Responses to Blog #30: What is Modern Money?

By L. Randall Wray

Q1: A fewquick questions:
(1) Isn’t Charles Goodhart essentially a neoclassical who accepts thechartalist approach to money?
(2) Would it be accurate to say the sources of modern chartalism/MMT are:
    (a) Mitchell Innes’s work
    (b) G. Frederick Knapp’s work
    (c) Keynes and Abba Lerner’s functional finance model
    (d) Post Keynesianism
    (e) some contribution from Minsky? (i.e, FIH)
In this sense it is a new macrotheory sharing many ideas with older PostKeynesians (uncertianty, endogenous money, subjective expectations) but thathas done innovative work in shattering myths about how the central bank andtreasury really function, even though one might argue that Abba Lerner was thetrailblazer in this work:
Lerner, A. P. 1943. “Functional Finance and the Federal Debt,” Social Research10: 38–51
Lerner, A. P. 1944. The Economics of Control, New York, Macmillan.
I’ll just end by saying that when Keynes finally read Lerner’s he appeared toendorse it.

A: The first MMT conference I recall was organized by WarrenMosler at Bretton Woods in 1996. At that time, he called it “Soft CurrencyEconomics”, but most of the pieces of the MMT puzzle were there. The 3economists invited by Warren were: Charles Goodhart, Basil Moore, and YoursTruly. I would not accept “essentially neoclassical” as an accuratedescription of Charles. However, to say that he marches to his own drummerwould be accurate! We don’t agree on everything, but we agree on much. A bitmore on that conference: a) the one who actually did the work of organizingWarren’s conference was none other than Pavlina Tcherneva, who at the time wasan undergrad student of Mat Forstater;
b) my memory is notoriously bad and someone will probably correct me byreminding me that the BW conference was not the first meeting of MMT, butit was certainly the first time I met Warren and Pavlina! I think I hadmet Mat before, and had known Stephanie for quite some time; I think I had metBill before 1996–but memory is foggy. I knew all of these people on-line andwe had been working on MMT for several years, but I think the meetings andconferences began in 1996.

Q2: Does Basil J.Moore subscribe to MMT? I know his work on endogenous money. Just to clarify:the founders of MMT are Warren Mosler, Charles Goodhart, Basil Moore, RandallWray, Bill Mitchell, Pavlina Tcherneva, Stephanie A. Kelton and Mat Forstater?Since Basil Moore was obviously a Post Keynesian, is it correct to say thatmany of the founders were influenced by Post Keynesianism ? Does not WarrenMosler have a connection with Paul Davidson? And good old Hyman Minskyinfluenced you, Profesor Wray? Finally here are my brief thoughts on thehistory of MMT: http://socialdemocracy21stcent…

A: Looks good. Look at the first MMP blog which has a list of contributors, andstudents etc that I thank. It is impossible to formulate a complete, definitivelist. Kelton is Bell. Except for my “students” (Tcherneva, Tymoigne,Kaboub, Nersisyan, Leclaire, Fullwiler, Bell, etc, too many to list here)most of us originally met on the old PKT internet discussion group. Others,like Moore and Davidson and Minsky and Kregel are “fathers” in somesense of the PK approach–so I knew them from early 1980s. They accept elementsof MMT, but except for Kregel it probably would not be good to list them asMMTers. We all learned from them. Note I have been negligent in forgetting tolist Ed Nell–and will do so–because he was a supporter from the earliestdays. And he helped to organize meetings at the New School. Minsky is withoutquestion the greatest economist of the second half of the 20^thcentury. So, yes, we were influenced.

Q3: Would Henry C. Carey be considered as a kind ofprecursor to MMT? Was he an influence in your intellectual formation?Could this be the source? http://www.amazon.com/Modern-M…

A: Professor Mat Forstater isour resident historian of thought. He might know Carey or this Burstein; thenames do not ring a bell with me.

Q4: John Carney’s piece referring to crony capitalismwas most interesting as was Mitchell’s response talking about the JG. I alsosaw your blog on the JG. These all have a great appeal and I hope you willcomment more. There is no doubt there is just plain corruption when thegovernment tries to stimulate the economy directly but even the JG will besubject to that. I suppose corruption or whatever name you give it exists inall endeavors. The JG has some problems in this world, not least of whichis a base for effective political support. So, again, I hope you willspend some time on those issues. At some point the economics has to come togrips with political power and society.

A: We will deal with most of these issues in coming blogs.But if we all agree on the theory then all we need to do is put our headstogether to make it work. What amazes me is that upward of 95% of theobjections now—20 years later—are about program implementation, politicalfeasibility, and corruption. OK I think some of you are smart. Put your darnedheads together. Stop criticizing. Start solving problems. I cannot see any useof economics or any other branch of human endeavor if it does not try to tackleproblems. Finding useful work for a JG employee seems to me to be on the orderof difficulty as finding a pot for your 2 year old to pee in. If you cannotresolve that problem, you are up the creek without a paddle, so to speak. Haveany of you ever put a diaper on your damned kid? You began as all thumbs andsharp pins. After a few months you could do it with eyes closed, one-handed, ina restaurant while serving your guests with your other hand. As Keynes said,this is like dentistry. Solve the damned problem. Stop complaining. All of you,every single one of you, should be able to resolve all these issues before Ieven start posting blogs about the JG. That’s a challenge. My upcoming posts onJG should be completely redundant. Get your buns in gear. You’ve been here formore than half a year; all the pieces are in place. Go for it. Prizes and fameawait.