Bill Mitchell: DTM eta DTM proiektua (2)

Sarrera gisa, ikus Bill Mitchell: DTM eta DTM proiektua (1)


(ii) MMT and the MMT Project – Part 2


One of my presentations at the January Sustainability Conference in Adelaide focused on the basics of Modern Monetary Theory (MMT). (…)

I thought it would be useful to write an extended account of what I was thinking when I said those things. It will help clarify what I see as the difference between MMT and the MMT Project. You can see exactly what I said if you want to watch the video of the presentation ( Introduction to MMT Adelaide 2020: But, of course, that doesn’t necessarily mean you will ‘know’ what I meant. So this blog post seeks to clarify some of those comments so that everyone explicitly understands what I was talking about. This is Part 2 of a two-part series where I discuss what I call the MMT Project and other issues that seem to cause confusion and/or concern.

(a) The MMT Project

The other point I want to make is that while I consider MMT to be a body of work that belongs in the macroeconomics discipline, there is a lot of work going on in a related way which I refer to (for want of a better descriptor) as the MMT project.

The MMT Project encompasses valuable scholarly work from other social science disciplines and humanities that draw on the core technical macroeconomics of MMT to advance knowledge in those disciplines and, in some cases, add wider perspectives to the core MMT knowledge.

The MMT project is thus much broader than the technical work in macroeconomics that I call MMT.

As an example, you might like to read or re-read this article from 2017 – A Memo From MMT’s Legal Department – which I think succinctly encapsulates the value of cross-discipline interaction.

What is interesting in this respect is that progressive social scientists have struggled to glean anything useful from mainstream economics, because that body of work has been largely hostile to progressive ambitions.

Mainstream economics is biased towards supporting neoliberal aspirations despite what some economists working in that tradition will tell you.

It also abstracts from a range of important issues – such as the work on human decision-making that psychologists, sociologists and cultural anthropologists do as their core discipline subject matter – which then leads to sterile deductive models and resulting erroneous conclusions.

I am thinking here of the way in which mainstream economics characterises humanity as rational, maximising units who pursue individual self-interest as their sole goal. Those assumptions are foreign to the way the other social sciences construct human decision-making.

The thing about MMT – as a body of macroeconomics – is that it liberates our understanding of the capacities of the currency issuer from the harsh mainstream logic that the government is financially constrained and all the baggage that flows from that myth, which reduces the fiscal space available.

In that sense, MMT opens up new possibilities across all the realms of human endeavour, which other academic disciplines specialise in.

The MMT Project reflects the fact that these other disciplines have opened up a dialogue with the core MMT academics (that is, the macroeconomists) which can generate two-way enrichment as part of our ambition to be ‘well read’.

So when I say that MMT is macro, that doesn’t mean I eschew the insights that these other disciplines who are now part of the MMT Project have provided.

Speaking personally, they have enriched my intellectual life.

But there is only 24 hours in a day and the harsh reality of life is that specialisation in academic life is inevitable.

Which is why I largely concentrate on the technical macroeconomics that is MMT and rarely comment on the other valuable work that is being performed within the MMT project.

(b) Louisa Connors eta Bill Mitchell

But I have been known to deviate from that narrow path and my work with Louisa Connors on Framing and Language is an example of that.

We have brought together the cognitive linguistic research and the MMT macroeconomics to provide knowledge on communication strategies for progressive activists engaged in political action.

In this way, the core MMT macro is taken to a different level of dialogue.

See, for example:

1. Framing Modern Monetary Theory (December 5, 2013).

2. The role of literary fiction in perpetuating neo-liberal economic myths – Part 1 (September 11, 2017).

3. The role of literary fiction in perpetuating neo-liberal economic myths – Part 2 (September 12, 2017).

I also regularly draw on other social science disciplines to elaborate an understanding of why neoliberalism is flawed.

And once we get into the realm of policy, then discipline intersection is crucial.

For example, I am currently building a coalition to outline a transformative agenda for Australia and beyond. We need the assistance of expert climatologists, sociologists, engineers and all sort of other skills to work within the same project.

