This week we continued our (unplanned) extension of commentary on Austrian economics. The post was featured on the home page of NEP as well as on the MMP. A large number of comments were provided, although few questions or comments that really needed response. There is no doubt that Austrian economics always provokes response—by lovers and haters. There is almost no in-between.
The purpose of my blogs has almost been lost—in part, my fault because I chose to respond to comments by Austrians, especially John Carney at CNBC—and that took us somewhat far afield. Since the very first discussion group I joined—PKT (Post Keynesian Thought) back in the early 1990s(?) I have found that Austrians punch way beyond their weight class when it comes to on-line discussion. In economics, Austrians don’t amount to much more than a handful of fringe individuals. I do not say that to put them down. I’m just reporting. Indeed, Austrians want to count themselves as outsiders and find a lot of affinity with heterodox economists. Austrians (with some justification) find themselves even more excluded from normal academic discourse than do even Post Keynesians or Institutionalists; in America they probably vie with Marxist-Leninists for awards as the most fringe group. But of course, they come at things from the far right rather than from the far left.Still, some of them are recognized as great scholars—I’m thinking in particular of George Selgin (history of private coinage; “free” banking”) and Walker Todd (history of the Fed). I count both of them as my friends and I’ve learned a lot from them. That does not mean I don’t disagree with them! But often Walker and I find ourselves in the midst of a conference where we not only are the “odd men out” but where we substantially agree on some topic or other. A good example is the tendency of Washington to come to the rescue of thieving banksters who are destroying our economy.

So what was my purpose? To argue that Austrians can safely adopt MMT. Our disagreement should be about the scope of the “public purpose”and the role of government in pursuit of the public purpose. I’m actually going to say a bit more about that in my next post. I’ve decided we need a part 4. That means I’m delaying for one more week our introduction to the Job Guarantee. I hope you will agree it was worth the wait. And I hope I can say something that Austrians find useful.

So, on Monday there will be one more, final, post on Austrians and MMT. I do not think I’ve yet succeeded in making my point. Love them. Hate them. It’s worth one more effort.

Getting back to commentary. The really truly surprising thing is that given how relatively unimportant Austrians are in terms of academics or policy-making (look, we all love Ron Paul but mostly because he does not matter—he’s that favorite crazy uncle who drinks a bit too much at family get-togethers and then says things we’d all like to say but never dared),Austrians dominate internet discussion groups. Here at NEP they do not, but any blog post at—say—Naked Capitalism or even HuffPost that hints that government might actually be able to do something useful will generate a nearly infinite number of responses challenging the blog. And while the responses are nearly 100% predictable, we still need to account for that. I’m not sure what to make of it.

A large portion of the responses appear to be by“professionals” (paid or unpaid, I do not know) who repeat almost word-for-word their responses across the world wide web. (In a very nice blog today, Pavlina Tcherneva has responded to an individual who posts virtually the same response anytime the JG is mentioned.) So, some of it is just “flacking”—repeatedly posting the same message and never accepting any response, always insisting on getting in the last word.
Back when we had the PKT there was a small handful of Austrians who literally killed the discussion group through such tactics—they’d post tens, dozens, hundreds of posts a day to dominate the discussion. And like “whack a mole” new ones would always come along and start all the same old tired critiques a new just when you thought you had settled some debate. These flackers usually appear to be—at best—only marginally educated.  But that helps their cause a great deal, as they can always assert a sort of moral superiority against “elite” academics—the same sort of argument a Glen Beck or Rush Limbaugh makes against pointy-headed intellectuals. It works well, and wastes a lot of time as well-meaning participants actually try to teach them a bit of economics. It is almost always a waste of time.

All of this is a lead-in to tone of commentary. I have noticed at least two comments telling John Carney and Ramanan to take a hike. That is probably my fault. I want to be clear here. I do not want either of them to leave. I am engaging John because I think he is worth engaging. I enjoy his comments at NEP and also his posts on his own blog. Yes I’ve been strong, maybe harsh, in my responses to him. But I am glad John is engaging us. And note his most recent post sided with MMT against Austrians on interest rates. Nor do I want Ramanan to leave. Yes, I am tired of his flacking. It looks awfully suspicious—predictable, insistent, and barely rising above marketing. I gladly accept any real criticism he has to offer, although I would prefer that he would make his comment and then accept a response. When he goes on and on repeating the same thing a half dozen times on the same blog that gets mighty tedious. But, let’s all try to tone it down. Telling him to go away is taking it a step too far. I will try to be more tolerant and I hope Ramanan will try to use more self-restraint.

