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Krugman "legitimizes" MMT (but needs a copy editor)

Fine word, legitimate, but you know what I mean. Krugman's blog:

There have, however, been a couple of side shows, with what I guess now constitutes mainstream Keynesianism – carried forth in public debate by Martin Wolf, Simon Wren-Lewis, Brad DeLong, Jonathan Portes, Paul DeGrauwe, and whatshisface, among others – subjected to non-austerian criticism on both flanks. On the left are the Modern Monetary Theory types, who assert exactly what the austerians like to claim, falsely, is the Keynesian position – that budget deficits never matter (except for their direct effect on aggregate demand). On the right are the market monetarists like Scott Sumner and David Beckworth, who insist that the Fed could solve the slump if it wanted to, and that fiscal policy is irrelevant.

Well, it's nice that Krugman now recognizes MMT as a legitimate school of economics -- initial caps and all -- beyond the stale salt water vs. fresh water dichotomy.*

On the other hand, I'm not keen on Krugman's framing: "[B]udget deficits never matter" is an offensive echo of Dick Cheney. Which right there is our first copy editing problem: Krugman's got to get his snark straightened out. I mean, you can't classify MMT as part of the left and then put Dick Cheney's words in their mouths, right? It's a category error.** (And since Krugman is a truly brilliant blogger, I'd expect no snark kerfuffles from him at all, signalling, to this close reader at least, some deeper underlying failure to think things through on the Good Professor's part.***)

On the third hand, we've got Krugman's parenthetical:

"(except for their direct effect on aggregate demand)."

This seems to be new; at least the phrasing is new.

To my simple mind, Krugman's main sentence plus parenthetical seems a lot like "The American flag is all red (except for the blue and white parts)," but I'm assured by people who are a lot smarter than I am about MMT that Krugman's statement is technically correct. So we call in our copy editor for this little problem too, and the parenthetical becomes:

"(although deficits, like taxes, can and should be used to manage aggregate demand)"

Fixed it for ya....

NOTE * Some, like me, might quarrel with putting MMT on the left. Starting from a real understanding of the operational realities of money creation isn't a left vs. right thing, is it? And I certainly know MMTers who wouldn't place themselves on Krugman's spectrum at all. That said, since Krugman doubtless thinks of himself as being of "the left" (and if he is, then Obama's a Kenyan Socialist) he's really saying "These guys are on my side." Which I suppose isn't the worst possible outcome.

NOTE ** Then again, Krugman may be putting MMT words in austerian mouths ("assert exactly what," for some definition of exact). Gee, thanks, and why, and anyhow the same copy edits apply.

NOTE *** Or, to be fair, a sign of some deeper tectonic shift beneath the everyday political landscape, a la pre-1860 America, such that received categories no longer apply. Krugman the partisan would be the last to notice such a shift consciously, but it could be that Krugman the stylist might, unconsciously, have done so.

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Submitted by Hugh on

Krugman is a neoclassical and a Keynesian. He's saying that austerians accuse Keynesians of believing that deficits don't matter. Krugman then asserts that this is the MMT position. The bit about aggregate demand is unclear because of the construction. "Doesn't matter" in the context connotes doen't matter in a negative sense, but increased aggregate demand via deficit spending in the current economy is a positive from the MMT point of view. So there is a mismatch.

I am not an MMTer and am critical of it, but Krugman has it wrong. MMT asserts that government can run deficits for as long as it needs to, that the government can overspend for as long as the private sector is underspending. But it does not hold that deficits never matter. Running deficits after the private sector has recovered would create inflation. MMT has always acknowledged this as a constraint on deficits.

Modern economics is mostly bunkum and Krugman is just a particularly well-known charlatan who has tailored his snakeoil pitch to a certain segment of rubes.

Submitted by MontanaMaven on

I am in 100% agreement. It strikes me that there really are far too many fields of study. Used to be just a few like philosophy, history, rhetoric , math, and logic. I believe economics began as "political economics" and was a way of justifying plunder using math.

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Submitted by wegerje on

I've only been following Krugman for a couple of years so there's lots that I'm sure I've missed.

MMT opened my eyes to money creationism. Since then I have been able to navigate my way around economics discussions pretty damn good in my view. Of course a lot of folks think that. But then a lot more folks don't think it, so that's progress on my part. But coming in after the start of the movie means that I sometimes don't get all the characters right. For a while I really liked Michael Hudson. I still like him. See at one time I wanted to be a Marxist. And I still have a soft spot for economists that get Marx. I mean it doesn't matter whether Marx was right or wrong about this or that. What matters is that one gets Marx. Hudson gets Marx. And in his own bumbling way so does Krugman. Deep down. Even if it's hard for him to express it. Hell it's hard for anybody to express getting Marx. So yeah that tends to put Krugman somewhere left.

For a long time I enjoyed struggling with Stirling Newberry, Struggling to follow and get him. Then I stumbled on MMT, wrote a post and a commenter said that Stirling believed that MMT ideas could be used to fund wars as easily as employment. At the time I took it as a criticism of MMT. Then I searched Newberry and found a long ramble of his that included a lot on MMT. I devoured each sentence until .... Well until Newberry turned to another topic. Well that's Newberry for you. What a tease sometimes. Ok almost all the time. Just where did Newberry end up standing on MMT?

Well I guess like Marx, Newberry gets MMT. Oh I don't know for sure whether Newberry gets Marx. Probably, but he carefully dances around Marx or at least dances around getting Marx.

But it appears to all be coming together. Krugman more and more gets MMT with this latest comment. I sure Krugman would say that MMTers are starting to get him. Whatever.

So my question for you. Examples please of some non-leftists that get MMT?

Submitted by lambert on

And he's right on MMT but also wrong. I think that the real operations of fiat money and what can be done with fiat money are two different layers of abstraction. And find me the money system that will prevent war....