> The mainstream economic theory genuinely believed that handing out central bank securities would work just as well as, say. adjusting a UBI or normal fiscal policy.
No, it didn’t.
Mainstream economic theory (or even the major heterodox theories) has never held that monetary policy is a sufficient substitute for fiscal policy in general, and mainstream economists in the US (of all stripes, though they differ on what fiscal policy should be) are always complaining about Congress not taking what they see to be appropriate fiscal action and leaving the economy to the Fed and monetary policy.
> Modern Monetary Theory on the other hand is the philosophy of a six year old who asks daddy why the government can't just print more money to buy stuff.
MMT is just “fiat money isn't commodity money, so fiscal constraints are historical cosplay rather than fundamental reality. The real constraint on so-called ‘fiscal’ activity is purely monetary.”
No part of the descriptive element of MMT is in actual serious dispute by orthodox economics. Orthodox economists just tend to prefer the policy behavior that occurs with c
the cosplay of fiscal rather than purely monetary constraints. Which is fine—frankly, I think Congress does a bad enough job with fiscal policy when monetary policy is hived off and given to the Fed, so I can see some naive policy responses to the realities embraced by MMT that would be counterproductive. OTOH, acknowledging the realities instead of trying or bury them because their are some obvious bad potential responses is necessary to have the discussion that gets to policy that incorporates reality well.
> Just because they don't completely redefine economic models from the start doesn't mean MMT isn't a theory.
Yes it does, it makes it not an economic theory but a political one.
> Their description of how government issued currency, coercion, and tax act as a tool to capture services from the economy (as opposed to filling up a treasury for the government to spend) is extremely underrated in mainstream economics.
It is Abba Lerner's functional finance and it essentially only applies to the US federal government, as noone else is big enough. But they also like to extend it to "banks don't lend out deposits", which isn't true. And the idea that you can raise taxes to control inflation doesn't appear to be true either.
> Why would MMT be limited to traditionally left/right boundaries?
Cuz they're only trying to sell it to left-wing politicians.
> Some claim that their theories are more clearly descended from Keynes than conventional economics do.
The conventionals recognize this too:
> With everything else going on, I really don’t want to spend time arguing with the Modern Monetary Theory people; after all, we agree on basic policy issues right now, and they are never likely to have as much destructive influence as the deficit scolds. But the MMT people think they have an argument with conventional Keynesians like me, and as long as they’re out there claiming that standard macroeconomics is all wrong, I guess we need to respond.
> As someone with an econ degree, people advocating for a return to the gold standard are so weird to me. I totally understand people having objections to how central banks manage the money supply and the impacts that has on the economy, but that doesn't mean we should give up control of it completely.
I think you're probably thinking about it wrong. It's not a conventional policy proposal. I think the main factor is just naked mistrust of people like you (people with an econ degree, etc), leading people to seek out simple solutions you have no control over.
Another factor is people just getting high on pure ideology, and losing interest in solving actual problems in the pursuit of that ideology.
> Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription.
Nobody who decides the policy will have read the theory anyway, so that doesn't really matter.
It requires a suspension of disbelief to accept that economic policy is decided based on theory. It is the same fig-leaf as copyright supporting artists, then the law clearly being written by groups like Disney based on their own convenience.
> from my view the theory is fairly straightforward
But as you've stated it, the "theory" is on-face wrong.
Money isn't created when the government spends because it borrows from private credit markets when it spends, taking money out of circulation.
Money is created by monetary policy, not fiscal policy.
I don't necessarily disrespect MMT, I just have trouble tying people down to making a specific claim. Either they are saying something obvious and not at all contrary to mainstream economics, or they are making claims that I think are wrong - but I have trouble pinning down any particular claims.
> MMT especially is not at all a mainstream theory.
AFAICT, the descriptive aspects of MMT are widely accepted, if deemphasized in prescriptive contexts, aspects of mainstream economic theory (not just [neo-]Keynesian, but across essentially the whole spectrum of descriptive economics.) The prescriptions that MMT adherents make based on those descriptive aspects are out of line with mainstream prescriptions, which tend to honor what MMT loudly points out (and mainstream economics more quietly acknowledges) is the fiction of the finite public purse.
> I personally think a lot of established macroeconomics is bullshit. There's just no mechanism to verify many of the hypotheses
Modern academic (and central bank) macroeconomics is literally all about taking macroeconomic models to data. Period. Attend any macro seminar in the field at any university and that’s what you’ll see. In particular: it is directly about “verifying the mechanisms.”
Your complaint is perhaps somewhat ignorant of the way macroeconomics is actually practiced.
> What mainstream economics can't handle is financial saving. Quite literally it is abstracted away from their models, yet it exists in the real world.
An extremely bizarre claim. Literally the first macroeconomic models you learn in grad school have savings. This is always an option to consumers so it’s always going to be in the model.
Moreover, actual macro models (even extremely simple ones) will permit you to save in cash or in some financial instrument (eg bonds).
> But it's a false dichotomy that these are the only choices.
I agree. Unfortunately, these are the only choices that are typically envisioned by people advocating balanced budgets, so they are automatically associated to the concept. It's the responsibility of such advocates to come up with alternative choices; alas, as we've just seen, they don't seem willing to entertain the possible existence of alternative paths.
> The problem with most macroeconomic theories is that they ignore too many important details. So for example [...] you can come to completely different conclusions as to the effectiveness of government spending.
Among the many important details these theories ignore is the actual identity of people responsible for such spending.
>For example, Keynsian economics requires everyone to be forced to save through a central banking system.
Where did you get this strange idea from? You can literally buy anything with your money to save in real assets or at least non monetary savings like bonds. If anything, low interest rates tell you you should stop saving in money but they don't force you to save or stop saving in money. Nobody is here to tell you what you should do as an individual actor.
> I sincerely doubt if humans truly understand economics
This exaggerates our ignorance. Microeconomics is well understood, down to producing testable hypotheses. In macroeconomics, we can draw broad lessons. We know, with respect to elected governments, economies with independent central banks outperform those with political ones. We know there is a relationship between interest rates, money supply and inflation, even if we can’t precisely predict it.
Macroeconomics is largely qualitative. It tells us directions, but not precisely. (Microeconomics is properly a science, offering a full set of experimental tools and falsifiable predictions.)
> For example, nobody in the economics profession would refer to the financial system as being 'centralised'. It is not. There's no central planner.
There is and it is called the Board of Governors of the Federal Reserve System. By setting the EFF rate (or QE policy if EFFR ~= 0%) of the global reserve currency, they control many facets of the financial system and broader economy.
It's not very fine grained control ("bake X loaves of bread"), but it is centralized control and planning.
No, it didn’t.
Mainstream economic theory (or even the major heterodox theories) has never held that monetary policy is a sufficient substitute for fiscal policy in general, and mainstream economists in the US (of all stripes, though they differ on what fiscal policy should be) are always complaining about Congress not taking what they see to be appropriate fiscal action and leaving the economy to the Fed and monetary policy.
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