As another example, when I was writing – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – it soon became apparent that I had to draw on the international law literature to build a case for a nation unilaterally withdrawing from the Economic and Monetary Union.

The legal principle of Lex Monetae provides the basis on which a nation is fully empowered to redenominate its assets and liabilities in whatever currency it chooses, including a newly introduced currency.

So if we were actually implementing a unilateral exit blueprint to restore currency sovereignty, the team would have MMT economists and lawyers who understood MMT, among other professional input.

I discussed this international legal principle in these blog posts (among others):

1. Options for Europe – Part 79 (May 6, 2014).

2. Options for Europe – Part 80 (May 7, 2014).

The other point to make is that while I can be somewhat definitive about what constitutes MMT – as a body of macroeconomic thought – given that I was one of the original development team, I have no legitimate role in ‘controlling’ what endeavours become part of the ‘MMT Project’.

Warren Mosler and I have discussed this point in detail over the last few years as the popularity of MMT increased and all sorts of wider applications to other disciplines started to spring up.

And while much of the work within the ‘MMT Project’ is being done by those with a progressive bent, there is nothing to stop someone from cognate disciplines who has, say, a Right-leaning perspective, embracing the core MMT insights to advance their particular view of the world.

Finally, I am fully aware that once we start with these demarcation exercises, the fuzzy edges can start to become the story.

Sometimes it is easier to demarcate what something isn’t rather than what it is.

The MMT Project is also different to what I have referred to as ‘Post MMT’ (see below).

(c) The Lens thing

As our ideas were becoming more well-known, people increasingly would write or state that ‘when we have MMT things will improve’ or we need ‘MMT policies to replace the neoliberal regime’.

While the motivation was sound – to improve policy to make it advance well-being – the construction was flawed.

So I came up with the statements that:

1. MMT is a not a ‘regime’ that we can ‘go to’.

2. There is no sense in saying “MMT policies are …”

3. MMT is a lens and enhances understanding of the capacity of the currency-issuing government.

4. It is not something you ‘do’ but something that is!

5. An MMT understanding enhances the quality of our democracy because politicians can no longer lie about not having enough money to do something the population deems desirable.

6. Policy requires us to overlay our value judgements on this understanding.

Some people take exception to this set of propositions, particularly, because they appear to separate perception from values.

I know the argument.

I studied Philosophy 101 where we had deep discussions about value, objectivity, subjectivity, the meaning of life, do I exist?, and all the rest of it.

I know there is no such thing as a value-free statement.

Every element in that 6 point list is value-laden.

So why did I choose to represent the issue in that way?

Simply because it quickly disabuses people of the conclusion that our work is intrinsically Left or progressive in the political or values sense.

I wanted it to be apparent that a person with Right-wing tendencies could still reach the same understanding of the monetary system and the capacities of the currency-issuing government as I have.

I didn’t want to get into a deep and go-nowhere debate about the meaning of life.

As a progressive, if I can get a conservative to understand that the government is not financially constrained in a logical sense, then I have the basis of a conversation.

If I start off on a values contest then there is no conversation.

So I chose to abstract from obvious deep subjective elements that underpin the whole concept of money and all the rest of the building blocks of MMT.

I find that is a constructive way to go.

But I know that ultimately everything can be reduced to the subjective … and at that stage there is no where else we can go in the conversation.

We are then back in a post modernist relativity void.

Please read my blog post – The erroneous ‘lets have a little, some or no MMT’ narrative (February 20, 2019) – for more discussion on this point.

(d) The Theory part

There are still people who claim that MMT is just a description of reality and the use of accounting is a basis of MMT.

Neither conclusion is accurate.

Accounting is clearly important to MMT as we aim to be stock-flow consistent.

But if that is all MMT was then we don’t get far.

For example, the question is how do those financial balances adjust when one or more changes to ensure that accounting identity is maintained.

The answer requires us to theorise about economic (and human) behaviour. That is, have conjectures or hypotheses about the way humans behave and what that behaviour means within the institutional framework for economic behaviour.

