Keynesianism, NeoFisherism, And MMT

The title of this post lists three macro models that I believe are wrong. But they are not all wrong in the same way.

I’m not even sure I understand MMT, as when I try to engage with proponents of that theory they keep telling me that I’ve got it wrong. I say, “So you’re saying A, and here’s why that’s wrong.” They respond, “No, we aren’t saying A, we are saying B.” I respond, so you are saying B, here’s why that’s wrong.” And they respond, “No, we are not saying B, we are saying C.” Then I explain why C is wrong. It never ends.

Perhaps it’s just me. But here’s the problem for the MMTers. Paul Krugman is sympathetic to many of their policy preferences. He’s also “on the left”. He likes some politicians who like MMT. But he has exactly the same reaction to the model as I do:

Now, arguing with the MMTers generally feels like playing Calvinball, with the rules constantly changing: every time you think you’ve pinned them down on some proposition, they insist that you haven’t grasped their meaning.

I don’t expect everyone to be able to explain their models in a way that a slow mind like me can understand. But they should be able to explain it to one of the half dozen most brilliant economists in the world.

It seems to me that the problem with macro is that the underlying problems are so complex that there are a wide variety of ways to address these problems. For instance, just in the field of money, you have the interest rate approach, the quantity of money approach, and the price of money approach. Within each of those you have varying assumptions about price stickiness, Say’s Law, crowding out, rational expectations, Ricardian equivalence, market efficiency, and a host of other issues. The possible approaches quickly multiply, each developing different frameworks and even different languages.C + I + G = PY. MV = PY.IS/LM.AS/AD. Etc., etc. You end up with a sort of Tower of Babel.

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Gary Anderson 7 months ago Contributor's comment

Most of the time, lower rates are proof of contraction, but not always. But MMTers say lower rates are proof that we could be running bigger deficits, expanding more. But what if that is wrong? MMT could get us into a lot of trouble as a nation.