- MMT is an improved (much clearer and more straightforward) description of how existing monetary and banking systems work.
- MMT proposes a government job guarantee (employer of last resort) as a tool to reduce unemployment and act as an automatic fiscal stabilizer with regard to inflation. (Note that we already have valuable automatic fiscal stabilizers in the form of income taxes and welfare benefits.)
Here's a chart I drew showing the evolution of selected economic schools, with MMT being the focus: Evolution of Selected Economic Schools
Note that MMT draws from institutional economics (recognizing the role of large institutions as well as classical markets), chartalism (the basics of fiat currency), Keynesianism, financial instability considerations, and a sectoral balance perspective (accounting based economics).
I also wrote something of a The National "Debt" for Dummies -- not intended to be condescending but rather to be easy to understand: The Socrates Show, with guest Pete Peterson.
The best textbook presentation of MMT economics that I have seen is Eric Tymoigne's Money and Banking.
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Post originally written February 2019. Additional insight July 2020:
A major advantage of MMT, compared to conventional economics, is the level of discussion. MMT economics is a view of the monetary system at a higher level than is common with the conventional wisdom. Conventional wisdom is overloaded with assumptions, graphs, and jargon from a more detailed level which obscures the big picture. The big picture shown by conventional economics is that government debt is like household or business debt. The big picture shown by MMT is that paying back the debt is trivial for a currency issuing government. Thus, the government debt is different from personal or business debt. Conventional wisdom eventually gets to this point also, but only after obscuring the situation through discussion of government bonds, interest rates, and central bank procedures, and, often, misleading analogies to household and business finances.
The conventional economic wisdom is an example of excessive reductionism, comparable to other evils such as race reductionism.
2 comments:
Why is a job necessary though? Wouldn't UBI suffice?
The problem with a jobs guarantee is that it is always at risk of make-work just to met the "job" criterion.
Regarding the merits of a job gurantee v UBI: This is something of a value judgment with pros and cons nn both sides. I tend to favor a job guarantee as more practical beyond a certain level of safety net. A high UBI could be inflationary. As more people spend time on non-marketable hobbies, marketable goods and services (e.g. food, transportation, cleaning, child care) could become more expensive. I know there are also good arguments on the other side which I won't get into now.
At any rate, I think the job guarantee v UBI issue is somewhat independent of MMT as a descriptive mechanism for how modern economies work.
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