The robustness of the theorising is determined by how congruent the statements we make are with the empirical world. MMT has proven to be highly congruent in this respect.

Behavioural theories are required to answer those questions and they are important parts of the body of work that we now refer to as MMT.

I have dealt with that issue in this blog post – Understanding what the T in MMT involves (September 20, 2018).

(e) Post MMT

I wrote about this issue in the two part blog series:

1. Reflections on the 2nd International MMT Conference – Part 1 (October 3, 2018).

2. Reflections on the 2nd International MMT Conference – Part 2 (October 4, 2018).

The widespread discussions about the idea of an employment guarantee that occur these days is an interesting case of what I think is ‘Post MMT’.

As I have written previously, from the perspective of MMT, there is one concept of a Job Guarantee – which requires the currency-issuing government to maintain an unconditional job offer to anyone who wants to work at a socially-inclusive minimum wage.

The job offer is flexible in hours at the choice of the worker.

The wage would be adjusted over time as national productivity increased.

The fixed wage offer at any point in time though, is a crucial part of the framework and is what distinguishes the MMT approach from other ‘job creation’ approaches that might be suggested.

It is the fixed wage offer at the bottom of the existing wage structure that provides the inflation anchor for the economy by allowing the government to use aggregate demand management to redistribute workers from an inflating sector to the fixed price sector if deemed appropriate.

It is obvious that that structure can be made more complicated with, for example, tiered wage offers and more. But once that sort of option is considered we are moving beyond the MMT approach into something that I have, for want of a better terminology, called ‘Post MMT’.

So there is one MMT Job Guarantee and any number of ‘jobs guarantees’ in the Post MMT world.

I only advocate the MMT version for obvious reasons.

(f) MMT and other things

The discussion about the ‘MMT Project’ also raises another interesting point, dilemma, call it what you will.

And this is a fairly sticky wicket to be batting on!

There is usually a well-defined and informed logic to the relationship between the core MMT macroeconomics and work being done in other disciplines as part of the ‘MMT Project’.

So, for example, a sociologist concerned with urban poverty and a lack of employment opportunities in the case area they study, will be empowered by MMT because it dispenses with the myths that the currency-issuing government cannot afford to make extra jobs available that are inclusive to the most disadvantaged workers in any geographic area.

Immediately, their policy options increase and the questions the sociologist, for example, will then start asking and the solutions they explore will widen and differ. Instead of, for example, being locked into the neoliberal ‘training’ box (where unemployment is constructed as the individual’s lack of skills or motivation) and devising all sorts of redundant and ineffective training approaches, whole new work on designing and implementing job creation programs becomes imperative.

But, there is also a tendency I have observed for every issue that liberals might think important to be called an essential part of the MMT project. I disagree with these types of associations.

I have seen on social media claims that ‘MMT’ encompasses positions on a whole range of other interesting issues, such as population policy (free movement or otherwise), European union membership or otherwise, gender issues, ethnicity, sexuality and the like.

As I explained above, none of those claims have merit I am sorry to say.

The link between MMT and the work within the MMT Project has to have some congruence. It has to be, for example, that the insights that MMT provides, directly reinforce or inform work being done in the broader MMT Project.

So, to use one example, there is nothing logical that can be derived from MMT to justify claims that to have an MMT understanding one must support complete freedom of movement of people (open borders).

Those who display an MMT understanding may express views, one way or another on these issues, many of which come under the heading of ‘identity’, but that is not the same thing as saying that these issues belong in the core body of work that we have developed.

They do not.


I hope that this two-part series has helped clarify my thoughts on these issues.

I also reiterate that I adopted a stylistic approach in this two-part series and understanding that fuzzy edges on some of these concepts may be important.

But in general the points are:

1. MMT is macroeconomics.

2. The MMT Project is about work in other academic disciplines which uses MMT insights or broadens the context in which we place the macroeconomic insights.

3. There are many ideas that do not fit into the MMT-MMT Project nexus – and I used the example of open borders which has become a sort of ‘darling’ issue among some areas within the Left.

