Realism is practical idiocy but most people like it. And they dislike ‘theory’. So, Richard Murphy opens his post with: “Modern Monetary Theory does suffer from being called a theory.” Note, first of all, nobody else than MMTers themselves has chosen this designation.
Richard Murphy makes it clear that he is not an unworldly theoretician but a down-to-earth realist and that MMT is as realistic as one can get: “In other words, it’s a description of what happens and not an explanation of what might be.”
Richard Murphy plays the old cliches of theoretician and practitioner against each other. Needless to emphasize that a theory is NOT something lofty, unreal, unworldly, or impractical, just the opposite: “There is nothing so practical as a good theory.” (Kant) A scientific theory is the humanly best mental representation of reality. The whole of civilization is built upon good theories.#1
The problem most people have with science is that is often counter-intuitive. Personal experience tells one that the sun goes around the earth but the Theory of Gravity says it is the other way round.
The issue has been addressed by the great methodologist and economist J. S. Mill: “People fancied they saw the sun rise and set, the stars revolve in circles round the pole. We now know that they saw no such thing; what they really saw was a set of appearances, equally reconcileable with the theory they held and with a totally different one. It seems strange that such an instance as this, ... , should not have opened the eyes of the bigots of common sense, and inspired them with a more modest distrust of the competency of mere ignorance to judge the conclusions of cultivated thought.”
Fact is that in the political arena the bigots of common sense are on their own. The ambition of agenda pushers like Richard Murphy is to win over the majority of the bigots of common sense. To enlighten the world scientifically is NOT his business.
So, what is wrong with MMT? MMT is scientific junk and political fraud.
Richard Murphy argues:
(i) “Let me absolutely clear: what this says is that government spending actually creates the money to enable the apparent payment of tax that appears, in popular imagination, to fund that spend. It also creates the money to buy government bonds ― which are private wealth. In other words we don't have tax and spend. We have spend and tax.”
(ii) “This logic is core to modern monetary theory: it is tax that provides value to a state’s money. It is the government’s promise to accept its own currency in payment of tax that gives its money its worth.”
(iii) “So money has value because the government endows it with that quality. And then, and only then, is the supposed left-wing quality added to this whole issue, because modern monetary theory then notes that when markets do not create full employment … then the government can create its own money to just to indirectly boost economic activity …, but to do it directly by investing itself.”
All three arguments are commonsensically plausible but scientifically false.#2, #3 What MMT boils down to is that economic problems can and should be solved with money-creation/deficit spending. Of course, it is long known that deficit-spending stimulates the economy, what seems to be unknown is that the macroeconomic Profit Law says that Public Deficit = Private Profit. So MMT first and foremost stimulates the one-percenters.#4
However, MMT claims to promote the cause of the ninety-nine-percenters: “The only twist most explicit modern monetary theorists add is that we could use this power of the government to create money out of thin air … for the good of everyone by trying to boost employment, investment, productivity and median wages by direct government activity or investment. If that’s cultish, faddish, or left wing, then so be it, I say.”
Needless to emphasize that Richard Murphy never mentions profit, the Profit Law, or the profit effect of deficit spending. Worse, MMTers regularly make this effect verbally disappear by speaking of benefits for the private sector a.k.a. ninety-nine-percenters while the benefits actually go to the business sector a.k.a. one-percenters. And this is not only bad science but a plain political fraud.
So, what is the real political and scientific reality? MMT policy is an abuse of the fiat money system with massive and virtually unlimited redistributive effects in the interest of the one-percenters. MMT is phony social policy designed by Wall Street and marketed by roll-up-the-sleeves realists like Richard Murphy and heart-winning Progressives like Stephanie Kelton.#5 The marketing is good but the product is real crap.
* Tax Research UK
#1 Why J. S. Mill had no friendly word for the bigots and votaries of common sense
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 MMT: Richard Murphy’s battle-for-money hoax
#4 Keynes, Lerner, MMT, Trump and exploding profit
#5 MMT and grassroots movements
Related 'What is so great about cargo cult science? or, How economists learned to stop worrying about failure' and 'No trade-off, Kant said' and 'Bagehot’s wisdom and the silliness of modern economists' and 'Economics and the Fallacy of Insufficient Abstraction' and 'Complexity and stupidity' and 'MMT: Richard Murphy’s battle-for-money hoax' and 'Wrapping up the MMT narrative'.
