I am told that this is the standard response to pro-modern monetary theory posts on social media right now:
Every tool in the MMT toolbox also exists in the toolbox of what might be called more conventional economic thinking, with one exception. It's just not a useful way of looking at the public finances compared to the conventional view.
I think this comment entirely misses the point of modern monetary theory (MMT).
MMT is not primarily about inventing new tools. As a matter of fact, almost everything in the MMT toolbox does already exist in conventional economics. No one disputes that. Those tools include:
- taxes,
- spending,
- borrowing,
- interest rates,
- regulation, and
- capital controls.
The difference is not the tools; it is the questions that MMT lets us ask, and the different constraints it lets us assume exist that make the difference.
Conventional economics starts from the question:
How will the government pay for this?
That immediately frames policy around affordability, market confidence and debt ratios. Politics is removed from the discussion in conventional economics because it is presumed to be constrained as to what it can do by financial markets.
MMT starts from a different question:
Do we have the real resources to do this, and what would stop us?
The constraints are now labour, skills, energy, land, supply chains, ecological limits, and inflation risk, plus political preferences. The government can now decide: it is empowered to do so. MMT permits democratic choice, in other words
That shift really matters. It is, in fact, fundamental. It moves the debate away from false financial scarcity and towards the real-world trade-offs in economics. As a result, it forces policymakers to justify why something cannot be done, rather than hiding behind household metaphors or bond-market folklore to justify inaction.
So, the claim being made on social media wholly misses the point about MMT, and doesn't even explain what the key exception is. That is not because MMT abolishes constraints. Instead, it relocates them from money to reality. That makes it a more helpful way of thinking about public finances, not a less useful one.
If the opponents of MMT are going to come up with a generic response to it on social media, they have to do a lot better than this. When MMT helps us answer questions in ways conventional economics avoids, it is useful, by definition.
And for those interested in comparing the value of theories, watch this:
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The tools may exist…. but the MMT insight is that a screwdriver is for doing/undoing screws, not stabbing things.
🙂
Feynman clip excellent way to round off!!! Nice!
So there are real resources available like you said. You’d like to harness those resources, move them around, organise them to deliver something better than what is being done with those resources at the moment. You can’t implement slavery so you have to pay people. People will voluntarily come off the dole if there’s a job worth doing that pays more than the dole by an amount that beats the loss of leisure time. People will insulate buildings for money, but they won’t do it well under conscription system, so their labour has to be bought. So it brings us back to how do we pay. It’s a short hand way of saying the same thing.
But your six bullet points missed one out – the one that MMT does not have in its box of tools.
Conventional approach to public spending does have it.
You are right that if there are real resources and useful things to do, and if we reject coercion, then labour has to be paid. People will only supply labour if the wage compensates for effort, lost leisure and alternatives. So the question “how do we pay?” is shorthand for “how do we mobilise labour voluntarily?”
Here is the step that matters.
In a monetary economy, payment is not constrained by prior tax revenue. The state pays by issuing money. That is not controversial operationally. What is constrained is whether paying more people will create inflation by competing for scarce resources.
Conventional economics has an implicit tool to deal with that constraint: slack. It keeps unemployment and underemployment high enough that wages are disciplined. That ensures labour is always available at prices the system finds acceptable. This is not an accident; it is built into NAIRU logic. It is the missing tool you are pointing to.
MMT rejects unemployment as a policy instrument, but it does not reject labour discipline altogether. Instead, it relies on capacity management rather than scarcity management.
Full employment is achieved not by conscription or fear, but by:
• creating demand where unused labour exists
• sequencing and pacing spending to avoid bottlenecks
• using taxation, regulation and procurement to release resources from low-value uses
• shifting labour from rent-seeking and speculative activity into socially useful production
• allowing wages to rise where capacity exists, and restraining excess demand where it does not
So the answer to “how do we pay?” is not “with taxes” and not “by magic”. It is: we pay by issuing money, and we decide whether that payment is sustainable by reference to real resource availability, not financial balances.
The tool MMT lacks is not a payment mechanism. It is the willingness to use unemployment as a disciplinary device. Conventional economics calls that realism. MMT calls it unnecessary and socially destructive.
That is the real dividing line.
———
And if you come back again, try using an argument, not word salad.
If MMT offers nothing new and is just a restatement of conventional economics, why the hostility to it?
And why are people so desperate to adhere to an existing neoliberal framing which is misleading at best or just plain wrong? You might need to earn or borrow to pay for the groceries or the mortgage, but “tax and spend” is just not how governments work.
The hostility to MMT is revealing precisely because, as critics often say, it “adds nothing new”. If that were true, it would be ignored. It isn’t, because MMT does something that much of conventional economics prefers not to do: it makes explicit what is usually left implicit, and in doing so it removes a great deal of political cover.
MMT does not invent new monetary operations. Central banks, treasuries and settlement systems already work exactly as MMT describes. What MMT does is insist on starting analysis from those operational facts rather than from metaphors. Once you do that, a number of comfortable stories collapse. Governments are no longer financially constrained like households. “Running out of money” stops being a meaningful fear. Bond markets stop looking like disciplinarians and start looking like institutions whose power is tolerated by policy choice.
That is uncomfortable, not because it is radical, but because it is exposing.
Which leads to the second question: why cling to the neoliberal framing? Because it is useful. The “tax and spend” story does several jobs at once. It limits democratic ambition without saying so openly. It turns political choices into matters of supposed necessity. It allows distributional decisions to be smuggled in as technical constraints. And it disciplines labour, public services and welfare recipients while leaving wealth and finance largely untouched.
Most mainstream economists know the household analogy is wrong. Many will even admit it privately. But abandoning it would require a different kind of public debate – one centred on real resources, inflation risk, power and distribution. That is a harder conversation, and one that threatens existing hierarchies. Most especially, it would challenge the economists fight it: their power would disappear, and they are terrified of that.
So MMT is resisted not because it is false, but because it is inconveniently true. It does not promise free lunches. It simply refuses to let bad metaphors do political work. And once you accept that governments do not “tax and spend” the way households do, you can no longer hide behind the claim that austerity, underinvestment and inequality are unavoidable. That is what really provokes the hostility.
The use of the word ‘useful’ in the standard response you quoted is a giveaway. It raises a key issue about both MMT and neoliberal economics: who is it useful to and what is it useful for? And I imagine most of us know the answers to those questions.
As an introvert, I often find myself reaching for ‘I can’t do that’ as an easier (or perhaps more socially acceptable) way of declining an invitation than ‘I don’t want to do that’ with all the requirements to explain and justify that go with it. It has its’ limitations as a way of managing my social life. but it definitely seems like a terrible way to run an economy!
As an aside, I found the recent comments here on Myers Briggs really interesting. I understand it has its’ critics, but I’m an INFJ and was relieved, I guess to find an explanation that helped me understand myself better, and also reassured me that there is nothing wrong with me 🙂 .
I’ve also appreciated the support and understanding you often post about neurodivergence: my 19 year old son is autistic and wasn’t able to finish his a’ levels due to a mismatch between the way his teachers wanted to teach, and the way he prefers to learn. He is gifted at mathematics and chess, which he tutors online, and is currently immersed in learning philosophy and how to live a better life. He is not in education, employment or training (and is supported by me, he receives no state benefits) but I am sure he will find a way to use his talents and make a difference to others as he works out his place in the world. I view his neurodivergence as a gift, and not something to be ‘cured’.
Thank you Richard for all you do and write about. I wish you and your family a very peaceful Christmas and let’s all hope for better times in 2026.
Good luck, Susanne, and to your son. There is a space for everyone, I am quite sure. Finding it is the problem.