As many readers here will be aware, I recently dedicated quite a lot of effort to thinking about a white paper on modern monetary theory that Warren Mosler had suggested summarised all the essential elements of that idea.
As became clear, my thinking suggested that there were differences in my approach to MMT when compared to that which Warren proposed as one of the founders of school of thought. I summarised those differences in a paper that I published here a wile ago.
I am now pleased to report, with Warren's consent and encouragement, that we had a very constructive and good-humoured discussion of these issues yesterday. We plan to repeat the process quite soon. Warren even offered to come over to the UK to do this face-to-face if it was useful.
What resulted from that discussion was an understanding that we come to this issue with very different priorities in mind. Warren's focus has always been on creating a new body of thought. Mine is on creating ways of communicating the ideas within MMT in a way that increases the likelihood that the benefits of that body of thought are realised within our political economy. As a consequence, we are using very different language.
I understood from Warren that he thinks my objective is appropriate. As he joked, after 30 years MMT has not achieved the objective of influencing practical politics in the way that it would obviously desire so there must be ways to improve its communication. What we have agreed to discuss is how that can be achieved.
I am quite sure that this will require a degree of compromise from both of us. The goal will make that effort worthwhile, but give this some time. It has to fit into my agenda, which is a little hectic right now.
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Excellent. Whenever I try to explain MMT to people – they struggle to match it with the narratives they hear from politicos and the MSM. They also raise the question: but if it is this way, why do the politicos not spend money etc etc. At that point, I have no answer. I look forward to the exchange and am confident that something very constructive will emerge.
This is excellent news. I agree about the communication of MMT ideas. That has needed improving for ages. It’s good that both of got together on this.
Excellent. Constructive. The room for discussion, exchange of ideas and mutual understanding is established. A much better outcome than Silo thinking can produce. Just avoid the economics priesthood; time wasters.
Something strange has happened to the style/formatting of this post. The page background has gone red, the usual RH sidebar is now at bottom left, and comments are only visible in a sidebar to the right. Preceding and following posts look normal. (Firefox 113.0.1 (64-bit)).
Weird
It was a bug the link code. I have no idea what but I have removed the link code and it seems ok now
Thanks
Is it just me or have the bells started ringing in all the churches throughout the land!
I am relieved and heartened – thanks for sharing.
This is good news.
As part of Steve Keen’s Rebel Economist group I’ve been testing out various metaphors to help communicating the core principles to ‘the rest of us’. It’s a crusade worth fighting in the face of the upside-down, illogical linguistic smokescreens that make the concepts difficult to understand. Being able to capture the imagination and the understanding of the average voter is the route to change.
I read Andy Haldane’s FT article (see your other blog post today) earlier today, but oh, the comments make me lose the will to live. The sooner that MMT becomes mainstream the better.
Good luck to all endeavours to communicate it more effectively to the general public.
Thanks
I should read them, I guess
Pleased to hear you got on with Mr Mosley, but we all want to know if you’ve talked with Warren Mosler yet?
Oops…..
Good to hear that it was constructive, and looking forward to hearing whether there were any further understanding of the nature of tax.
I’m sure that Warren could come over, and it would be useful, but I would be interesting in some video podcast being produced, as I think your perspective would illuminate MMT further.
Very pleased that it went well.
Broadcastable material is the agreed goal
This is great news! I fear that you are up against it, because I think the oligarchs are going to continue to stifle such good ideas, no matter how well explained. I’m pretty sure stifling the healthy spread and development of MMT ideas is a conscious part of their keep-the-people-down agenda. Grrrr! Luckily, they can’t keep the people down forever!
Patricia Pino explains MMT in a Twitter thread.
MMT is extremely easy to understand in its basic form and because of that it is a perfect antidote to the Government budget ‘household analogy’ that has so poisoned economic discussion for decades.
MMT is a description of the monetary system. Currencies are created by an authority (Govt) imposing a tax and then providing the only means to pay for that tax, the currency. They set the rules of what we need to do to obtain the currency & this determines the price level.
In mainstream economics ‘the market’ is capable of existing in isolation and the Govt is an externality disturbing ‘equilibrium’. #MMT turns that premise on its head. With the market being a by-product and therefore dependent on a Govt that needs to provision itself w resources.
By increasing taxes the Govt creates unemployment. By spending the Govt creates employment. So unemployment is the result of insufficient spending. Moreover, as the Govt is the monopoly issuer of the currency. It never needs to “borrow” its own currency before it can spend it.
