L. Randall Wray
The following text reproduces my notes for my talk on the final night of the conference; I think there is a video of the entire panel that will be posted up on the conference site later
This conference is dedicated to the memory of Landon Rowland, a local Renaissance man. You have heard both Robert Skidelsky and Chancellor Leo Morton speak of his accomplishments.
Over the years, Landon regularly invited Bill Black and me to lunch to discuss our view of the state of the world. We’d meet at a local restaurant where all the wait-staff knew Mr. Rowland by name, and knew where he wanted to sit and what he liked to eat.
He’d praise the work of our department and ask how the university was treating us. Well, we don’t have to go into that now, on this joyous occasion. He always promised to put in a good word with the Chancellor. I’m sure he did.
He was a major contributor to the last three meetings of our conference. He expected nothing in return but stimulating presentations.
His generosity and enthusiasm were critical to the success of the last conference and to the existence of this one. I was ready to hang it up. He and Lord Skidelsky conspired to talk me into one more. Both of them found funds to ensure there would be a conference in 2016. Robert paid the costs of setting up the internet site. Landon paid the costs of bringing in the Keynote speakers. Unfortunately he couldn’t be with us tonight.
I talked to him through his illness. He was always upbeat. He learned all he could about his rare affliction—that dated back to his youth when he was exposed to asbestos while working in maintenance in the apartment complex where he lived with his family after his father’s death. He embraced alternative, radical, cures and was happy to be the guinea pig. When he thought it was time to get an assistant to help in some daily tasks, he asked for an economics graduate student.
For the intellectual stimulation.
That’s a rare individual who would seek out a budding economist for scintillating conversation. Most people would rather have their teeth drilled.
Landon had a long life, but it was cut too short. I know he would be especially happy to be here tonight, as we celebrate the UMKC economics department’s contributions to heterodox economics. For those who are interested in a short note about his life, please see this.
I want to do some thank-yous, but I also want to explore why we are here tonight. What a long strange trip it has been.
First there is Warren Mosler, who stumbled on the old PKT (Post Keynesian Thought) discussion group—I think it was the first online venue that brought together heterodox economists. Without Warren you would not be here tonight, and there would be no Modern Money Theory. That is the unvarnished truth. Warren brought the reality of the real world to academic economics in a manner that is exceedingly rare. His penetrating challenges forced a handful of us to reinterpret what we knew—what was already staring us straight in the face.
In retrospect, it is now all so clear. It is so clear that our long-time critics now claim that all the essentials of MMT were always obvious to them—no matter how hard they fought against that obviousness.
As an outsider who knew finance, Warren could cut through the fog of academics. The theme of this particular conference is standing on the shoulders of giants. I like the metaphor, which I learned from Minsky (and which he got from his professor). But sometimes standing on the shoulders of giants puts your head right in the midst of the fog.
Sometimes, you are better off at ground level. Warren has that knack of taking down a 10,000 word academic exercise with a simple phrase: taxes drive money; bonds are a reserve drain; government spends through keystrokes; currency issuers cannot run out; the government’s debt is the nongovernment sector’s net financial asset.
That is all obvious to you now. Before Warren it was not. Your head was in the fog.
Second, there is Mat Forstater, who had the good sense to recommend Pavlina Tcherneva to Warren when he posted a request for a good research assistant to do a literature search—to find the giants whose shoulders he didn’t need for understanding, but who might prove useful in selling the ideas.
Without Pavlina there never would have been the 1996 meeting at Bretton Woods that served as the first conference for what would become MMT. It was titled “A Framework for Macroeconomic Analysis”.
Warren invited me and my family. Frankly I wasn’t sure I should go. I wrote to Paul and Louise Davidson, who had just visited Warren at his Florida house. By all means, they said, Warren is a gracious and generous host.
Warren brought together Post Keynesian academics and financial markets practitioners to hammer out the beginnings of MMT—people like Charles Goodhart and Basil Moore, as well as Alex Pollock of the Federal Home Loan Bank, and David Mittlelman and Maurice Samuels who manage Harvard’s endowment.
Today we celebrate the 20th anniversary of that meeting, along with the 70th anniversary of the other Bretton Woods meeting. Truly auspicious.
For 20 years Pavlina has been in the thick of it. She joined Mat and me at the Levy Institute—she worked in the forecasting center—and then she moved with us to UMKC in 1999. The rest is history, as they say.
Third, there are the two Jims at UMKC—Jim Sturgeon and Dean Jim Durig—who together had a vision for the Interdisciplinary PHD in the Econ program at UMKC. They recruited us, and then added Stephanie Kelton and Fred Lee.
