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This critique (and it is the by far the most common critique of MMT I've heard) boils down to this: "MMT may very well be an accurate depiction of reality, but

This critique (and it is the by far the most common critique of MMT I've heard) boils down to this: "MMT may very well be an accurate depiction of reality, but the problem is that if people start to see it as an accurate depiction of reality then inflation might go up." That's definitely a problem for a certain class of people (creditors and investors). MMT is controversial because, if true, it's undermining a lie that is supporting those interests ("keeping inflation as low as possible") over the interests of society as a whole.

tptacek 8y ago
This does not make sense as a rebuttal. The MMT'ers and the monetarists agree that runaway inflation is very bad. Essentially what you're doing here is confirming the misperception that MMT is just left-wing back-rationalized voodoo economics, which it is not.
- pytester 8y ago
  ^^ This is a straw man. I also agree that runaway inflation is bad. Almost everybody does. What I wrote above cannot, under any serious interpretation, be considered as a defense of runaway inflation.
  - tptacek 8y ago
    Help me understand where I went wrong reading this. I read, paraphrased: "The problem with MMT is that if everyone believes in it, they'll do things that cause inflation to rise", and "This is a problem primarily for the investing class".
    - pytester 8y ago
      That's accurate. Note that I did NOT say that it would cause runaway inflation. Runaway inflation (or hyperinflation, if we're being terminologically precise) == Inflation > 50% per month == Zimbabwe destroying its farmland and industry and having nothing useful to export and thus not having an economy that can support the current level of spending. Rising inflation == The US deciding, according to MMT principles, in the next decade that "fiscal responsibility" is not a reasonable justification for preventing medicare for all and maybe seeing a percentage bump in inflation as a result.
      - tptacek 8y ago
        MMT economists don't support inflation at any level, do they? They support alternative means of controlling inflation. Put differently, it sounds like you're using "MMT" as an incantation to dismiss inflation, which would be unfair to the MMT'ers.
        pytester 8y ago
        >MMT economists don't support inflation at any level, do they? MMT does not make normative judgements on inflation. It does state that taxation and fiscal spending are more effective control knobs to target inflation than monetary policy, but that isn't a normative judgement either. >it sounds like you're using "MMT" as an incantation to dismiss inflation I'm giving context to why hyperinflation / inflation scaremongering surrounding MMT exists. I'd do it for the same reason for why I'd reference oil company profits in reference to global warming skeptics - because it's the responsible thing to do to associate the motive for spreading bad science with the bad science. Naturally this gets abuse slung at me - with phrases like "left-wing back-rationalized voodoo economics" slung around for instance.
        tptacek 8y ago
        Can you source your claim that MMT doesn't make normative judgements on inflation? That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show. As I understand it --- once again --- MMT says inflation is bad, but that there are better ways to control it than monetarism and fiscal austerity. The distinction between my understanding and yours is highly material, because in my understanding, an attempt to actually deploy MMT policies at the Fed in the service of (say) single-payer that resulted in rising inflation would be a problem and evidence of failure, and in your understanding it wouldn't. In my understanding, the MMT economists would say "here are a set of policy levers we should use to ensure inflation doesn't increase", and in yours MMT economists would say, essentially, "single payer is worth extra inflation". The idea that inflation and deficits simply don't matter as much as conventional economists think it does is, as I understand it, a caricature of MMT that actually annoys MMT economists.
    - AnimalMuppet 8y ago
      "Rising inflation" != "runaway inflation". The difference may be differing assumptions on how likely it is, if MMT were adopted, that we would stop with merely rising inflation.
    - baursak 8y ago
      MMT is both a description of the current system, a system that is already in place, and a set of policy proposals. So "believing" in MMT may simply mean understanding clearly the process already happening.
      - tptacek 8y ago
        I think the argument that MMT is non-normative with respect to inflation is simply false. I'm not an expert, but, like, I've read things other than this article, and in all of them (along with this article) MMT proponents are at pains to point out that "inflation doesn't matter" is a misconception.
        peteretep 8y ago
        As a neutral observer, it feels like if you’re right you could easily show it by literally finding 3 normative judgements on inflation by prominent MMT proponents, and pasting them here, rather than referring to “I’ve read things”
        tptacek 8y ago
        Well, your first would be this article, as I said. Your second would be the debate between Furman and Kelton on the Ezra Klein podcast, as I said. I'll dig up a third cite. Like, one of the things in my head is the Kelton vs. Krugman argument, which I read on Krugman's blog, but that's not the best cite, since you're getting Kelton secondhand through Krugman there. Happy to help. If you'd like to help too, you could cite a source that says MMT'ers feel like inflation doesn't matter.
        peteretep 8y ago
        I have Ctrl-F’d through the article for “inflation” and only see “excessive” inflation as being normatively judged. Which bit do you feel supports your assertion?
        scott_s 8y ago
istjohn 8y ago
But FTA: MMT rejects the modern consensus that economies should be steered primarily by the raising and lowering of interest rates. MMTers believe that the natural rate of interest in a world of fiat money is zero and that pegging it higher is a giveaway to the investor class. So according to the article, MMT actually holds that interest rates are held too high under conventional monetary policy.

