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Is Modern Monetary Theory a good idea?

by Milan_Griffes1 min read16th Apr 20199 comments

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https://www.vox.com/future-perfect/2019/4/16/18251646/modern-monetary-theory-new-moment-explained

I don't know very much about this, but it seems like MMT is getting enough cultural / political purchase that it could end up having a big impact.

Either a big positive impact or a big negative impact, depending on how sensible it is.

Does anyone with MMT expertise have a take?

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The IGM Economic Experts Panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs they assembled a panel of expert economists. They had something on Modern Monetary Theory recently:

http://www.igmchicago.org/surveys/modern-monetary-theory

Of interest might also be the comments and further links that the economists cite to backup their opinions.

It makes sense as a different way to conceptualise the government's budget constraint - limited by inflation (or the maximum sustainable level of seignorage) rather than an ability to borrow per se.

I just think analysing matters that way won't show that the government can spend a significant amount more than it does today, without higher taxes. There isn't lots of latent productive potential in the economy right now that could be unleashed, if only there were more spending. If that's correct, that makes it a much less interesting idea.

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Sumner thinks they're worryingly confused.

https://www.econlib.org/mmt-is-wrong/

I can only give a secondhand perception - from people (including economists) offhandedly discussing in blogs, social media, etc, MMT appears to be crankery that sometimes violates economic knowledge, but sometimes is so vaguely defined that it's "not even wrong".

If this is true, seeing it published under "Future Perfect" is worrying .

I didn't read the Future Perfect article as being especially supportive (though I only skimmed the middle portions). It seemed like a fairly neutral report on "something a lot of people on our side of the political spectrum care about". Did I miss a portion of the article that actually advocated for the idea?

For the record, I think it's best to ignore Future Perfect articles that don't have any obvious bearing on EA causes (unless they seem actively damaging to EA) because something like half their work fits that description and I don't think that's going to change.

I agree with Aaron, though I might be more in favor than most people of "high-quality EA Forum discussion of things that are important for how the world works but aren't obviously EA-flavored or actionable". Vox probably isn't a great source for topics, but I do think EA should be branching out increasingly into topics that don't feel EA-ish, to build up models and questions that might feed into interventions further down the road.

+1

I think monetary policy etc. has a lot of relevance to things EA cares about.

Happily it's already on Open Phil's radar: https://www.openphilanthropy.org/research/cause-reports/macroeconomic-policy

If it's crankery then it shouldn't get a fairly neutral report.