Iruzkinak (1)

  • joseba

    Bill Mitchell: zaindari zahar baten azken istorioaz
    The old guard trying to stay relevant and failing
    … just a brief comment on the latest fiasco from ‘Mr Spreadsheet’ Kenneth Rogoff as he stares into the abyss of irrelevance and is trying to hand on like grim death to any shred of credibility. He has none. If he ever did, the spreadsheet scandal finished it. But he never did anyway.
    Apparently more negative interest rates are what we need
    One of the themes I am promoting in my current European and UK teaching and speaking tour is that we are amidst a paradigm shift in macroeconomics, which provides Modern Monetary Theory (MMT) economists with a fantastic opportunity to fill the gap as the old neoliberal consensus starts to fracture.
    There are various forces driving this shift.
    First. there is clearly an anti-establishment revolt underway as the mainstream Left political parties decay and lose relevance.
    They signed their own death warrant when they adopted the mainstream macroeconomics as their centrepiece, claiming they would ‘do’ surpluses bigger and better than the conservatives.
    In some nations, while in power, they inflicted the neoliberal austerity more harshly than the conservatives, all in the name of ‘fiscal consolidation’ and appeasing the financial markets.
    They also tried to divert attention from that reality by talking incessantly about identity issues.
    The only way these parties could continue to claim they were left of centre is because in surrendering to the core neoliberal agenda, they pushed the centre way to the right.
    The old conservative stances of the 1950s/1960s now look positively progressive when compared to the ‘left’ parties now who are lost somewhere out in the right.
    This lacuna has allow extreme elements on Right to strengthen.
    The ‘popularist’ Right movements have provided a coherent response to the widespread and growing—yearning for greater territorial or national sovereignty.
    There is a desire among people to regain some degree of collective control over politics and society and take it away from the elites who have crafted policies to suit themselves.
    There is also a desire to ensure flows of capital, trade, and people – that constitute the essence of neoliberal globalisation – do not work against society.
    And there is a desire to reverse the neoliberal depoliticisation that has allowed elected governments to divert responsibility to ‘external’ agencies or ‘independent’ central banks for the harsh policy regimes that have undermine our material standards of living and retrenched public services.
    In Europe, the experiment with Emmanuel Macron, who was seen as the ‘extreme centre’, has failed. The on-going struggles with the gilets and the repressive response from state instruments such as the police and troopers to their demonstrations is evidence enough.
    Britain is now free from the neoliberal dictates of the European Union. They can now call the shots.
    And we have the real prospect of a Trump versus Sanders Presidential election later this year, if the DNC doesn’t get its way and sabotage the latter, which would represent a major shift in American politics.
    These are two outsiders, largely divorced from the mainstream Republican and Democrat elites, but representing them all the same. Both happy to abandon the neoliberal austerity.
    Second, there is now widespread acceptance that economic policy is creating dissonant outcomes. Growth is faltering, inequality is rising, and precarious work is on the rise.
    Even central bankers are now making political statements, making a mockery of their so-called ‘independence’ (or exposing the lie that they were independent).
    They have admitted that monetary policy has nowhere to go and is now an ineffective counter-stabilisation tool. It was never effective but at least they are making that reality public now.
    Their calls for a return to fiscal dominance is also driving the paradigm shift.
    It is obvious that monetary policy has been proven to be ineffective. The expansion of central bank balance sheets as they funded deficits (via QE) in search of higher inflation rates has failed.
    The ECB, for example, has systematically failed to achieve its primary policy goal – price stability – but, meanwhile, has been effectively operating outside of the Treaty by funding government deficits.
    Finally, the extremes that monetary policy have been pushed as governments refuse to engage in fiscal interventions of any sizeable scale, are now undermining the top-end-of-town – financial capital.
    The latter are finally realising that listening to mainstream economists is a bad bet and the exclusive use of monetary policy has pushed the parameters (rates, yields, etc) to levels that actually undermine profitability in the financial sector and push large insurance and pension funds to the brink of insolvency.
