More than 200 years ago, economics started as Political Economy. Those were honest times and the founding fathers identified themselves openly as political agenda pushers. John Stuart Mill, the philosopher of Liberalism, was from 1823 to 1858 on the payroll of the British East India Company.#1 Things changed with Jevons who renamed Political Economy to Economics and claimed to do science.
So, there are political economics and theoretical economics. The main differences are: (i) The goal of political economics is to successfully push an agenda, the goal of theoretical economics is to successfully explain how the actual economy works. (ii) In political economics anything goes; in theoretical economics, the scientific standards of material and formal consistency are observed.
Despite their commitment to science, economists have produced NOTHING of scientific value in the last 200+ years. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept profit wrong.
Economics is proto-scientific garbage but advertises itself as science. Economists deceive the general public. The “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel” is a fraud.
Economics is propaganda for the benefit of the Oligarchy. MMT is just the latest example. Stephanie Kelton is currently the most popular proponent of the false MMT message ‘Deficits Are Good For You’.
“Professor Kelton will deliver the annual Harcourt lecture ― The Deficit Myth ― Modern Monetary Theory and the Birth of the People’s Economy ― at the University of Adelaide on Tuesday 14 January to a packed audience. The event was sold-out almost as soon as it was announced.”
“Her much-anticipated book, The Deficit Myth: Modern Monetary Theory and Creating an Economy for the People (to be published on 9 June 2020), will show how to break free of the thinking that she says has hamstrung policymakers in Australia and around the world.”
Now, the plain scientific fact of the matter is that the MMT policy of deficit-spending/ money-creation is bad for WeThePeople and good for the Oligarchy.#2, #3
According to the macroeconomic Profit Law,#4 MMT deficit-spending/money-creation has serious negative distributional effects:
(i) The Law implies Public Deficit = Private Profit.
(ii) The greater part of private profit is invested in government securities and earns interest which is taxed from WeThePeople as long as the debt is rolled over.#5
(iii) A growing public debt can be rolled over for a very long time but at some future date has to be redeemed. This will cause severe economic problems.#6, #7
The communicative task of MMT academics is to brush all negative distributional effects and the inevitable future problems aside: “Government deficits are normal and even necessary to the health of most economies ― that’s according to one of the world’s most influential economists, Professor Stephanie Kelton, who will be a Visiting Professor at the University of Adelaide this month.”
Economics students are expected to swallow proto-scientific garbage and brain-dead propaganda without turning an eyelid. After all, that is what they have done since the founding fathers.#8
The fact of the matter is that public deficit-spending/money-creation is a free lunch program for the Oligarchy.#9 The fact is that the so-called market economy is on the life support of the State and Wall Street is on the life support of the Central Bank. Macroeconomic profit is in the main produced by public deficits. Financial wealth grows in lockstep with public debt. The Oligarchy, in turn, uses the opulent free lunches to corrupt what remains of the State’s legislative, executive, and judiciary institutions and, not to forget, academia.#10
* University of Adelaide
#1 “The company ended up seizing control of large parts of the Indian subcontinent, colonised parts of Southeast Asia, and colonised Hong Kong after a war with Qing China.” (Wikipedia)
#2 For the full-spectrum refutation of MMT see cross-references MMT
#3 Exploding the Household Fallacy
#4 Qm≡Yd+(X−M)+(G−T)+I−Sm Legend: Qm monetary profit/loss, Sm monetary saving/dissaving, I investment expenditures, G government spending, T taxes, X export, M import, Yd distributed profit.
#5 Stephanie Kelton sells children into debt slavery
#6 How to pay for the war and to be bamboozled by economists
#7 Some nasty MMT surprises behind the time horizon
#8 Econ 101: Economists flunk the intelligence test at the first hurdle
#9 MMT: The fusion of Wall Street and Academia
#10 Stephanie Kelton: MMT’s public farce
Related 'The Kelton-Fraud' and 'Stephanie Kelton’s legendary Plain-Sight-Ink-Trick' and 'Down with idiocy!' and 'The sectoral balances obfuscation: stupidity or corruption?' and 'Dear idiots, MMTers are Wall Street’s agenda pushers'.
