Responses on MMT by Josh Marshall

Responses on MMT, Part 1

Editor’s Blog – Talking Points Memo / by Josh Marshall / 2min

Printing some responses from readers to my post from yesterday about the slippery politics of MMT. From TPM Reader PJ …

I read with interest your thoughts on MMT, and am in the kind of academic circles where people will give talks where they think about and discuss MMT as part of some suite of solutions to the excesses or problems of late capitalism (or even straight up liberalism, in the conventional sense). I think perhaps both you and Matt are focusing too much on the practicalities of MMT rather than its rhetorical function, though there might be reasons to maintain the skepticism, there’s another possibility about policy facilitation therein.

I might consider it in parallel with supply-side economics as a device utilized by the Right. Was supply-side economics out of joint with the conventional economics of the post-war political and economic systems? Absolutely. Did its lack of relationship to reality doom it politically? Not at all. It enforced its (from the standpoint of the system) incoherent demands for quite some time, and continued to flex those muscles with the last big GOP tax cut. What was coherent was its ability to unite a set of groups around a theory which had institutional backing, ‘expert’ support, and all the other scaffolding that tend to be the markets of policy relevance: think here of how Heritage and AEI came up to ape Brookings and so forth in the second half of the twentieth century.

I think many MMT advocates are perhaps aware that it struggles to be reality-relevant in the way you are describing, but consider themselves to be facing two competing theories: one is the zombie body of supply-side, itself disconnected from reality. The other theory is more like conventional liberal economic theory, and with the scale of problems we face in terms of inequality but, especially, perhaps with respect to climate change, there’s no getting away from the fact that we will have to actively choose to inhibit our economic growth in the near to medium term for there to be a future that includes any prospect for economic growth. If conventional economics is tied to reality, it is by any definition one where catastrophe is written in the stars if we continue to prioritize GDP as a public good above others, albeit in the shambolic fashion wherein we can’t really think in the long term.

So, I think MMT is kind of like a magic phrase, one that if repeated enough and given scaffolding, could ultimately animate a series of progressive policy decisions that are necessary. The theory itself might be unrealistic and unworkable, but there is a way of considering how the Right succeeded by making a bunch of realistic and unworkable demands repeatedly and insistently. This is a very long game, but I would not count it out as a working theory for what the theory represents.

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Responses on MMT, Part 2

Editor’s Blog – Talking Points Memo / by Josh Marshall / 2min

Printing some responses from readers to my post from yesterday about the slippery politics of MMT. From TPM Reader A …

Hi, Josh. I’m an economist and Prime member (hoping to upgrade soon but have to convince hubs of necessity of expense first…). I read you every day, and the work you and your staff do is indispensable.

I just read your MMT post, and it is spot on. I would go even further. I consider MMTers to be the left-wing equivalent of Hayek/gold standard acolytes. Both of them defy what we know about how the economy works, theoretically and empirically.

That being said, deficits don’t concern me too much. I tend to agree with Olivier Blanchard, whose research shows that as long as overall economic growth outpaces the interest rate paid on the debt, we’re fine. That doesn’t mean we don’t have to be watchful and stay in certain limits, but we certainly have plenty of room, particularly in an environment of sustained low interest rates coupled with economic growth, to make much-needed investments in our infrastructure and educational systems.

Here’s my spiel, me on my expert soap box:
I think the idea of a GND is great in theory, but what concerns me more is the trend of economic concentration we’ve seen across industries over the last couple of decades. Usually, conservatives like to talk about “the free market,” and that if the government got out of the way, we would all prosper. Well, it’s true that the “free market” increases prosperity for all, but the “free market” is not what conservatives think it is. In economic theory, a free market (or what we call “perfect competition”) means that in every industry, there are tons of sellers, tons of buyers, the product/service being produced/sold is identical, and–KEY, in my opinion–there is something called “perfect information”: every buyer and every seller knows everything about every potential and actual transaction. Obviously, perfect competition is about as common as a unicorn. But the idea is that we want to get close.

Sometimes, the way to get to perfect competition is to get government out of the way, but sometimes, we actually need government intervention to get us closer to perfect competition. A lot of markets suffer from “information asymmetries” such that the seller knows more than the buyer, or the employer knows more than the employee, and can take advantage of that. Think of the opacity of hospital pricing, or companies that can restrict employees from revealing salaries to each other.

In other cases, the government should get out of the way. Consider that Medicaid and Medicare are barred by law from negotiating lower prices with pharma companies. Examine the US airline industry– only three truly national carriers (United, Delta, American). This is by design, in the form of anti-cabotage laws, and they ban foreign airlines from flying between domestic airports in the US. (Similar to the Jones Act, which deals with shipping and was suspended during the last big hurricane). If BA or Air France or KLM can meet our safety standards, why shouldn’t they be allowed to serve domestic US customers? This lack of competition is why tickets are expensive and passengers can get beaten up and otherwise abused on flights–they have no choice.

For far too long, conservatives have claimed the mantle of “the free market,” when what they actually mean is “whatever businesses want to do, unchecked.” As I said, I like a lot of the ideas in the GND, but I would much rather see the Democrats really take on these structural issues of concentration and info asymmetries to change the rhetoric surrounding the (incorrect) ideas that the body politic currently holds toward markets. I would like the Dems to look at every part of the economy and ask: What’s keeping us in this market from getting as close to perfect competition as we can? Do we need more or less govt. policy to move in that direction? I believe that thinking in this way could change things fundamentally, for the better.

The GND and MMT to pay for it…. well, it’s just looney tunes, practically and politically, and there are more basic issues to deal with.

Responses on MMT, Pt 3

Editor’s Blog – Talking Points Memo / by Josh Marshall / 3min

Printing some responses from readers to my post from yesterday about the slippery politics of MMT. From TPM Reader MO …

What we have now is a fiat currency pretending it’s still on a gold standard. That is, we have a financial system designed around using the natural scarcity of commodity commodity money, but we’ve abandoned commodity money. oddly, we persist in acting like money is in natural limited supply, and we can only get more of it by taking taxes, say.

The money we have is basically a bet on future productivity and stability. it’s a social compact. That’s really all it is: faith in the United States of America. And of course there’s nothing at all trivial about that faith. It motivated people to fight and die. Or emigrate, of take a chance on businesses, or work towards their own self advancement. The US has tangible physical assets and resources, it’s an extraordinary human accomplishment. But the united States itself is as Anderson says an “imagined community, and the money we use is nothing but a symbol of that community.

So why can’t we fund a welfare state by paying people in printed money? Heath care is a bet on the stability and productivity of our citizens: health care returns benefits in the form of that very same productivity. The money is not scarce. The danger, the obvious danger, is inflation, but as mentioned taxes effectively extinguish money and can be used to prevent inflation.

I wrote a history [relevant topic in economics from major academic publisher]. I only mention to suggest that this isn’t an ill-considered claim. Why do we still act as if money is a naturally scarce commodity, when we know it isn’t?