MMT as Public Policy

First The Economist, now CNBC.  CNBC’s Senior Editor John Carney has put together a series of posts on Modern Monetary Theory at his blog.  One of Carney’s objections to MMT is this:

…my biggest point of departure with the MMTers is they display a political and economic naivete when it comes to the effects of government spending. When they talk about spending it is almost always in terms of abstract aggregates, which is weird for a school of economics so focused on the specifics of monetary operations. What this means is that they miss the distortions of crony capitalism the accompanies so much government spending.

I’m not sure this is a problem for MMT in particular, but you might put the point a little differently.  Fully MMT-inspired public policy would require a particular set of political and policy-making institutions.  If inflation is going to be fought through raising taxes, for example, we will need a policy-making process that is able to pull this off, and with the right timing.

But having said that, after observing the process since the outbreak of the Great Recession it’s pretty clear that we don’t even have the right policy apparatus for carrying out conventional aggregate demand management.  Having a robust set of automatic stabilizers in place during the crisis would have been far more preferable to forming fiscal policy according to the whims of Susan Collins and Olympia Snowe (or catering to Congress’ anxiety about a thirteenth digit).

Carney’s latest entries:

Monetary Theory, Crony Capitalism and the Tea Party

Modern Monetary Theory and Austrian Economics

Can the Government Guarantee Everyone a Job?

MMT Monetary Theory vs. Austrian Monetary Theory

The Trouble with a Job Guarantee

The Wall Street Firm That Uses Modern Monetary Theory