Monthly Archives: July 2013

By Rohan Grey

[Part I] [Part II] [Part III] [Part IV] [Part V]

As mentioned at the end of the preceding section, Murphy’s major outstanding critique of the MMT analysis was that it presumed the existence of a state with a currency monopoly by virtue of its taxation power – or, as Murphy’s described it, MMT was “in favor of robbing liquor stores” in order to ensure a demand for its currency. In my opinion, this critique was underdeveloped, since it did not articulate why the problems identified were worse than the problems of any other feasible system.

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By Rohan Grey

[Part I] [Part II] [Part III] [Part IV] [Part V]

As will be clear to anyone who watches the entire thing, there was very little clash by the end of the debate on the operational mechanics of the modern monetary system:

Murphy: In particular, what makes the Austrians different from other schools of thought, even other nominally free market schools like the Chicago economists – Milton Friedman, guys like that – the Austrians have a very particular view of what interest rates do.

So the Austrians say “look, the interest rate is a price, and in that respect it is like any other price – it communicates information about the real world. It’s not an arbitrary number – it really means something – and if the market interest rate is supposed to be 7 percent and the Federal Reserve makes it 0.25 percent, that’s going to screw things up.

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By Rohan Grey

[Part I] [Part II] [Part III] [Part IV] [Part V]

[If you are interested only in the substantive analysis of the debate, skip directly to Part II]

On July 4th, the New York Times published a profile written by economics journalist Annie Lowry on former hedge fund manager and maverick economic theorist Warren Mosler. The school of thought Mosler subscribes to, known as “Modern Monetary Theory” or “MMT,” has been covered by a number of journalists (see, e.g. here, here, here, and here). MMT purports to combine insights from a range of historical monetary theorists with an understanding of contemporary monetary operations to construct a progressive meme for money that drastically differs from most standard economics textbooks.

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