When Mat and I interviewed with Jim Durig, he finished the meeting with one final question. Could we guarantee that the UMKC Economics department would gain a national reputation for heterodox economics?
Frankly I had no idea. It sounded like long shot. So I lied. “Yes, we can guarantee it.” That sealed the deal.
To say we succeeded beyond our wildest dreams would be an understatement.
Fourth, I have to thank Jan Kregel and Paul Davidson. Jan started the early version of this conference, in Trieste, Italy. Paul picked it up and reinvented it in Tennessee. When he retired from Knoxville we moved it here. Jan joined our faculty as a Distinguished Professor, and he did most of the organizing through the early years.
Over the years a huge number of students has helped to organize and run the conference—too many for me to name here. I want to mention a few students and staff members that all of you here have already met at least via email. First Mila who was my right hand, handling all aspects of this conference. Second, Nicola who worked closely with me on the previous conferences, and played an advisory role on this one. And third, Kyle, Ignacio, Devin and Jordan who handled various essential details such as the program, T-shirts, and the conference website.
I thank Deborah and Kayla from the department office who handled the important stuff like the registrations and paying the bills.
It has been a long strange trip. When we began a bit over 20 years ago, I thought the parameters of the trip were pretty clear. We were borrowing the insights from great minds of heterodoxy to integrate then-current strands of research.
Endogenous money and central bank interest rate targeting; Keynesian theory of effective demand; rejection of the orthodox analogy of a government budget constraint, replaced by an understanding of sovereign currency; repudiation of the notion of a Phillips Curve in favor of an Institutionalist approach to the labor market and wage setting; close institutional analysis of actual operating procedures; and careful examination of the history of money in place of the Robinson Crusoe barter story.
None of it was new. It was a conscious integration of all the traditions I had studied as a student—helped immeasurably by Warren’s understanding of the real world financial system.
Warren thought it would be easy to win over the entire profession; he thought it would take a few months—maybe a couple of years at the outside. We’d win Nobel Prizes. I was somewhat skeptical. Warren was used to dealing with really smart people in financial markets. I was used to dealing with academic economists with careers and reputations on the line—where being right carries no rewards; where dogma Trumps.
Maybe that is a poor choice of words. After this election it might be banned from the English language.
I knew that a repackaging of heterodoxy was not going to go over well with mainstream economists, who would have to reject everything they had ever done.
However, I will admit that I thought we’d have a relatively easy time with heterodox economists. I was wildly wrong. To some extent, our belief that it would be easy is what made it hard. We did not always explain ourselves well. We were too impatient. And we got too defensive when we were criticized by those who didn’t understand what we were saying.
It took a long time, but I’ve learned that it is impossible to eliminate ambiguity with mere words. No matter how hard you try, it is not what you write, but how it is interpreted that wins the day. This is the new frontier for MMT—how can we elicit the proper interpretation, with the frames that can trigger the right neural connections. No one thinks with her brain; morals always Trump. There’s that word again. To many of our heterodox brethren, it just sounds immoral to say that the government cannot run out of money.
I had hoped to have Warren here for this celebration so that we could together acknowledge his contributions to this conference, to the UMKC program, and to revitalizing Post Keynesian economics more generally.
Warren declined. It would have been a bittersweet affair. I’m embarrassed by the way my university and my fellow heterodox economists sometimes treated Warren. I wish we could make it up to him.
He contributed something like $4 million to the effort—supporting the PK conference in Knoxville and after its move to KC.
He supported many dozens of UMKC PHD students over a period of almost a decade. He made it possible to bring many visiting scholars to UMKC to enliven discussion. Our program’s success would have been impossible without Warren.
Again, that is the unvarnished truth. Without Warren, UMKC would still be sitting in the middle of the MidWest. Because of Warren, it sits in the Center of the Universe—to borrow one of his phrases.
He contributed funds to a number of other academic institutions, too. He never expected nor asked for anything in return. This was philanthropy of the highest order—to advance understanding.
Lastly, I’d like to thank a few of the PhD students with whom I worked closely over the years.
I served on Scott Fullwiler’s dissertation committee. He told me he had worked through my 1990 Money and Credit book in preparation. I told him that is nice, but endogenous money is a pretty trivial advance. He had to read my much more important forthcoming 1998 book, Understanding Modern Money. He did. And he’s made major contributions to MMT ever since. He’s now replacing me at UMKC.
Stephanie Kelton wasn’t technically a student but she’s been with me since the Denver days. I don’t have to recount her contributions to MMT, and also to injecting a tiny bit of sanity into American policy making. UMKC remains in good hands.
Back to the students. I already mentioned Pavlina—My student, my friend, and now my Chair at Bard. If you live long enough and have good enough students, I guess that happens.
