The Economist Takes Note: Modern Monetary Theory Gets Much Deserved Attention
As faithful readers of this blog will know, I make only very sporadic contributions to this blog but a substantial fraction of those contributions have made reference to modern monetary theory (MMT), the view (crudely put) that, based on a detailed understanding of the institutional mechanisms behind monetary operations, calls into question our obsession with balancing the budget.
Well, after many years in the wilderness, it looks like one of the chief MMT protagonists has gotten the attention of The Economist: http://www.economist.com/node/21542174 while the community at large has gotten the attention (and admiration) of at least one senior person at CNBC:Â http://www.cnbc.com/id/45765009
While these are far from perfect representations of MMT, they offer reason for hope that in 2012, we might see a more reasoned discussion about fiscal and monetary policy emanating perhaps, dare I dream big, from within the NDP or perhaps even in the Liberal Party.Â Finally, for those who want to get real insight into MMT, check out the New Economic Perspectives primer series at: http://neweconomicperspectives.blogspot.com/2011/06/modern-money-theory-primer-on.html)
All the best for 2012 everyone…
Judging from the all-candidates meetings I attended here in Ontario during the recent provincial election the last people to show any interest in economics are those in the NDP, Greens, and other political parties. I might even go out on a limb and suggest that this explains why fewer and fewer of us on the receiving end of the Canadian economic system bother to vote.
The first two links in the article don’t work in my browser (Firefox).
As well as “MMT”, I hope you will look at the work of Steve Keene who has a slightly different viewpoint but and advocates a different solution to the present crisis. His blog at http://www.debtdeflation.com/blogs/ is, for me, a must read daily. He suggests a form of “debt jubilee” as a short term solution.
He has shown that the basic model of neoclassical economics (which even Paul Krugman believes) is self contradictory and has been working on a new model based on the ideas of Minsky. But Minsky was unable to put it into mathematics, and Keene is doing that, and already has a model the shows that unregulated capitalism is fundamentally unstable.
The N.D.P. and progressives generally need to attack what the press thinks is “Conservative” government’s main strength, namely their management of the economy, and produce a credible alternative.
Once people realize that neoclassical economics is a house of cards, and that there is a party that represents a credible and more rational alternative, the political situation in Canada will take a huge swing away from the “right-wind” ideologues.
But we have to get that message out. Attack the government at what appears to be it’s point of greatest strength, but which is actually it’s greatest weakness.
The Economist link sounds of interest but does not work
Here is the Economist link:
I was wondering if there is anybody working with the NDP right now promoting the tenets of MMT. I sent Peggy Nash an email on the subject and she’s interested, but wants to see what kind of support for it I can generate. It would be nice to get a list of progressive economists who support this with there contact info, so I can say to her, these are the people supporting this monetary theory etc. In a world that is adopting austerity measure to solve their economic woes, MMT is a relevant alternative for nations that issue their own currency.
Ed — Been a follower of Steve Keen for many years. Back when I was working in the federal government in 2009, there was a brief shining moment where I had convinced my superiors to contract with him so that he could run his model for Canada — contract was drawn and ready to roll but at the last minute, my boss got cold feet based on conversations she had with senior Finance muckety-mucks. My only quibble with Steve is that he has been a bit murky on his views with respect to sovereign debt but I think he’s slowly edging into the light there. Understanding of his work here in Canada would be vast improvement on the state of economic discourse.
Jens — good to hear that Ms. Nash is at least open minded enough to consider this stuff. I will note that before announcing her leadership run, she was lead on the House Finance Committee and was instrumental in getting Marc Lavoie — the leading academic Post-Keynesian stock/flow guy — to appear before the Committee as part of its pre-budget consultation. He did a superb job giving the context. You can read the transcript here: http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=5135021&Language=E&Mode=1&Parl=41&Ses=1
I can only add that some of us are pursuing other avenues but I like your idea of a list. If you want to email me offline, we can discuss further: email@example.com
Oh one more thing — many thanks to Marc Lee for fixing the broken link. Not sure what went wrong there!
Arun, thanks for your reply.
I am on the local N.D.P. riding executive for Esquimalt Juan de Fuca, which elected M.P. Randall Garrison last year. We’re having a strategic planning session this month and I will certainly be doing my best to promote the idea that the N.D.P. must attack the Cons at their weakest point (which everybody in the press thinks is their strongest point), and must have a credible economic alternative to do that, and that both MMT and Steve Keene’s analysis provide a way to achieve that. So I hope I can persuade our M.P. to bring this up in caucus.
I only hope other party riding executives can get the word and our elected M.P.s can be persuaded to see the potential that MMT and Keene’s work have to give them a powerful weapon against the Cons in the next election.
We desperately need to knock down the prevailing neoclassical economic model and show it for what it is, a self contradictory mass of confusion that isn’t working and can’t work.
@Ed Seedhouse: best of luck, but constant attacks on “deficit” finance, which is what MMT implies (although even that is a bit of a misnomer) has been the foundation of the NDP’s economic policy since the beginning of the Jack Layton era. Remember that Layton (and Topp, and later Ashton, and the libertarian Mulcair, etc.) proudly trumpeted that Paul Summerville’s support of the party was based on the promise that the NDP would pursue balanced budgets. I have given up on the NDP.
thanks for the kind words!
my blog can be found at:
where ‘the 7 deadly innocent frauds of economic policy’
can be read on line (no charge!)