November 30, 2015

MMT: cross-references

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Grok on Mar 6, 2025

What does the AXEC project say about MMT in general and about the effects on distribution in particular?

The AXEC (Axiomatic Economics) project, led by economist Egmont Kakarot-Handtke, provides a critical perspective on Modern Monetary Theory (MMT) that is grounded in a rigorous axiomatic approach to economics. The AXEC framework seeks to establish a scientifically valid basis for economic analysis, emphasizing formal consistency and empirical testability, and it often challenges prevailing economic theories—including MMT—for failing to meet these standards. Below, I outline what the AXEC project generally says about MMT and its specific critique regarding the effects of MMT on distribution, based on Kakarot-Handtke’s publicly available writings, such as those found on the AXEC blog and related commentary.
General Critique of MMT by the AXEC Project
The AXEC project views MMT as fundamentally flawed and scientifically deficient. Kakarot-Handtke argues that MMT lacks a coherent theoretical foundation and fails to adhere to the principles of rigorous economic science. Specifically:
  1. Logical and Mathematical Defects: AXEC contends that MMT’s foundational sectoral balances equation—often expressed as (G - T) = (S - I) + (X - M), where G is government spending, T is taxes, S is saving, I is investment, X is exports, and M is imports—is logically and mathematically defective. According to AXEC, this equation does not properly account for the profit dynamics in the economy, rendering MMT’s macroeconomic framework invalid from the start. Kakarot-Handtke asserts that without a correct understanding of profit, MMT cannot accurately describe how the economy functions.
  2. Proto-Scientific Status: MMT is dismissed as "proto-scientific" or "scientifically worthless" because it does not meet the criteria of formal axiomatization and empirical falsifiability that AXEC demands. Instead, AXEC portrays MMT as a politically motivated narrative rather than a genuine economic theory, accusing it of being more about agenda-pushing than advancing knowledge.
  3. Refutation on All Counts: Kakarot-Handtke claims that MMT has been "refuted on all counts" due to its failure to correctly model the monetary economy. He argues that MMT’s assertion that a sovereign government can create money without constraint overlooks critical structural realities, such as the interplay between monetary flows and real economic variables like profit and income.
  4. Moral and Political Critique: Beyond its theoretical shortcomings, AXEC labels MMT proponents as "stupid or corrupt or both," suggesting that their advocacy serves the interests of specific groups (e.g., Wall Street or the oligarchy) rather than the public good. This reflects AXEC’s broader skepticism of economic theories that align too closely with political agendas.
In summary, the AXEC project rejects MMT as a "bad theory" that misrepresents how the economy operates, particularly by ignoring the centrality of profit and relying on flawed accounting identities. It positions MMT as part of a broader failure in economics to move beyond storytelling to a true science.
AXEC’s View on MMT and Effects on Distribution
The AXEC project places significant emphasis on distribution as a critical economic outcome and argues that MMT’s policies exacerbate distributional inequities in ways that its proponents either fail to recognize or deliberately obscure. Here’s what AXEC specifically says about MMT’s effects on distribution:
  1. Deficit Spending and Distributional Consequences: AXEC asserts that "deficit spending creates the distribution people complain about." In the AXEC framework, public deficits—central to MMT’s policy prescriptions—directly increase the financial assets of the private sector. However, Kakarot-Handtke argues that this process disproportionately benefits the business sector (particularly profit-earning firms) rather than households or wage earners. He encapsulates this in the axiomatically derived insight: "Public Deficit = Private Profit." This means that government deficit spending, as advocated by MMT, funnels money into the hands of the profit sector, worsening income and wealth inequality.
  2. Lethal Consequence on Distribution, Not Inflation: While MMT focuses on inflation as the primary constraint on government spending, AXEC counters that "the lethal consequence of MMT policy is NOT on inflation but on distribution." Kakarot-Handtke argues that the real danger of MMT lies in its tendency to redistribute income and wealth upward—toward corporations and the wealthy—rather than causing generalized price increases. He suggests that MMT’s emphasis on inflation as the limiting factor distracts from this more insidious effect.
  3. A Free Lunch for the Oligarchy: AXEC frames MMT as providing "a free lunch for the oligarchy." By enabling deficit-financed spending without addressing how the newly created money flows through the economy, MMT effectively subsidizes the profit sector at the expense of wage earners and the broader population. This critique aligns with AXEC’s broader narrative that MMT serves the interests of economic elites, such as Wall Street, rather than promoting equitable growth.
  4. Empirical and Theoretical Underpinning: In the AXEC model, the economy is analyzed through a set of axioms that explicitly include profit and distinguish between the business sector and the household sector. Kakarot-Handtke uses this framework to show that MMT’s money creation (via deficits) increases the stock of financial assets held by the business sector, leading to higher profits without a corresponding increase in wages or household income. This contrasts with MMT’s claim that deficit spending can achieve full employment without adverse side effects, as AXEC insists that the distributional impact undermines such promises.
  5. Comparison to Other Critiques: Unlike mainstream critiques of MMT that focus on inflation or fiscal sustainability, AXEC’s focus on distribution is distinctive. For example, where critics like Larry Summers or Kenneth Rogoff warn of hyperinflation risks, AXEC argues that the real issue is not price stability but the structural enrichment of the profit sector over time, which perpetuates inequality.
Conclusion
In general, the AXEC project views MMT as a scientifically invalid theory that misrepresents the monetary economy and serves as a tool for political and economic agendas rather than a contribution to economic understanding. On the specific issue of distribution, AXEC argues that MMT’s reliance on deficit spending systematically favors the profit sector, exacerbating income and wealth inequality rather than addressing it. This distributional critique is framed as MMT’s most significant flaw—more damaging than its potential inflationary consequences—and is seen as evidence of its alignment with the interests of the oligarchy rather than the public.
This analysis is drawn from Kakarot-Handtke’s consistent arguments on the AXEC blog and related platforms, where he repeatedly ties MMT’s policy implications to adverse distributional outcomes. While AXEC’s perspective is heterodox and uncompromising, it offers a unique lens on MMT that prioritizes formal rigor and distributional dynamics over the more common inflation-focused critiques.


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