It’s hard to know which comments to respond to—most werejust comments on or extensions to things I wrote, that do not need any response from me. A few asked about the JG but that is the next topic. It seems that I can talk about two issues in a useful manner.
     There was a huge dispute about the MMT position on “inside” credits and debits and saving and whether we ignore it. That is to say, within the private sector we’ve got individual households saving in the form of claims on other households and firms, and other households and firms going into debt running up deficits. Our point was that at the aggregate level that sector’s inside credits and debits and surpluses and deficits and financial saving all net to zero.
Adda government or foreign sector (“outside”) and now the domestic private sector can “net save” in the form of “net financial assets”, running a surplus that consists of accumulation of financial claims on the outside sector(s). What seems to have thrown some to a loop was our occasional statement that we can for some questions ignore all the “inside” saving of the domestic private sector;in that case, outside (net) saving (net accumulation of financial assets) equals the deficits of the outside sectors.
And so it is true that there are—in thatcontext—some statements that the private sector cannot save unless the government sector (or foreign sector) runs deficits. Yes, IN THAT CONTEXT we can say such a thing—we are taking the entire private sector as a whole and saying that it cannot “save” (run a surplus) unless some external sector(foreign or government) deficit spends. That does not mean that within the private sector there is not lots of saving and investing going on—with lots of individual households or firms running surpluses (saving) and others running deficits. But all of that inside stuff nets out.
Does that mean it does not matter? No. But how it matters depends. It requires more investigation. That is exactly what Godley and I did beginning in 1998.
Finally, yes there is also “real” saving going on and it can occur even without money. Once we net out all financial assets/liabilities we get down to real stuff. Does it matter? Yes. Why does MMT focus so much on money? Because it is MMT.
We have never been confused about any of this. Some readers have. There is an automatic tendency to presume that the fault is always at the hands of the writer, not the reader. Especially when that reader is not very well educated in the subject under discussion. So we had a group that either did not read much of what we wrote, or did not understand what we wrote, and got all up in a huff and formed a website based on the proposition that MMTers did not know what they were talking about. Can we just make up now? I don’t know. It isn’t up to me. I didn’t leave in a huff and puff.

There were various statements about that particular website and politics—whether it can be “politics free” or not. My view: of course not. There is no such thing as economics that is value-free. But I cannot speak for them. My view—as I stated in a previous blog—is that we must examine the public purpose, which must be a political consideration. I believe it is an inherently progressive subject. I do not see why Austrians would have a problem with that. There is room to disagree on what we include in the public purpose, and what portion of that has to be supplied by government. I think we made some progress in our discussion with John Carney—but clearly we’ve still got a gulf. I’ll try again in part 4.


  1. A big part of the reason for the heavy austrian presence on the internet is the mises institute's fantastic website.  The sheer amount of print and audio/visual media they have available is staggering, and lots of it is geared toward people with little background in economics.  Other heterodox schools would do very well to try copying it.

  2. Excellent point! The various right wing think tanks including the Austrian institutes are wallowing in money. They literally cannot spend all the funds they've got. There are so few legitimate Austrian researchers that these institutes have to pay pure hacks who are unable to produce anything that would past muster. They literally just make it up. But, yes, they also can afford all the bells and whistles–shiny publications, great websites (and truth be told, they also republish the classics and sell them at affordable prices, which is a nice public service). It would be great if heterodox economists could get just one percent of that funding. But as you know, we get almost nothing. That is why Stephanie added a "donate" button to NEP!!!! We do not have our Koch Brothers. NEP has no funds. We have a volunteer staff of one. His name is Mitch. If you can afford it, donate today. If you can't afford it, thank Mitch for the great reorganization he did to the website 24 hours ago–which came off without a glitch.

  3. I would go as far as to say that some of Murray Rothbard's lectures do a great job in presenting what Austrian economics is all about.  "Mises in One Lesson" is an example.  And if you never took econ in school, his Econ 101 lectures are easy listening.  He is actually kind of funny in spots.