Over the years there also were a couple of Erics, Zdravka, Alla, an Andy or two, Nicola, Flavia, Joelle, Fadhel, Yeva, Felipe, Kalpana, Ryan, Yan, Heather, Daniel, Karol, Shak, and some Bobs, Bens, and at least one Mike.
Many others have passed through our PhD program and are now teaching all across the US. Thirty years from now, someone will weigh the relative contributions of the handful of important heterodox programs throughout US history. Wisconsin, Texas, Oklahoma, Denver, Umass, Rutgers, Utah and the New School.
If Fred Lee had not died an untimely death, he would prove that UMKC produced a greater quantity and greater quality of heterodox economists than any of those.
No matter what the facts might actually show.
As our colleague Bill Black always claims, UMKC punches above its weight class. Operating with a shoestring budget and a handful of faculty, it has produced a remarkable group of heterodox economists. When I look at the AFIT (Association for Institutionalist Thought) or the AFEE (Association for Evolutionary Economics) conferences for their annual programs, I’m struck by the embarrassment of riches—UMKC students and graduates dominate. You saw the program here, full of current students ably presenting the research that they’ll more fully develop in the years to come.
I retired from UMKC as of August 31. It was a good run—17 years here, after a dozen years at Denver before that. I get restless, but I retired mostly for family reasons. I thank my colleagues and students for the good times.
With the efforts of Lord Skidelsky, it looks like there will be yet another Post Keynesian Conference in 2017. Watch NEP for the announcements.
I’m not an economist, but I have learned a lot of important financial information from this site and other sites dealing with financial matters (e.g., Naked Capitalism). I’ve bought a book or two about heterodox economics and have tried (mostly unsuccessfully) to teach my husband what I have learned. The information about MMT and my interest in following the perfidy of Goldman Sachs have done wonders to increase my understanding of the financialization of the economies of North America. Thank you all so much for taking the time to share and explain to us laymen how MMT works and how it affects our everyday lives.
Have a great retirement, Mr. Wray.
Prior to stumbling upon Warren Mosler’s book 7 deadly innocent frauds, nothing about economics teachings made any sense to this layperson trying to understand the fiscal or monetary policy decisions being made. There was both relief and shock at learning of the degree of disconnect between any prior thoughts and the reality which the books asserted facts clearly established.
At that time (after the GFC), I thought MMT was brand new because I had never heard of it before, and like Warren Mosler, I thought MMT would quickly take over the world of economic thought and all of those who pioneered this would have their Nobel prizes soon!
Congratulations and many thanks to all of you for developing and sharing this instrument which will move the mountains over the course of time.
All the best to you professor Wray in your retirement.
Thank you, Prof. Wray! After retiring from the physical sciences in 1998, I became aware of these heterodox ideas that contradicted my recollections from Econ 101. Fortunately, I came across the weekly installments of your MMT Primer in 2011 and have been an advocate in my small way ever since.
Enjoy whatever you do in retirement. Active minds don’t retire; they just enjoy more.
Best regards to you and your family.
My thought on the history of MMT is that it must have been known and understood for at least seven decades. You cannot apply something until you discover and understand it, and, the United States, the Allies, and others could not have fought World War II without applying MMT. What has happened since then is that a lot of Wall-Street supremacists and others, who want money only to enter the economy from the private banking system so that the federal government does not muscle in on their territory with deficit spending, have spent enormous amounts of money on propaganda to make the world undiscover MMT.
Dr. Wray – I would like to add my best wishes for you in your retirement. I found my way to MMT through Cullen Roche, and then Mike Norman and finally got to Warren (7DIF) and you and the rest of the UMKC crew. I received my economics degree from Wharton, but never found the field particularly interesting because it seemed detached from the reality of our economy. Learning about MMT in the later stages of my life reignited the interest I began with as a freshman. This was a theory and body of work that finally made sense, unlike rational expectations and representative agents.
I am forever indebted to you for teaching me so much about the actual workings of our monetary system. I have spent the last few years trying to gently educate my friends and associates about MMT and the realities of our economy. Maybe trying too much sometimes as my daughter won’t allow me to talk to her about it anymore. 🙂
Good luck and Godspeed.
Dear Prof. Wray,
As I wasn’t there, I could not applaud. I do it now and wish you all the best in the future.
Many thanks for all your efforts and those of all the people you mentioned. My self-interested hope is that you keep contributing.
Thank you for your primer on MMT and the follow on book. My only prior knowledge on economics I got in first year economics classes decades ago. I recalled then one professor saying that during the war years the treasury simply issued bonds to the fed. Somehow that idea seemed lost in the ensuing years, and I came to believe there was some immutable law, not well known to mere humans, that made deficits and debt anathema to moral individuals. That must have been … gold, right? So, of course, the government had to have taxes to buy anything. And issuing debt would put us at the mercy of …. someone. So balance the budget at least over a few years was just necessary to stay solvent. Otherwise…. a bad thing happens, like inflation or unemployment or a foreclosure, the Weimar Republic comes to America!
