Modern Monetary Collectivism

These days, MMT—modern monetary theory—is all the rage.

Most people, especially among those criticizing this (post)modern way of looking at money and government spending, have focused on the macroeconomic parts of the illusive MMT promise. The gist of the MMT framework is that we can all have nice things if only government officials would adopt the commonsensical view of MMT. (Yes, yes, there are real capacity constraints, but we’ll wave them away).

The ideas surrounding MMT have most noticeably been advanced by Stony Brook professor Stephanie Kelton. Her book out this year, The Deficit Myth lays out many of the fundamental tenets of MMT and includes a lot of unconventional discussions on those topics. Refreshing or revolutionary, you might say if you favor her cause; moralizing and unpersuasive, if you don’t.

What many astute observers have overlooked is the stark language she uses in the book, the overwhelming tendency to ignore individual choice and preference: the “we,” “us,” and “our” that are endlessly scattered throughout the book.

While flip-flopping between a notion of explaining the world as it really is and advancing highly partisan policies and value judgments, Kelton waters down her message. Dispassionate, accurate, real-world monetary and fiscal analysis or partisan collectivist paternalism—which is it?

Collectivism and Obvious Moral Progress

The big harm—ultimately the big constraint—for a world of modern monetary theorizing is idle resources. This goes by many names: spare capacity, output gap, or unemployed capital or labor. The big loss, says Kelton, is that these unused resources could have been employed “performing useful tasks for society.”

Set aside the spare capacity myth and ponder “useful tasks for society”—useful to whom? Value is subjective; and society is not an entity but a mish-mash of conflicting and ambiguous wills. What’s useful to Kelton is wasteful to someone else.

Keynesianism on steroids, not an inapt description of MMT’s policy proposals, completely butcher values. Value isn't what Kelton would like the world to be: value is what free individuals are willing to give up for some good or service delivered with certain quality. Determining what’s “useful” is not something that a central planner can do; aggregating what’s useful for a group of individuals into a nondescript “society” is impossible. Same goes for the “social programs in desperate need of funding.” Or Britain’s socialized healthcare system (the National Health Service, or NHS) that “desperately needs more public investment.” More value judgments for a collectivism run amok.

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