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> Take taxation as an example. Simplified, Neoliberal = taxes bad. MMT considers taxation to be an instrument to control demand and inflation (by proxy). I mea

> Take taxation as an example. Simplified, Neoliberal = taxes bad. MMT considers taxation to be an instrument to control demand and inflation (by proxy). I mean oversimplifying is something we can do confidently after a set of ideas has lived up to the standards we expect from a macroeconomic framework. One big problem with MMT is that it’s been basically whatever Stephanie Kelton et al. says it is each time they hop on a podcast and argue for some policy positions. For a while it was hey spending more won’t cause inflation. It sounds like you’re saying now it’s hey taxation is how we control inflation? So with MMT it’s historically been difficult to make definite statements about anything and seems more a tool to argue for policy.

moooo99 3y ago
> It sounds like you’re saying now it’s hey taxation is how we control inflation? Among other things. A (if not the) fundamental idea of MMT is that for a government that issues its own currency, money is *not* a limited resource. The wealth the private sector accumulates is what the government (or rather, its central bank) issued in the first place. Taxes are not there to finance the government and its spending, they're there to establish the government issued currency as a valid form of payment. This is a stark contrast to today, where "the taxpayer pays for the government". Pretty much everything else builds upon this fundamental idea. > For a while it was hey spending more won’t cause inflation. This isn't universally true or false, it's also very much compatible with the idea of MMT. Fundamentally, as introduced, money is considered to not be a limited resource. The restrictions placed on how much debt a government can take on etc. are arbitrary and of political nature. There are, however, very real restrictions that aren't artificial in nature. Human labor as well as the availability of natural resources are the two example that would effectively constrain everything. Regardless of how much money you throw at a given industry, when they cannot fulfil the demand because they don't have the human labor to produce the stuff in demand, prices will go up (=inflation). The same principle applies for natural resources, but in two ways. For one, if your production capacity has reached its natural limited (i.e. there is no more stuff), prices would go up if you continue throwing money at the problem. You're also constrained if you'd have to import resources. The Eurozone can create euros, but if you have to pay for Oil in USD they won't matter much. That is also where the restrictions for MMT in terms of applicability come from. The state needs a large degree of monetary autonomy and the currency is not bound to a physical object (gold standard, etc). Also, as already implied, if you'd have to take on debt in a currency that you do not issue yourself, MMT won't really be applicable either.

moooo99 3y ago

> It sounds like you’re saying now it’s hey taxation is how we control inflation? Among other things. A (if not the) fundamental idea of MMT is that for a government that issues its own currency, money is *not* a limited resource. The wealth the private sector accumulates is what the government (or rather, its central bank) issued in the first place. Taxes are not there to finance the government and its spending, they're there to establish the government issued currency as a valid form of payment. This is a stark contrast to today, where "the taxpayer pays for the government". Pretty much everything else builds upon this fundamental idea. > For a while it was hey spending more won’t cause inflation. This isn't universally true or false, it's also very much compatible with the idea of MMT. Fundamentally, as introduced, money is considered to not be a limited resource. The restrictions placed on how much debt a government can take on etc. are arbitrary and of political nature. There are, however, very real restrictions that aren't artificial in nature. Human labor as well as the availability of natural resources are the two example that would effectively constrain everything. Regardless of how much money you throw at a given industry, when they cannot fulfil the demand because they don't have the human labor to produce the stuff in demand, prices will go up (=inflation). The same principle applies for natural resources, but in two ways. For one, if your production capacity has reached its natural limited (i.e. there is no more stuff), prices would go up if you continue throwing money at the problem. You're also constrained if you'd have to import resources. The Eurozone can create euros, but if you have to pay for Oil in USD they won't matter much. That is also where the restrictions for MMT in terms of applicability come from. The state needs a large degree of monetary autonomy and the currency is not bound to a physical object (gold standard, etc). Also, as already implied, if you'd have to take on debt in a currency that you do not issue yourself, MMT won't really be applicable either.