At the recent Scottish Festival of Economics, held in Edinburgh, Warren Mosler, who is credited with creating modern monetary theory (MMT), was asked whether he was frustrated that the idea had not received the attention it deserved. He acknowledged that it had received less attention than he would have wished and simultaneously suggested that MMT had, to date, produced only one superstar, whom he suggested to be me.
In social media terms, looking at YouTube, blogging, X and other platforms, what Warren had to say is undoubtedly right. Of all those who have commented on MMT or contributed to the theory, as I have with regard to tax, it can reasonably be argued that I have the greatest reach. To my surprise, I have a bigger following than Stephanie Kelton, who is the only rival I might be considered to have in these terms.
That said, later that day, Will Thomson, who interviewed me during my session at the festival, asked whether I was really a supporter of MMT at all. In the context of what Warren said, this might have been surprising, but I got the impression from several others attending the event that this is a question often asked in MMT circles.
I have taken time to reflect on this, having been on holiday (officially). Having done so, my starting point is that, if the question is whether I agree with MMT's description of the monetary system, the answer is yes.
I have long argued that government spending precedes taxation. The state, working with its central bank, creates money when it spends. Tax is then used to withdraw money from the economy, not to fund that spending. Government bonds are, in effect, savings mechanisms for the private sector, not a financing necessity for a currency-issuing government. What I stress is that those are not marginal claims; they go to the heart of how money works, and they are entirely consistent with the work of people like Warren Mosler, Stephanie Kelton and others.
At the same time, I reject the idea that a government is like a household. MMT makes it clear how absurd this suggestion, which is embraced by neoliberal economists, is. A household has to earn before it can spend. A government with its own currency does not. Its constraint is not financial; it is the availability of real resources and the risk of inflation if those resources are overused. This is a position that MMT has made clear, and it follows directly from observing how the monetary system actually operates.
In all of this, I do, of course, recognise the importance of the relationship between government deficits and private sector surpluses. When the government runs a deficit, the private sector, by definition, runs a surplus. That accounting identity matters because it shows that attempts to eliminate deficits, unless offset by external balances, will reduce private wealth. That insight owes much to the work of Wynne Godley, which MMT has helped popularise.
So, if that is what being an MMTer means, I meet the criterion. But that is not the whole story, which is why the question is asked of me.
All of these issues are technical and useful for precisely those reasons. I do not, though, think they are doctrinal, and where I differ with some 'MMTers' is that I do not think MMT itself is doctrinal. My position is that its technocratic explanations are key to understanding how policy might be delivered, but they do not represent a policy position in themselves. The reason for saying so is quite straightforward. Describing how money actually works is akin to describing gravity, and gravity is no more a policy than MMT is. Understanding a technocratic issue may inform policy, but it cannot represent policy in itself.
This difference in perception of the significance of MMT is most clearly highlighted with regard to what is called the job guarantee, about which I published a glossary entry this morning, setting out my concerns about this idea, which some within MMT consider a central element of MMT.
I do not do so. In fact, I think that the focus on the job guarantee within MMT is misplaced because I think that to suggest that a job guarantee is essential to MMT is to explicitly accept that MMT cannot achieve the goal that I wish to achieve, which is an economy that can be managed using the understanding that MMT provides to deliver full employment for all who want a job without resort to a job guarantee being required for those who would otherwise be a pool of unemployed labour, which is something that I would rather did not exist. As a result, the job guarantee conflicts with my view of what the economy's goal can and should be. It is not, in my opinion, a core element of MMT; rather, it is a policy choice intended to deliver full employment, and I think better policy choices to achieve that goal are available.
More broadly, however, it is important to note that my work does not start from MMT. It starts from understanding the economy through the lens of accounting and observation of individual and institutional behaviour. I am, for example. interested in how the Treasury and central bank actually work, and not in defending any particular school of thought on that issue. If that leads me to conclusions that align with MMT (as in fact happened before I ever became aware of MMT as a body of thought), then so be it. But the route matters, because it keeps the analysis grounded.
I also place much more emphasis on issues that MMT does not often focus on or even downplays. My concern is often with tax justice and tax design, inequality, corporate behaviour, governance, power relationships and the structure of the economy we have created. Money matters in all of these, of course, but as part of the wider political economy. Understanding how money works is a means to an end, not the end itself.
So where does that leave me? If I had to answer the question directly, because I do agree with MMT's description of how money works, I would suggest that I am an MMTer. But, if you, I think erroneously, believe the job guarantee is core to MMT, I am not in that camp. I can live with that, but I would suggest that it would be a loss to MMT if such a difference of opinion cannot be embraced by it.
This, I think, is an honest position. It acknowledges the intellectual contribution that MMT has made, whilst also making clear that I am not bound by it.
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Great post. The reason I was at the conference, volunteering to help make it happen, is I believe we need diversity of opinions in economic thought. What you say is right – to agree with the empirical observations that MMT makes is to agree with MMT itself. Policy suggestions – even those that come from primary MMT scholars – are apart from the core academic body.
