James Montier summarizes: “Modern Monetary Theory (MMT) seems to provoke a visceral reaction amongst the ‘great and the good’ such as Rogoff, Krugman, and Summers. However, when reading their criticism I am often left with the impression that they haven’t actually bothered reading anything on the subject of their critique.” and “Sadly, the behaviour of the great and the good is far from exemplary in terms of economic debate. Terms like mess, foolish, fringe, nonsense, and voodoo alongside fear-mongering mentions of hyperinflations may make for an exciting story but they do little to advance the debate. In fact, the use of these words and the generally dismissive (but thoroughly unsubstantiated) nature of these articles appear to be typical of the output of those suffering from groupthink.”#1
To complain about economists’ ceaseless blather is either naive or insincere. Economics claims to be a science since Adam Smith/Karl Marx but has never been anything else than political propaganda. In the political sphere, nobody cares about scientific truth. The point of political communication is to engage the audience and the tools are well-known since the ancient Sophists: rhetoric/storytelling/lying, empty promises, fear-mongering, and smearing.
It is no secret how politics works and there would be no problem at all if the political sphere and the scientific sphere were strictly kept apart. However, this is not the case with economics. Economists claim to do science but instead push a political agenda. Economics is the worst scientific failure of modern times. So, the profession’s claim to do science as expressed in the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud. Economists are not scientists but useful political idiots.#2
The scientific mission of economics is to figure out how the monetary economy works. Economists have failed at this task. Instead of figuring out the mechanics of the economic system, they have exhausted themselves with pointless speculation about Human Nature/motives/behavior/action. The point is, though, that Human Nature/motives/ behavior/action is the subject matter of Psychology, Sociology, Anthropology etcetera. That is, economists have never understood what their subject matter is. The scientific fact of the matter is that the major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent, and that all get the foundational concept of the subject matter ― profit ― wrong. MMT is no exception.#3
And this makes it inevitable that economic debates degenerate in the shortest possible time into folk-psychological sitcom blather. Explanations do not consist of the identification of objective economic relationships but of speculation about subjective motives/emotions which, in turn, boil down to hate, revenge, resentment, greed, imperiousness, and other psychological/social pathologies. Thus, economics leaves the scientific sphere and ends in PsySoc blather.
The current Mainstream vs MMT debate is no exception. Each side accuses the other of stubborn groupthink. This psychological explanation is beside the point. Each side pushes a political agenda. The lethal defect of economics is not cognitive impairment but political corruption.
In order to get out of the mess, the first thing to do is to proceed from PsySoc blather to science. MMT has to be rejected because it is materially/formally inconsistent. The lethal blunder of MMT is located in the foundational sectoral balances equation (I−S)+(G−T)+(X−M)=0. Because there is a crack in the foundations the whole analytical superstructure of MMT is scientifically untenable. #4, #5
MMT has not to be flushed down the drain because some random moron hates it or because some academic loudspeakers suffer from groupthink but because MMT is provably false, i.e. does not satisfy the scientific criteria of material/formal consistency. This is how science works. Economists, though, are to this day NOT guided by the principles of science.#6
No one hates MMT but everyone despises stupid/corrupt economists.
* GMO, James Montier Why does everyone hate MMT.
#1 Fake surveys and Groupthink in the economics profession.
#2 For details of the big picture see cross-references Political Economics.
#3 MMT is better than mainstream economics but still not good enough.
#4 Refuting MMT’s Macroeconomics Textbook.
#5 For the full-spectrum refutation of MMT see cross-references MMT.
#6 For details of the big picture see cross-references Failed/Fake Scientists.
Related 'Economics: the honeypot for know-nothings' and 'MMT vs WSJ: Another futile exercise in moron bashing' and 'Meet the MMT smart arses' and 'The retirement of a fake scientist and real agenda pusher' and 'The clock runs down on economics' and 'Too much ado about deficit spending' and 'MMT-Refutation for Dummies'. For details of the big picture see cross-references Not a Science of Behavior.