Switch of threads at this point.
You summarized the White Paper: “Mosler answers the question ‘What is MMT?’ as follows. MMT began largely a description of monetary operations, which are best thought of as debits and credits to accounts kept by banks, businesses, and individuals.” and “To give further background, Warren Mosler is successful fixed income investor who developed the ideas around MMT independently of the other founders, …”
The problem is this: Warren Mosler’s approach is microeconomic and institutional. Now, we know from methodology that ALL microfounded approaches run into the Fallacy of Composition. NO way leads from the description of the institutional/operational details of the Fed or other banking systems to the understanding of how the monetary economy works. Monetary Theory has to be macrofounded.
Because Warren Mosler gets the analytical starting point wrong, he gets the determination of the price level and the key interest rate wrong.
From the correct macrofoundations follows the correct balances mechanics, i.e. the interdependence of the balances of the business, household, and government sector. From the mathematically correct balances analysis (= macroeconomic accounting) follows that MMT’s sectoral balances equation is false.
So, both Warren Mosler’s microfoundations approach and the post-Keynesian macrofoundations approach are provably false. And when the foundations are false the whole analytical superstructure is false.
Conclusion: Forget the White Paper, forget MMT, and stop blathering about the absolutely irrelevant institutional/operational details of Fed/Treasury/Private Bank interactions. The lethal blunder of economics is that the macrofoundations are false since Keynes because economists are too stupid for the elementary algebra that underlies macro.
People love hands-on practitioners like Warren Mosler and love to get lost in operational details and regard Mosler as an expert because he has made tons of money on Wall Street. Nothing wrong with this, except that economics is above Warren Mosler’s intellectual pay-grade. The proof is in his White Paper.
You say: “Egmont you here: ‘Public Deficit (G−T)’ G doesnt include Transfer Payments so that is not the ‘Deficit’... at least not in Cash Basis Accounting ...”
Right, transfer payments have been left out of the picture here. But you can easily apply the analogous case which has been dealt with elsewhere.#1 Just substitute transfers for Yg.
The inclusion of transfers does NOT change the crucial relationship Public Deficit = Private Profit, so there is no need to bring transfers in at this point.
#1 Q: How are you going to pay for it? MMT: By stealth taxation!
I said: “Now, we know from methodology that ALL microfounded approaches run into the Fallacy of Composition. NO way leads from the description of the institutional/operational details of the Fed or other banking systems to the understanding of how the monetary economy works. … Because Warren Mosler gets the analytical starting point wrong, he gets the determination of the price level and the key interest rate wrong.”
The Fallacy-of-Composition argument does here NOT relate to monopolistic money creation but to the determination of the price level. The price level is NOT determined à la Mosler by the government “setting one price” but by total output and total spending of all households and the government taken together. If in the limiting case government spending is zero, the price is still determined.
For the production-consumption economy without government, the macroeconomic Law of Supply and Demand says for the elementary case that P=W/R.
The government is neither needed for the determination of the price level nor for bringing money into the economy.#1
From Warren Mosler’s ‘operational core’ follows NOTHING about the price level or other macroeconomic variables. Obviously, Warren Mosler has NO idea what macroeconomic profit is and this alone is proof that the White Paper is proto-scientific garbage.
#1 The right and the wrong way to bring money into the economy
The macroeconomic price, aka the price level, is in the elementary case given by P=ρE W/R. This is the macroeconomic Law of Supply and Demand. Extensive explanations have been given elsewhere.
The price level follows logically from macrofoundations which are for a start defined by three macro axioms (Yw=WL, O=RL, C=PX), two conditions (X=O, C=Yw), and two definitions (Q≡C−Yw, S≡Yw−C)
The equation is composed of measurable variables and is therefore testable in principle, i.e. as an integral part of the complete and more complex price equation.
From Warren Mosler’s “operational core” follows NOTHING about the price level.#1
#1 Why MMTers permanently explode myths of public deficits