P.S. Can I suggest you edit this sentence which is very ambiguous and easily read the opposite to how you intended? “ At the same time, I reject the idea that a government is like a household, which is a core tenet of MMT.”
Thanks, and edit made.
Perhaps the problem for economic MMTers is “theory”? As you said in Cambridge “you look through the window and observe the real world”.
The UK has 1mn young people out of work. The real world position currently there is no work for them. But they are treated as “spongers”.
Money creation shows that the UK as a sovereign state with its own currency can create the money to invest in the country and also create work for its people.
The UK state is not a household budget operation.
I am left with the view that the narrow fixation of MMTers is akin to “how many angels can you get on a pinhead”.
Keep looking out of the window and tell it as you see it.
“Gov’t spending precedes taxation…”
Well, quite. Of course it does.
But today, I got an email from HMRC reminding me that my 2024-25 tax summary was ready, dedicated to telling me “how the government spent your Income Tax and National Insurance contributions”.
It’s an uphill task trying to educate the public about how government spending is financed, when the HMRC takes time (and public money) at the end of every tax year, to mislead every taxpayer with lies about the household analogy which state the exact opposite of the truth.
Agreed. Surely “what the government has spent” would be more accurate.
If they insist on using the household analogy, I’d say it was less about Pater Familias saying to Long Suffering Housekeeper (ie The Taxpayer) “I’ve been to the bank and they say there’s not enough money in the account. so we can’t afford it”. It’s more like showing LSH a credit card bill that has to be paid back to stop ending up the proverbial creek without a canoe.
Whilst I think labels do more harm than good, within the fold so to speak, I too believe that the acceptance of how government financing works is at the heart of being an MMTer.
I do however lean much more towards a JG than UBI and was interested to hear Bill Mitchell say, at the kick off meeting of MMTUK, that it was, in fact, his and Warren’s parallel ideas on a JG >30 years ago that brought them together, and sparked MMT. In other words, the JG seeded MMT.
And, as I say, I disagree. Warren has assured me this is just fine with him. I suggest stop being dogmatic. It really does not help MMT supporters to be so.
I was just passing on what I’d heard Richard and giving my opinion on JG v UBI. We are all in the same school, for want of a better word, so no need for name calling.
We agree on that
I share your view about what MMT is…. and a job guarantee (or any other policy) is not part of the description.
The reason this matters is that we want to maximise what we agree on and get it accepted as the mainstream understanding of Money. I want to live in a world where Kemi Badenoch agrees that MMT is the correct description of money….. and then see her try to justify her policies in that light.
Agreed
Is there really a meaningful difference between you and the orthodox job guarantee believers? If full employment is a desirable goal and your understanding of money creation shows that the government can afford to employ all those looking for work but who can’t find it in the private sector, what practical difference does it make to guarantee a job to those “left over” as it were after all other levers have been pulled? Or perhaps I have misunderstood?
I do not think the JG is needed. Others think it integral for theoretical reasons. I am a pragmatist.
There’s a typo here where you meant to write money and not many: “Describing how many actually works is akin to describing gravity”
Thanks
Edited
Thanks
What initially set you apart from the other MMT proponents was your grasp of taxation which unsurprisingly you never ignored and how tax worked with MMT. UBI is another issue that needs the same forensic treatment.
MMT needs to be ‘networked’ with other realities, ideas and polices – plugged in, made interconnected. In trying to build a new economic system, there is simply no other choice but to do this.
Agreed
Foolishly I posted my comment on this before reading your glossary entry where you make your objections and differences clear. Apologies.
Quizzing AI:
Under the standard model, top three policy priorities are:
1. Security & rule of law
2. Public health (basic survival)
3. Employment
Employment sits below security and health because you need safety & a healthy population before jobs can function.
Under MMT with a Job Guarantee (JG), this order flips.
The JG becomes Tier 1 – not because employment is more important than safety or health, but because it is the most effective way to achieve them.
Law & order: A JG removes economic desperation.
A legal, dignified wage floor reduces theft, black markets, and recidivism. Structured community work gives former offenders routine and purpose, lowering crime.
Police can then focus on violent offences rather than poverty-driven acts.
Public health: Unemployment drives depression, suicide, and substance abuse (“deaths of despair”).
A JG provides income, structure, and social connection – acting as preventive medicine.
It stabilises housing and nutrition, cutting emergency room visits.
During recessions or pandemics, it automatically absorbs displaced workers, preventing mental health collapse.
Thus, under MMT the priority order becomes:
1. Job Guarantee (the anchor) – automatically stabilises security and health.
2. Public health & basic survival – now easier to deliver.
3. Rule of law – less strained as economic crime falls.
A JG does not replace police or doctors, but it makes both systems cheaper and more effective.
By elevating employment to the foundation, the MMT framework treats job guarantees as the single most necessary priority for lasting safety and well-being.
*
I disagree with most of that. The claims made are about policies of full employment, not a JG, which always creates rules in marginal activities. And a JG is a low wage policy – the claims made are not consistent with that, at all. AI can be very wrong. It is here.