Anyhow, I am sad to see you leave. You are far too young to retire. I noticed you were withdrawn this past year plus. I do hope all is well with you and hope to see more of your insightful analysis. Good luck in your retirement.
FYI for everyone . . . Randy didn’t retire from being a professor/scholar. He retired from UMKC and went to the Levy Institute. He’s still going to be as active as ever, just not at UMKC. This speech was from an event at UMKC, where he has obviously left a tremendous legacy.
Professor Wray, I want to make sure you know how indebted and grateful I am to you―and to Stephanie Kelton―for inspiring and informing my understanding of modern fiat money. It is the great revelation of my life, and the thing that keeps me optimistically striving every day. The story you tell of how it came about deserves, I think, a literary dramatization. If that were done, and done well, it would surely elevate MMT in the public imagination where it firmly belongs.
Thanks for the nice comments. As Scott says, I’m not dead. Yet.
However, I’m not going to be as “active as ever”–or, at least, I’m going to more carefully choose what I do with my time. I retired from UMKC to be able to spend more time with my family. And I’ll probably do less blogging but you will soon see the long overdue textbook that Bill Mitchell and I have been working on for a decade (!), joined recently by Martin Watts to finish that off. And there will be another surprise a few months after that…..
Meanwhile, I am working at Levy and at Bard College.
Thanks for giving a bit of context about how MMT came about. I’m sure that it will take some more years, but finally macroeconomics will be changed. The “balance sheet approach” has now been embraced by both heterodox economists and some mainstream ones, and I’m sure that in the future discussion will evolve around balance sheets, transactions and behavior, not around equilibria and assumptions.
Professor Wray I never met you, but I have been following your work now for over 10 years thanks to Bill Mitchell here in Australia. Your contribution to MMT will surely never be forgotten. Thank you for your book on Minsky, it gave so many insights to such an interesting character. Hope to see more of your published work in the future. I wish you good health and happiness in your life after UMKC.
I’m still working my way through MMT and heterodox economics — in between trying to sort out politics and such, to help keep the world from blowing up soon.
I tried to study economics many years ago — even started a course in it — but my reaction was “what kind of gobbledegook is this?”. It was learning about MMT, and your work was/is very helpful in that, that I finally found out what kind of gobbledygook it was.
I have a warning for you: as you slow your schedule and activity down you may discover some old nagging questions which you had not been thinking about rising to the surface and discover that you now understand them, and that you feel compelled to explore and communicate about them — and be catapulted into yet another incarnation, busier than ever. Best of luck — and thanks!
BTW — I’m listening to fascinati8ng podcast, about an hour, from
“… author and frequent CounterPunch contributor Rob Urie to discuss his new book Zen Economics published by CounterPunch. Eric and Rob discuss capitalism and the question of it being natural or unnatural, as well as the historical/anti-historical dichotomy, a theme running throughout the book. The conversation explores everything from the western understanding of time to Lenin and the formulation of imperialism as the highest stage of capitalism. Eric and Rob also question the very meanings of wealth, choice, and freedom under the conditions of capitalism and the modern world….”
Im sad to hear you are retiring. Your work has been truly remarkable so far, thank you for all the efforts.
But I wanted to return to discussion from December when you asked for “wordsmiths” to come up with a new term for treasury liabilities. (http://neweconomicperspectives.org/2015/12/debt-free-money-banana-republics-part-two.html)
After thinking I came up with idea: why not name them after purpose they were issued for? Private debts are issued for funding purposes. Debt for funding.
Why does sovereign government issue debt? Not for funding purposes I would argue. Take for example Japan that has large foreign currency reserves and domestic debt. Why doesn’t it use assets it has to pay down its debt? Because they know that doing so would be detrimental for the public good. It would be devastating for the Japanese economy.
So the reason why governments issue debt is for public good. Debt for funding and debt for economic well-being. Something like that.
Dear Professor Wray, Thank you for all your good work in economics. It has made a huge and positive difference. I have read large quantities of your writing and have always found them of the highest standard. I am sorry to hear the news regarding Mr. Rowland. I met him at a New York Review of Books event in the UK and was amazed to learn of his support for your old UMKC department. His friendship and support is just one more indication of the good work you do.
Congrats on your retirement and all the up and downs along the way. Your blog, books, research and ideas are enjoyable to read and provide infinite possibilities to ponder. Look forward to more from you and the many others that have gone through the program.