tptacek 8y ago

This does not make sense as a rebuttal. The MMT'ers and the monetarists agree that runaway inflation is very bad. Essentially what you're doing here is confirming the misperception that MMT is just left-wing back-rationalized voodoo economics, which it is not.

pytester 8y ago
^^ This is a straw man. I also agree that runaway inflation is bad. Almost everybody does. What I wrote above cannot, under any serious interpretation, be considered as a defense of runaway inflation.
- tptacek 8y ago
  Help me understand where I went wrong reading this. I read, paraphrased: "The problem with MMT is that if everyone believes in it, they'll do things that cause inflation to rise", and "This is a problem primarily for the investing class".
  - pytester 8y ago
    That's accurate. Note that I did NOT say that it would cause runaway inflation. Runaway inflation (or hyperinflation, if we're being terminologically precise) == Inflation > 50% per month == Zimbabwe destroying its farmland and industry and having nothing useful to export and thus not having an economy that can support the current level of spending. Rising inflation == The US deciding, according to MMT principles, in the next decade that "fiscal responsibility" is not a reasonable justification for preventing medicare for all and maybe seeing a percentage bump in inflation as a result.
    - tptacek 8y ago
      MMT economists don't support inflation at any level, do they? They support alternative means of controlling inflation. Put differently, it sounds like you're using "MMT" as an incantation to dismiss inflation, which would be unfair to the MMT'ers.
      - pytester 8y ago
        >MMT economists don't support inflation at any level, do they? MMT does not make normative judgements on inflation. It does state that taxation and fiscal spending are more effective control knobs to target inflation than monetary policy, but that isn't a normative judgement either. >it sounds like you're using "MMT" as an incantation to dismiss inflation I'm giving context to why hyperinflation / inflation scaremongering surrounding MMT exists. I'd do it for the same reason for why I'd reference oil company profits in reference to global warming skeptics - because it's the responsible thing to do to associate the motive for spreading bad science with the bad science. Naturally this gets abuse slung at me - with phrases like "left-wing back-rationalized voodoo economics" slung around for instance.
        tptacek 8y ago
        Can you source your claim that MMT doesn't make normative judgements on inflation? That's not my understanding, it's not what this article says, and it's not what Kelton said in her debate with Jason Furman on Ezra Klein's show. As I understand it --- once again --- MMT says inflation is bad, but that there are better ways to control it than monetarism and fiscal austerity. The distinction between my understanding and yours is highly material, because in my understanding, an attempt to actually deploy MMT policies at the Fed in the service of (say) single-payer that resulted in rising inflation would be a problem and evidence of failure, and in your understanding it wouldn't. In my understanding, the MMT economists would say "here are a set of policy levers we should use to ensure inflation doesn't increase", and in yours MMT economists would say, essentially, "single payer is worth extra inflation". The idea that inflation and deficits simply don't matter as much as conventional economists think it does is, as I understand it, a caricature of MMT that actually annoys MMT economists.
  - AnimalMuppet 8y ago
    "Rising inflation" != "runaway inflation". The difference may be differing assumptions on how likely it is, if MMT were adopted, that we would stop with merely rising inflation.
  - baursak 8y ago
    MMT is both a description of the current system, a system that is already in place, and a set of policy proposals. So "believing" in MMT may simply mean understanding clearly the process already happening.
    - tptacek 8y ago
      I think the argument that MMT is non-normative with respect to inflation is simply false. I'm not an expert, but, like, I've read things other than this article, and in all of them (along with this article) MMT proponents are at pains to point out that "inflation doesn't matter" is a misconception.
      - peteretep 8y ago
        As a neutral observer, it feels like if you’re right you could easily show it by literally finding 3 normative judgements on inflation by prominent MMT proponents, and pasting them here, rather than referring to “I’ve read things”
        tptacek 8y ago
        Well, your first would be this article, as I said. Your second would be the debate between Furman and Kelton on the Ezra Klein podcast, as I said. I'll dig up a third cite. Like, one of the things in my head is the Kelton vs. Krugman argument, which I read on Krugman's blog, but that's not the best cite, since you're getting Kelton secondhand through Krugman there. Happy to help. If you'd like to help too, you could cite a source that says MMT'ers feel like inflation doesn't matter.
        peteretep 8y ago
        I have Ctrl-F’d through the article for “inflation” and only see “excessive” inflation as being normatively judged. Which bit do you feel supports your assertion?
        scott_s 8y ago

istjohn 8y ago

But FTA: MMT rejects the modern consensus that economies should be steered primarily by the raising and lowering of interest rates. MMTers believe that the natural rate of interest in a world of fiat money is zero and that pegging it higher is a giveaway to the investor class. So according to the article, MMT actually holds that interest rates are held too high under conventional monetary policy.