Makroekonomia, Macroeconomics

Preface to our Macroeconomics Textbook

The following text will appear as the Preface in our forthcoming textbook – Macroeconomics – which will be published by Macmillan (Red Globe Press) on March 11, 2019.

(In Bill Mitchell-en The Twitter echo chamber:

The reality is coming closer.


Text starts here:

(i) DTM unibertsitatera

This book presents a comprehensive, university level study course in Macroeconomics from a Modern Monetary Theory (MMT) perspective.

Our approach is grounded in the operations of real world institutions, and our approach clearly identifies the policymaking capacity of central governments. The pedagogy thus starts by putting the currency-issuing government at the forefront.

We want students to understand how a modern monetary system operates, how the government and non-government sectors interact, how the central bank and the banks interact, how the labour market works, how trade and capital flows impact on economic outcomes and much more.

Students will appreciate what the capacities of a currency-issuing government are and how fiscal and monetary policy can be used purposefully to enhance the well-being of the nation.

(ii) Korronte nagusiko testuetatik kanpo

Unlike earlier pluralist approaches to macroeconomics where the teaching sequence begins with an exposition of the standard mainstream macroeconomics (dominated by the New Keynesian approach) and then qualifies that conceptual structure and framing with some ‘real world’ criticisms and quibbles, we feel students are better informed if we build the narrative from the ground up based on an understanding of how the monetary system actually operates.

In adopting that approach, we are informed by our view that the mainstream macroeconomic approach does not provide coherent knowledge upon which to understand those real world monetary operations.

We believe that students who are taught in the mainstream tradition are introduced to concepts and explanations of how the monetary system operates which are simply incorrect when applied to the real world.

(iii) Finantza Krisi Globala, Eurogunea, Quantitative Easing (QE), Defizit fiskalak

The consequences of these major flaws of reasoning have, at times, been devastating. Just think about the Global Financial Crisis (GFC). Mainstream economists did not see it coming, and, when the world was on the precipice of a total financial collapse, many advocated government spending cuts to maintain low fiscal deficits. Alternatively, think about the intractable problems within the Eurozone – problems that were identified even before the launch of the euro by MMT economists but which still are beyond the grasp of mainstream economists.

Among other mistakes, the mainstream approach was used to form predictions that quantitative easing would lead to accelerating inflation. That the rising fiscal deficits would push up interest rates and bond yields and that governments would run out of money. Also, that adoption of the euro would allow European nations to converge toward high and sustainable growth rates with rising living standards for everyone.

None of those predictions turned out to be accurate, yet governments that listened to this sort of advice forced millions of workers to lose their jobs and ensured that economic recovery would be a long, drawn-out and painful process.

The literature shows that economists working in the MMT tradition were much more prescient in understanding why the GFC occurred and why it quickly led to an even worse crisis in the Euro area, and what the likely outcomes of the subsequent government interventions would be.

We thus believe that an approach that starts with a sound understanding of how the monetary system works and the capacities of the government as the currency-issuer within it, the hallmark of the MMT approach, provides a sounder platform for students to learn about the economy.

(iv) Gizarte zientziak testuinguru gisa

While we present a detailed descriptive understanding of the day-to-day operations of economic institutions (government, central banks, commercial banks, households, firms, trading entities, etc), we are also mindful of the past. To provide students with a contextual perspective, we also introduce them to a rich historical analysis, both in terms of the history of economic thought itself, and the economic history of nations. There is much to learn from history. Many of the current debates that are conducted about policy options are just repeats of debates in yesteryear. More pointedly, some of the resulting propositions were categorically shown to be poor options in the past. We believe that students need to be aware of these issues so as to be better informed of the viable policy options available to government.

We believe the concepts drawn from cognitive sciences such as framing and language are important components in conducting an informed economic narrative and in report writing. In that context, a highly innovative feature of the book is to show students how we use language to frame economic narratives, to convey economic concepts and form policy options. In this way, we place macroeconomics in a broader social science context, which we consider enriches the learning experience for students.

(v) Matematika eta estatistika ere

We have not shied away from recognising the benefits of formality – the use of mathematics and statistical techniques. The book provides a solid introduction to more technical aspects of the subject – students will gain knowledge of mathematical techniques, not for their own sake, but because they help us gain a more effective understanding of the material covered.

Further, students will learn how to deal with real world data and apply that knowledge to real world situations. We see that as being essential preparation for students once they enter the professional stage of their lives and are required to prepare meaningful economic commentary.

(vi) Azken hitzak

Macroeconomics is an exciting area of study not the least because it has a profound influence on our everyday lives and the prosperity of our nations.

We want students who use this book to gain a thorough knowledge of the field of macroeconomics in order to equip them with the skills necessary to make sense of the important macroeconomic debates and to be able to constructively participate in those debates.

We hope you enjoy the journey.

William F. Mitchell
L. Randall Wray
Martin J. Watts

October 2018.

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