LINK on Jun 11
Link to the refutation of ‘MMT: economics for an economy focussed on meeting the needs of most people’: Richard Murphy: the MMT fraudster dressed up as realist
You say: “Trashing MMT because of the human condition is absurd. What we need is a system that can survive and enhance the human condition.”
The point at issue is NOT thrashing MMT but to answer the question: What is wrong with MMT?
The answer is:
(i) MMT is proto-scientific garbage, i.e. provably false, i.e. materially/formally inconsistent.
(ii) MMT is a political fraud, i.e. it pretends to promote the cause of the ninety-nine-percenters but de facto promotes the cause of the one-percenters.
(iii) MMTers are scientifically incompetent.
(iv) MMTers constantly violate scientific standards/ethics.
The remaining practical question with regard to MMT is how can folks like Murphy, Kelton, Mitchell, Mosler, Tcherneva, Wray, Fullwiler, Forstater, Kaboub, Pettifor, Keen, Tymoigne, Willingham, Grumbine, Ehnts, peterc, Hickey, Calgacus, Konrad, Anderson, Way, Deficit Owls, The Pileus, duncanpoundcake, consbyname, and many other soapbubblers be convinced to leave economics for good and thus to effectively contribute to the betterment of the human condition.
As the saying goes: “You got to know the system if you want to change it.”
MMTers do NOT know how the economic system, i.e. the price- and profit-mechanism, works.
Here is the challenge for all soapbubblers: this is the MMT balances equation (X−M)+(G−T)+(I−S)=0, and this is the AXEC balances equation (X−M)+(G−T)+(I−S)−(Q−Yd)=0. Which one is materially and formally consistent?
It is a sure bet that you do not understand what the equations say about the systemic interrelations, that is, how the monetary economy works.#1
What makes you think that you have anything of interest to contribute to the discussion?
#1 Do NOT look up the proof here
REPLY to Noah Way on Jun 12
Just answer two questions: Is the foundational macroeconomic balances equation (i) (X−M)+(G−T)+(I−S)=0 or (ii) (X−M)+(G−T)+(I−S)−(Q−Yd)=0 true? Can you prove your answer?
Don’t fear disgrace or embarrassment: Keynes, Post-Keynesians, and all your MMT colleagues flunked this test.
You say: “I'll put the question, how will corporations make profits in the brave future everybody is forecasting, when nobody is employed making a salary because everyone lost their job to automation and/or outsourcing? And after seeing how people respond, I'll respond that the corporate profits will come entirely from deficit spending by the Fed Gov. And that it will be sustainable.”
A sketch of the monetary economy after the demise of communism and capitalism has been given here: The Third Way: Towards the happy zero-tax economy.
You say: “Mathematical equations don’t apply to ideologies.”
True but irrelevant because economics deals with the economic system and systems are subject to objective systemic laws. For example, the Profit Law or the Employment Law.
Ideologies are for the retarded soapbubblers of the so-called social sciences.
Aircraft get off the ground because of the laws of aerodynamics and thermodynamics. Likewise, economies get off the ground because of systemic laws and not because consumers maximize utility by choosing between strawberry and raspberry yogurt or because greedy capitalists maximize profit.
Fact is that neither capitalists, nor economists, nor ideologues, nor MMTers, nor Noah Way know where macroeconomic profit comes from. This is the result of 200+ years of soapbubbling.
You say: “Only an idiot seeks to apply ‘objective systemic laws’ to human behavior.”
Very true again. Because of this, scientists apply objective systemic laws to systems. Imbeciles, on the other hand, come always up with a ‘behavioral’ explanation, e.g. the sun moves across the sky because Helios drives his golden chariot each day from East to West, or Zeus throws the thunderbolt because he is pissed off.
The subject matter of economics is the economic system, i.e. the interaction of economic variables like employment, price, profit, productivity, income, output, and so on. Human Nature/ motives/behavior/action is the subject matter of Psychology, Sociology, Anthropology, History, Political Science, Biology, Social Philosophy, Ethics and so on.#1, #2
Soapbubbling about human behavior is the chief occupation of brain-dead economists who still have not understood that economics is a system science. As a result, these confused confusers can to this day not tell what profit is.
Macroeconomic profit does not come into existence because some humans are greedy but because Qm=−Sm. There is NO chance that you ever understand this simple but fundamental equation, or what the subject matter of economics is, or what science is all about. This makes you a useful coworker of the MMT snake-oil sales team.
#1 Economics is NOT about Human Nature but the economic system
#2 Economics is NOT a social science