Writing About MMT

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The idea is to produce a smallish book on MMT. Perhaps I shall write it in German and English. I wonder whether there is a market for a bilingual presentation. What would be the point of a parallel text? I do not have a convincing answer to that question, except that I could add to my credentials as translator specialising in economics, banking, asset management and corporate finance.

I digress. The purpose of the present post is to outline the structure of the book, which will comprise three parts:

I. Presenting MMT

a) How the Economy Works Under a Fiat Money Regime

b) Policy Options

II. MMT's Challenge to Mainstream Economics

III. The Political Economy of MMT — Society, Politics and the State

ad I.

MMT is a pretty self-contained description of the modern economy under a fiat money regime. No economic theory can ever cover all aspects of an economy, neither can MMT. But it does a good job of giving us an idea how the larger aggregates of an economy work, interact and determine the performance of an economy.

The description gives rise to policy options. The transition between a) and b) is really fluent. If it is true that net financial assets can be increased by the state to jump start the economy or provide the entire population with instruments of risk-less savings, why not go for that option? The same holds true for options to modulate the business cycle, prevent inflation and ensure enduring full employment.

ad III. 

It would be somehow awkward, even negligent not to discuss these immediate implications of MMT. While strictly speaking the mechanisms of a fiat money regime do not by themselves contain any policy recommendations — and the reality of neoliberalism is that many of the potentialities of fiat money are left unconsidered or rejected (owing to conceit and lack of understanding) —, historically, MMT has been inspired by functional finance, which emphasises the duty of the state to take advantage of the mechanisms of a fiat money regime to further the public purpose.

The political nature of MMT is the subject of III. It i important because economics is to all intents and purposes embedded in a political context, and one of the drawbacks of established economics is to ignore the political environment that affects activities in the economy and the effect of economic policies on the community (which always has a pronounced political dimension to it — do we cater to investors who hate even relatively mild inflation and putting millions on dole, or do we ensure full employment accepting the socially less disruptive consequences of higher inflation?).

One way of summarising the cardinal defect of mainstream economics (ME) is by pointing out the illusion that markets as conceived of by ME and the economy built from the interaction of these markets represent an alternative to human economic (and other) interaction based on political competition and design.

No economic activity (even the mere sale of tomatoes on a farmer's market) is unaffected by political intervention (how much space is a tomato-seller granted, in which part of the market, for how many working hours, with what duties toward the operators of the market and fellow sellers and so on). The entire economy is permeated by political decisions, i. e. decisions based on reasons and forms of implementation that differ from pure trading action.

This insight is captured in the term "political economy" coined very early in the history of economics before ever more aloof abstractions began to oust a sense of reality from economic theory.

MMT encourages reflections about the effects of politics on economic activity and the repercussions of an economic regime for real people, trends in society and ultimately on politics.

We are going to see how the money regime relates to fundamental political issues such as social and individual freedom.

ad II. 

The artificial depoliticisation of economic theory which is constitutive of ME represents a significant symptom of the basic errors on which it is built. It assumes impersonal processes if only left to operate according to their logic will create optimal order in society. These process do not exist and ME is chiefly concerned with providing a narrative that seeks to establish if not the existence then at least the possibility and desirable prospect of this illusion, touting it as an economic policy objective of the highest dignity.

All the elements of a macroeconomics designed in pursuit of this illusion are figments serving the unattainable ideal of a impersonally self-regulating economy.

MMT show why an economy is not self-regulating and thereby inevitably calls into question all the cornerstones of ME.

So, at the very least, MMT lends itself to being used as a structured guide to a critical examination of ME. At the same time, it introduces money into economics (whose omission and misrepresentation in itself makes for an egregious defect in ME) and arranges the elements of its money theory in such a way as to produce a consistent view of the economy on the macro level,