Brilliant to see you follow up with this Richard. I have always considered you a significant and important voice, and it is clear that you agree 90% with most of the MMTers. I think the festival has created a thawing of some previously tense relations, and that is very positive. You are a MMTer! You even have a mug!
🙂
I will be in touch this week.
The mug is in regular use.
My late son spent the bulk of his adult graduate life either in temporary employent or unemployment, looking hard for work. He found it and the job “market” a dispiriting, degrading and dehumanising process.
So my pennorth is that I would like more consideration given to the experience, perceptions, observations and needs of those seeking work and populating the “job market” – the human beings we want to “care” for.
My way of trying to understand MMT (at a macro level?) is that it appears to be an operating system. Any policy can be put into it but the more the policy is configured to the system the more successful the policy is likely to be.
To my mind neither JG nor UBI are necessary if the government of the state was properly using its currency issuing powers to ensure full employment.
How about a glossary entry for UBI?
I will work on it…
Dogmatism is the enemy of “Blue Sky Thinking”.
A practical soul is more useful than a dogmatic one.
Techies love to get all excited about how to do the best thing and do it right.
Dogmatics are the friends of the darker professions.
The debate sounds strange to me. Surely MMT is saying that if a nation believes in the care economy, if inclusion in economic activity is a priority, then a government ( as part of the social contract of care) can guarantee every citizen be included.
By insisting a job guarantee means government employing you and “making up stuff for you to do so you feel included, but at a threashold of pain remuneration” the risk is that people, like Richard, rightly point out potential miscomings. However, the ” baby”, full inclusion, can easily be thrown out with the narrowly defined JG. More nuance is what I seek.
In the real world, there are serious shortages of key workers, and it’s causing real hardship for many people. Here is a list. It’s staggering. What is needed is urgent, detailed planning to get trained people into these jobs. Buzzwords like Job Guarantee won’t fix it. Hard work by experts in each of these professions might. MMT opens up a fighting chance that they will succeed.
Care workers (home care and care homes)
Nurses
Sonographers
Radiologists
Surgeons
Emergency medicine doctors
Stroke specialists
GPs (general practitioners)
Psychiatrists
Therapists (mental health)
Dentists
Physiotherapists
Occupational therapists
Electricians
Plumbers
Builders
Childcare workers
Teachers (especially maths, science, special needs)
HGV drivers
Bus drivers
Social workers
Seems to me that you are right and that MMT is a technical explanation of how the system works, whether it should continue to be called a theory which implies some doubt is debatable but I couldn’t think of an alternative,
It also seems to me that a JG, or your work on tax, are policy responses to the MMT world we live in and should be judged on whether they achieve their objectives. So the first question would be what are the policy objectives and it would seem to me that your politics of care are the right objectives for the UK and taxing wealth in the way that you have previously described are an appropriate response.
Thank you
I heavily sympathise with warren because you either support an unemployed buffer stock or employed buffer stock (Job Guarantee) Current system: https://en.wikipedia.org/wiki/NAIRU
“Monetary policy conducted under the assumption of a NAIRU typically involves allowing just enough unemployment in the economy to prevent inflation rising above a given target figure. Prices are allowed to increase gradually and some unemployment is tolerated.”
“offer everyone a public sector job at minimum wage and private sector only has to offer slightly better pay than minimum wage to attract workers from job guarantee to private sector or regular public sector. The Job Guarantee – a buffer stock of employed workers instead of unemployed that expands during recessions and decreases during booms. Easier to hire off JG than unemployed more private sector employment for the same level of inflation. Obviously you would have to restrict open borders to other countries with a Job Guarantee and equivalent social infrastructure otherwise they have to apply for a visa. The Job Guarantee is clearly superior to manual stimulus (Central Bank Independence advocates don’t like politicians – I don’t either) and interest rate changes that have long and variable lags while JG increases and decrease spending automatically and is ‘spatially targeted’ (at areas with high unemployment.) JG is an ‘automatic stabilizer.’ The Job Guarantee is fit to the person. This (USA-based but still mostly applicable) paper explains the Job Guarantee in detail as well as types of Job Guarantee jobs. “
The contrast between NAIRU and a Job Guarantee (JG) is real. The current system tolerates unemployment as a tool to control inflation. A JG replaces that with a buffer stock of employed people, offering work at a fixed wage that expands in downturns and contracts in booms.
That does have attractions:
• it maintains skills and employability
• it provides income security
• it can act as an automatic stabiliser
However, there are also significant challenges.
A JG requires very substantial administrative capacity to create useful, non-displacing jobs at scale. It also raises questions about wage setting, regional variation, and the potential for it to become either underpaid and unattractive or inflationary if set too high.
I would also challenge your final claim. A JG is not necessarily superior to fiscal policy more generally. Well-designed targeted public investment and employment programmes can achieve similar outcomes without the rigidity of a universal job offer.
So the real issue is not choosing between unemployment and a JG as absolutes, but how best to ensure full employment with price stability using the mix of tools available.