I’ve mentioned before that Paul Krugman’s reaction to MMT could be summarized as “it just doesn’t work that way”. He provides a more complete response in his New York Times column this morning. Here’s his conclusion:
The bottom line is that while functional finance has a lot going for it, it’s not the kind of axiomatically true doctrine that Lerner – and, I think, modern MMTers – imagined it to be. Deficits and debt can matter, and not just because of the effects of deficit spending on aggregate demand.
That said, I don’t think these objections are all that central to the budget issues facing progressives in the near future. You don’t have to be a deficit scold or debt-worrier to believe that really big progressive programs will require major new revenue sources.
and, consequently, major decreases in private saving and spending. I doubt his answer will mollify those promoting MMT as the solution to our fiscal problems because they’re what I think of as “folk MMTers”.
“Folk Keynesians”, a characterization that includes practically everybody in Congress, believe that government spending always stimulates the economy. They don’t believe there are ever any adverse consequences. They don’t believe that any “time-shifting” takes place. Similarly, “folk MMTers” believe that a monetary sovereign can always issue unlimited credit without adverse consequences.
What too many seem to ignore is that economics is not accounting. Accounting is just arithmetic and a few commonsense rules of thumb. Economics is a science of human behavior and, consequently, subject to the vagaries of human behavior. Human beings respond to incentives and adjust their behavior purposefully in response to them which is why any attempt at fine-tuning the economy by anyone for any reason will always be frustrated.
“Folk Keynesiansâ€, a characterization that includes practically everybody in Congress, believe that government spending always stimulates the economy.
Name one.
They don’t believe there are ever any adverse consequences. They don’t believe that any “time-shifting†takes place.
False, and hyperbolic.
Similarly, “folk MMTers†believe that a monetary sovereign can always issue unlimited credit without adverse consequences.
This is false and you can’t name one person making this argument.
What too many seem to ignore is that economics is not accounting.
Please demonstrate this or you’re making it up.
. Economics is a science of human behavior and, consequently, subject to the vagaries of human behavior.
Economics is not a science.
Human beings respond to incentives and adjust their behavior purposefully in response to them which is why any attempt at fine-tuning the economy by anyone for any reason will always be frustrated.
Another false argument that no one is making but you. No one is “fine-tuning” or proposing “fine-tuning.” It appears more likely you’ve become so cynical you find it easier to be against everything and for nothing.
Peace out.
Donald Trump is very obviously a folk Keynesian. Those in the Congress making statements about MMT have not mentioned the limits. Just look up the definitions of either economics or accounting. If you claim that you can alway control inflation by adjusting interest rates, you’re claiming the ability to fine tune.
“Peace out.â€
Put down the bong.
There is a former congressman down here who has a radio show. He loves to tell the story of how, newly elected, he made the rounds of Republican and Democrat alike to talk about spending, deficits , efficacy…..
He was basically laughed out of every encounter. Nobody cared. Nobody. Politics is just a vehicle for gathering money and power by those clever at the game. Notions of all but the vanishingly few having good intentions are childlike, and those who do have almost no practical experience or sense whatsoever. They couldn’t run a lemonade stand. You as usual are just being a pedant, Ben.