April 28, 2018

Poor Wicksell — abused as a testimonial for MMT

Comment on Lars Syll on ‘MMT — the Wicksell connection’

Blog-Reference and Blog-Reference

Lars Syll summarizes “In modern times legal currencies are totally based on fiat. Currencies no longer have intrinsic value (as gold and silver). What gives them value is basically the simple fact that you have to pay your taxes with them. That also enables governments to run a kind of monopoly business where it never can run out of money. A fortiori, spending becomes the prime mover and taxing and borrowing is degraded to following acts. If we have a depression, the solution, then, is not austerity. It is spending. Budget deficits are not the major problem since fiat money means that governments can always make more of them.”

That much is, of course, true: Wicksell envisaged a pure fiat money system run by the central bank (= giro system). This does not mean, though, that he was in any way a promoter of MMT’s claims or policies.

Wicksell certainly did not subscribe to patently false MMT propositions as
  • the value of money depends on taxation,#2
  • the Central Bank is the State’s department for arbitrary money creation,
  • deficit-spending/money-creation is the cure for all economic and social problems,#3
  • public debt does not matter.#4
With regard to the theory of money, Wicksell, Keynes, and MMT are superior to DSGE/RBC/ New Keynesianism, and the rest of Orthodoxy. However, all three approaches failed to integrate the Theory of Money into a consistent macroeconomic framework or what Keynes called the ‘monetary theory of production’.#5

Egmont Kakarot-Handtke

#1 Going beyond Wicksell, Keynes, and MMT
#2 The creation and value of money and near-monies
#3 Deficit-spending/money-creation is ALWAYS a bad deal for WeThePeople
#4 Deficits matter for distribution
#5 Reconstructing the Quantity Theory

Related 'How Wicksell and the rest got inflation/deflation wrong' and 'Wicksell’s misplaced critique of mathematics' and 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'The clock runs down on economics' and 'The sectoral balances obfuscation: stupidity or corruption?' and 'The Emergence of Profit and Interest in the Monetary Circuit' and 'The Axiomatic Unity of Circuit, Money, Price and Distribution' and 'Criminals and the monetary order' and 'The state of MMT? Stone-dead!'. For the full-spectrum refutation of MMT see cross-references MMT.

For more about macrofoundations see AXECquery.

Wikimedia AXEC152


billmitchell.org Mar 30, 2023,  For clarification of the history of the Theory of Money and the correct attribution to the original authors (KnutWicksell, Axel Leijonhufvud, Basil Moore, Marc Lavoie, Augusto Graziani, Wynn Godley) see William Mitchell - Modern Monetary Theory, When mainstream economists arrive at ideas 50 or so years late and pretend to be contributing to knowledge