  4. Randy,About Wynne Godley first. He is my hero and I have read the rarest of his pieces and IMO, his statements were always qualified. " Nor do I want Ramanan to leave. Yes, I am tired of his flacking. It looks awfully suspicious—predictable, insistent, and barely rising above marketing. I gladly accept any real criticism he has to offer, although I would prefer that he would make his comment and then accept a response. When he goes on and on repeating the same thing a half dozen times on the same blog that gets mighty tedious. But, let’s all try to tone it down. Telling him to go away is taking it a step too far. I will try to be more tolerant and I hope Ramanan will try to use more self-restraint." I cannot control what you think. But IMO your thoughts seem like a computer programmer who suspects the compiler for regularly throwing errors. That's because the syntax is not right, even though the idea is. I don't check comments here regularly except posts where I comment but down under even as recent as in the Feb 25th Saturday quiz such a thing I have been persistent on appears. Not only me, but other commentators have regularly pointed out this fact but it doesn't change at all! 

  5. Every time I browse my Kindle for econ books I come across all kinds of von Mises Institute products at very low cost.This is nothing to be laughed at.  Money talks.  While academics might convince themselves that nobody takes this stuff seriously, the Koches, Austrians and other libertarian right folks will keep marching on buying up public opinion, buying research institutes and buying professorships.

    • There are no copyrights. You can go to the site and everything they have for sale, you can download for free on PDF. The core of Austrian economics is money and its role, the fact that reserve banking is always insolvent and that the people can make better allocations of wealth than a bureaucrat.

  6. As Ronnie used to say "There you go again." More nonsense. No beef. Just flack.

  7. All the founders of the Austrian school: Carl Menger, Eugen von Bohm-Bawerk, Friedrich von Wieser, Ludwig von Mises, Friedrich von Hayek – all were hereditary members of the nobility.  Coincidence?

  8. Apologies for telling John Carney to "take a hike" as it were… 🙂 Didn't mean it in a "don't post here" sense, more of a philosophical "step aside" w.r.t. MMT and "the public purpose". Mea culpa.

  9. Standard response to being pinpointed where you go wrong!

    • Chill, chill, man!
      Here’s something to cheer you up:

      Why follow austrian economists?
      1. They are armed and dangerous – watch out for their invisible hand!
      2. They can supply (on demand)!
      3. When you are in the unemployment line, at least you will know who got you there.

  10. I've been reading Rothbard's "What has Government done to our money?" after a discussion I got into on the Mises Institute site. While I don't agree with all what what he's saying, the fact is he is an excellent writer and his ideas (at least in this book) are well accessible to the lay reader. I have to admit that as a not-professional economist, sometimes the wonky stuff on here gets over my head. While this encourages ME to go learn more, it's a severe turn-off for a lot of folks and they'll just stop reading if there is something they don't understand. While I agree that the academic framework needs to be sounds and the wonky stuff needs working out, they way to change hearts and minds in through easily accessible presenting. The MMTer who I think does this the best is Warren Mosler. I've listened to several radio broadcasts he's done recently and he can explain MMT in lay terms to almost anyone in under 30 minutes. Kudos to him as well as the rest of the MMTers (Randy, Stephanie, Bill, Pavlina, Marshall, etc.)  for putting in so much hard work. Just keep in the back of your mind that it's popular press books (MMT for dummies, anyone?) and mainstream TV (the daily show?) and radio interviews that will grow MMT and that those of us who read this site and the academic articles are only a small minority of the public at large.

  11. Marley: no worries. Forgiven. We all occasionally go a bit too far. Thanks for apology–I'm sure John will accept. That is very stand-up of you.

  12. Never went wrong. You just ain't a very careful reader. And do not know when to quit. Can anyone say flacker?

  13. Excellent. Glad you listen to Warren. He is a national treasure.

  14. Are you willing to let us know how much you are being paid to do this? Flacking, I mean.

  15. The Hare Krishnas have cheap books too, with lovely pictures. And free/cheap food on Sundays, and all you have to do is chant with them for an hour. This further reinforces my belief that Austrianism/Libertarianism is a cult, in which case it is almost useless to argue with them. An intervention is more appropriate. Though I would like to see the Mises Institute illustrate their publications with paintings like the Hare Krishnas or those paintings from Sunday schools. I want to see Milton Friedman driving the golden chariot being pulled by the two horses called Supply and Demand, appearing in his fearful multi-invisible-hand form.