Deficit fearmongering helps the Right justify cutting social programmes under the excuse we cannot afford it. Enforcing unemployment also tilts the balance of power in favour of Capital, but doing so needs to be justified with pseudo-science. MMT exposes all this.
Which is why they outright fear it (See senate motions against MMT in the US). The Left is another story, some have embraced it, but others still think they must abide by neoliberal narratives to be ‘credible’.
https://twitter.com/patricianpino/status/1393614459101384707?s=21
There is not much I agree with there, but I don’t much rate Patricia Pinto’s hardline MMT approach which reveals very little understanding of the real world to me.
She is a part of the problem with MMT, in my opinion, and why it can’t succeed without changing its messaging and methods of explanation. The Gower Initiative suffer the same problem.
The easiest way I’ve found to begin the explanation of MMT is to say that bank notes are train tickets and the government is the train company, because people can see with their own eyes that tickets are created when the ticket machine prints them and they are destroyed when the ticket collector tears them up on the train. If the train company sold many more tickets than they have spaces on their trains you can sometimes get inflation (you are getting less for your ticket if you have to stand for the whole journey), and other times not if people consistently to bought their tickets in books of 10 that they carried around unused in their wallets. Non-fungible means the ticket is only good for a specific date and train, and is therefore less useful than an open ticket.
Neat
Lunch with two ex British Rail operational researchers – concerned about the state of things but immediately not receptive to thinking about the potential implications of the fact that government seemed able to create hundreds of billions in 2020-21. Just a few mutterings about ‘when it would be payed back’ – or ‘what about Liz Truss’.
They didnt really want to discuss that maybe this money is owed to ourselves and so not part of the ‘debt’.
Maybe the ambition to communnicate the whole of MMT is not realistic – and much better just to focus on the two main points: 1 that governments can fund themselves, and 2 that governments can tax to avoid – the ‘wheelbarrows with tens of billions of deutchmarks ‘in the 1920s – which they also mentioned.
They had no interest in what Keynes might mean by ‘anything we can actually do we can afford’.
You are thinking my way
I loved your paper on MMT, but I have been slowly correcting my thinking since 2007 when I first started asking questions like “why does all this mean we have to reduce the health service, we still have the doctors, nurses and hospitals?”, so by now I it makes sense to me. However it is difficult to convince people who are effectively brainwashed. This is a great initiative.
Thanks
@ Andrew Broadbent,
“They didnt really want to discuss that maybe this money is owed to ourselves and so not part of the ‘debt’.”
Those on the fringes of MMT van often get themselves into a contradictory position on the question of government debt. On the one hand they’ll happily agree that “all money is debt” but then in the next paragraph they’ll say, as you have just done, something like ” this money is owed to ourselves so {is} not part of the debt”.
Hardly surprisingly those we are trying to reach can’t make any sense of this at all. The correct explanation is that it *is* all part of the debt. However, government debts are different from the debts you and I are familiar with. They do not have to be repaid, although they can be, and, usually, shouldn’t be reduced. The Government has to hold the negative numbers so that the rest of us can hold positive numbers.
Except that debt has been repaid Neil
So it is cancelled
That is what Andrew was saying
You can argue there was new debt in the CBRA
But Andrew was right about the gilts he referred to, IMO
@Richard,
Yes this is exactly what I’m saying. There is new debt in the CBRAs which is commensurate with the price of the QE bonds as purchased. CBRA meaning Central Bank Reserve Accounts for anyone who might be wondering.
We need to look beyond bonds when it comes to totting up the government’s balance sheet. There is nothing wrong in including everything. It’s better to have the full story rather than trying to minimise the extent of a non-existent problem. The government’s real assets *should* be included too. Not just gold reserves but everything else including the ability to levy taxes. If we did this we might very well conclude that the government wasn’t in net debt at all! This perhaps is another story.
It is promising that you are getting on well with Warren Mosler on a personal level. This is always a good start to resolving any differences!
But Neil, you need to say what you mean.
Those who support MMT who do nit say just what they mean and think the uninformed call fill in the gaps are doing the idea a massive disservice.
Is there a fundamental flaw in our financial systems that arises from the fact the money is a useful and valid mechanism to facilitate transactions, but that it is also incorrectly used as a device to store value (i.e. savings) when it, in fact, has no intrinsic value at all (i.e. £1000 or a gold ingot on a desert island are of no use whatsoever)?
That is an issue I need to discuss
But not tonight
I am knackered