    They are also calling for an end to the monetary policy madness and for governments to start investing significant amounts on public infrastructure to repair the damage that austerity has created, and, obviously, to give them investment opportunities that will make profits.
    All these factors reflect different motivations but they are pushing the debate in one direction.
    We are now entering a period of fiscal dominance.
    Only Modern Monetary Theory (MMT) has advocated the effectiveness of fiscal policy against massive mainstream opposition.
    That is the fact.
    Of course, all this presents a wee problem for the mainstream macroeconomists who have been caught out by the shift.
    Several of them are now trying to save face by publishing papers claiming that they advocated fiscal policy interventions all along and stealing ideas from MMT and other writers to fill the gap in their public record.
    The ‘we knew it all along’ strategy.
    They just look like sneaky fools.
    But that is always the case when a paradigm shifts gets underway. Some of the old guard will try to stay relevant by attempting to capture the emerging challenger’s ideas and presenting them, unreferenced, as if they were their own.
    Meanwhile, they actively attack the challenger in the media to try to discredit it in the eyes of the public as they steal its ideas and relabel them as their own work.
    Enter Kenneth Rogoff again. He is working hard on this ‘rats deserting the sinking ship’ strategy.
    On March 4, 2019, he wrote a Project Syndicate article – Modern Monetary Nonsense – which was a catalogue of lies.
    Next day, he put out another article for MarketWatch – Opinion: Modern Monetary Theory is smoke and mirrors nonsense.
    They told us that he hadn’t actually read much of our work.
    More recently, he has been busy trying to salvage his place in the debate.
    This blog post – Discredited academic dinosaurs continue to seek relevance (December 12, 2019) – analysed one of those attempts published by the UK Guardian.
    It seems the UK Guardian has become one of his outlets, which discredits that masthead.
    But with Brexit done – I know – there are all the agreements to finalise – but it is done in the sense that Britain has LEFT – the UK Guardian has to publish something I suppose.
    So it gives further voice to the Rogoff stuff.
    Fighting back all the forces that are pushing the paradigm shift, Rogoff has decided on what he must think is a clever, differentiating strategy.
    In his latest UK Guardian article – West Wing-style fiscal policies aren’t the only way to fight the next recession (February 4, 2020) – he writes that fiscal policy should not be used to provide stimulus in a downturn because it “involves messy, hard-fought compromises”.
    That is, politicians, who we elect, make decisions after considering the range of views.
    Rather he wants the “modern, independent, technocratic central bank” to be in charge. Unelected, unaccountable, opaque and detached from the voters.
    It is the typical argument people like Rogoff make. Depoliticise so that democratic choices are swept aside.
    But within his argument we see how confused he is.
    Earlier he writes:
    … that the time has come for activist fiscal policy, given the limits to monetary policy in an environment of ultra-low interest rates. Many leading central bankers also maintain that, instead of just playing its traditional role of deciding the allocation of government spending, investment, taxes, and transfers, fiscal policy can substitute for monetary policy in economic fine-tuning and fighting recession.
    So these technocrats in the central banks have admitted they cannot be effective any longer.
    That the neoliberal obsession with the primacy of monetary policy has pushed the parameters to ridiculous levels (negative rates etc).
    Then he says:
    … central banks have succeeded in doing with monetary policy.
    The selective quote here is that monetary policy has been “consistent, stable, and predictable”, which he claims is “the greatest innovation in macroeconomics since John Maynard Keynes pioneered demand management.”
    Yes, definitely “consistent, stable, and predictable”, but the only problem is that it hasn’t worked.
    Even central bankers have admitted that despite building the asset-side of their balance sheet up to ridiculous levels, they have not been able to get inflation close to their price targets.
    Why not?
    Because they have been presuming the economy works like the mainstream textbooks say it works. Like Rogoff thinks the system operates.
    And the reality is that the mainstream macroeconomics operates in a fictional world.
    So for Mr Rogoff, the solution is:
    … by finding ways to use negative rates more fairly and effectively.
    Tell that to the asset managers in the big pension and insurance funds who are staring at widening maturity mismatches and pushing their companies to the brink of insolvency.

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