  16. cool demonstration! eventhough HTML5 audio player might not pack all of the features it works well.. it let’s iOS folk hear the mp3, tho the player will launch in a new webpage; and to return to your original page, html5 music player

  17. Ramanan isn't a 'flacker'. He has his own Post-Keynesian blog:'s an ex online student of yours. In 2009 he claimed that you and Mitchell taught him how to think about the  economy properly. Now he seems to believe that he's found some little flaws or errors in your arguments. Maybe you should ask him to spell out in non-ranting non-obscurantist language what his point is exactly.

  18. This seems to be the crux of his criticism:From bilbo Saturday Quiz 2/25/12:Question 1:If a nation’s external sector is in balance (and thus making no contribution to real GDP growth) then the private domestic sector cannot save if the government runs a balanced budget.The answer is True.Ramanan says it is False.When I read the question it says the private domestic sector cannot increase it's savings in the aggregate for that year or budget cycle. The stock of savings remains unchanged from the previous budget cycle. Simple enough.Ramanan reads it differently apparently, and after much back-and-forth I'm still not sure in what way. He would have to explain that here himself.The confusion may arise from the fact that S is both a stock and a flow depending on how one defines the time period in question. Over (t=history) S is a stock. Over (t=1) S is commonly seen as a flow (Y=C+S+I+NX), although technically the period (t=history) could also be seen as a flow. This is true of any running total.Conversely Ramanan may be implying that even without a budget deficit the stock of savings can increase year-to-year, but he has yet to produce any math to substantiate his claim, only data extracted from NIPA or FoF tables. At least that's how I interpreted his argument.Or he may be claiming that the flow (I-S) does not represent "net savings", because "net savings" is a stock not a flow. See above.

  19. Ramana is a pedant quickly dissapearing up his own a-hole. But a clever one at that. His pedantry deserves some attention.

  20. Can I ask a question about inflation? I haven’t seen the ‘definitive’ MMT account of inflation covered in detail anywhere, other than the basic account that it results from demand being in excess of supply.

    Passing references (especially by Mosler) refer to “conflict claim theory”, and I’m trying to look into it, but it seems that hardly anyone has published a paper on it since the early 1980s.

    Have I missed it anywhere in the MMT primer?

  21. I bet 1 out of 10 of you couldn’t tell how the banking system works. Anyone familiar with the heart of Austrian Economics would have seen this mess coming a long time before it got here. You might read the forward of Rothbard’s Americas Great Depression. The thing about Minsky and Fisher was their conclusions as to what caused crisis, which was the overinflation of credit. Excess money creates bubbles, which naturally speculative endeavor follows. What appears to be legitimate is in essense speculation.

    What I see here is a lot of picking on people who don’t agree with you, without investigation to boot. I think Michael Hudson has some great perspective and I also believe from what I have read that he doesn’t give much credence to a lot of modern economic thought. Much of his insight adds to pearls I find elsewhere. Steve Keen actually wrote a book called Debunking Economics, knocking holes in the standard education most economist receive. Being Austrian economics isn’t taught in a lot of places, namely because it isn’t in the interest of the bankers, I doubt he is debunking that line of economics. There isn’t any other economics that examines objecctively the role of money, credit and speculation in an economy.

    The problem with MMT is this is what we have been using since LBJ debased the coinage. The fact that not one government on Earth has in net issued credit and paid a dime on it, is in itself creating money. The proceeds are showered throughout the economy, especially in places like the US and Europe. It is this excess of free money and government direction that has produced one bubble after another, starting with war machines and going forward to housing, agriculture and the markets in general.

    Lastly, you might go read Doug Noland of Prudent Bear. I think Doug is basically an Austrian, though he was the first writer I saw reference Minsky, back in 2001. Here is a link. Read this starting in 2001 and tell me no one saw it coming. The guys that went to the PHD schools of economics in the US didn’t see it coming. The ones that received credit, like Roubini only saw it after a few of the ducks came out of the row. Here is a 8 narration of the bubble as she blows and the various bombs being built.

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