austan Goolsbee to blow the whistle on this scandal and do everything within their power to expose and make right the disgrace they helped bring on our field.  If you actually want to learn about MMT, contact me and I will introduce you to my colleagues and their work.  Read our columns explaining why the kangaroo court you aided was a disgrace, take action to ensure it does not soon happen again, and work to undo the harm you have done.  I am sure that neither of you had ever read MMT scholarly work prior to rendering your ‘verdict.’  Please join us in righting this disgrace.

MMT scholars are going to continue to demand that the economics profession admit, condemn, and do everything possible to cure this scandal.  This must never happen again in our lifetimes.

4 responses to “Wolfers Blames MMT for Orthodox Economists’ Ignorance of MMT

  1. This is saddening. I guess the “don’t matter” position does exist, but MMT says they don’t matter in the orthodox way–via crowding out effects. We also downplay Pigou and “Keynes” real wealth and real balance effects as being all that important as influences on spending. Both of those are neoclassical ideas. Of course, deficits matter in myriad ways in a reasonable “MMT model”–via financial safe-assets ratios, etc. I agree in that I don’t see disagreement with the actual MMT ideas in most of the comments by the prominent mainstream economists polled. On the other hand, if asked, they are likely to disagree with many beliefs of typical MMTers; for example, the mainstream believes it needs models in which firms or consumers optimize. Also, the poll questions seem a bit like “trick questions”–hard to come up with the “right” answer or the intention of the question.

  2. Actually, I mention Keynes effects but as effects of price level changes, they are not all that relevant; I should have mentioned only Pigou effects as purported implications of deficits for the mainstream in my comment just above, along with crowding out. Has anyone in the mainstream mentioned Ben Friedman’s work on “crowding in”? It’s a mainstream observation that the government can issue short term debt if policymakers believe there it can’t issue long-term bonds without unacceptable effects on bond rates. In essence, it need not ever issue debt of any maturity beyond demand at existing interest rates.

  3. James Cooley

    At least MMT scholars have moved beyoud the state of “being ignored” and are now recognized as a real threat to the established order. Does this confrontation remind anyone else of the Copernican Revolution? Let’s hope it doesn’t take over a hundred years to discard revealed authority and that the fate of Galileo does not await MMT scholars.

  4. ChristopherJ

    Plenty of economists get MMT, William, including me.

    I studied in the 80s at ANU in Canberra. Never, ever, understood ISLM, but could pass the exams…

    The academic economists know they are wrong, but their jobs depend on them opposing the logic of MMT, even though none of them can develop one coherent explanation of why the theory does not describe how a nation like Australia could use public money for public purposes, instead of for corporations, insiders and those with power.

    We already have MMT. When the Fed says it is intervening in markets, buying assets to support them – really backstopping and supporting the wealth of the elites, those purchases are not supported by taxation or borrowing, they’re just creating money.

    It’s about time our central banks and governments started using our money for people.