Modern Monetary Theory (MMT) has a had its official coming out party over the last few months. Orthodox luminaries from Paul Krugman to Nick Rowe through to their prison wives such as Stephen Williamson have been generating one faux engagement after another with MMT. Clearly both the press and the volume of adherents MMT is attracting is causing inquietude inside the citadel.
The protagonists of MMT come from an assortment of vocations: academic economists and financial sector specialists. The basic thrust of their analysis is that debt and who holds that debt matters. Their main empirical point is that horizontal (credit) money matters when thinking in terms of the economy as whole and their central policy conclusion has tended to be that sovereign currency issuers like Canada and the US are never borrowing constrained. Public deficits do not matter in and of themselves, rather what matters is capacity utilisation rates and aggregate demand. Oddly the MMT position is subsumed under the broader heading of post-Keynesian economic thought.
Williamson thinks they are crazy because he is attempting a restoration of the failed elements of the hard monetarist policy prescriptions from the early 1980s. Krugman hates MMT as near as I can tell because it reminds him of just how much distance he has travelled from Keynes to Freddy Hayek via Friedman. Rowe, well is Rowe: ask him an empirical question and what you will get is a well thought out theoretical restatement of your question on his terms, in his ontological zone of preference.
So all in all, more heat than light. MMT is No Country for Old Men. Not because it lacks grounding in a sophisticated understanding of how both public and private credit creation works (deficit spending), it clearly does, but rather because its policy implications threaten the grand consensus on the veracity of neoliberalism particularly with respect to fiscal policy and labour markets.
MMT is going to win the battle and
loose lose the war. Orthodoxy has demonstrated itself to be extremely flexible when confronted with serious theoretical challenges such as the capital controversies, acknowledging its short comings and then returning to the central narrative. It has done the same with empirical short comings as well. In each case, it has first responded with derisive missives, then acknowledged in a limited sense its own short comings and then invented a work around so that it can come back to the basic glib classical proposition: all is for the best in the best of all possible worlds and any attempt to fuck with ‘nature’ is folly.
This view has always served as an ideological resource ready hand. The benefactors don’t really care if it is true in some narrow technical sense. That is not why they pay the rent and heating for the incubation of such thought.