NY Times columnist economist Paul Krugman claims MMT misses some obvious economic problems. He says it really originated with Abba Lerner's Functional Finance, and writes about it here and here. MMT economist, Stephanie Kelton, responds here.
Here's what Krugman gets wrong:
"But you don’t have to be a deficit scold to suggest that progressives should be thinking about how to pay for their policies. ....some progressives appear to believe means that they don’t need to worry about how to pay for their initiatives." -- Krugman
...and he basically criticizes MMT for believing their spending wouldn't raise the specter of inflation, and higher Fed interest rates, effectively "crowding out" private investment, ignoring that shortages of goods and services are really what initiate inflation (e.g. oil in the U.S. in the '70s, or food in Zimbabwe).
1. Taxes manage demand, they do not provision the government. If they really provisioned Federal programs, where would taxpayers get the dollars they use if government doesn't spend them out into the economy first?...
Then...uncontroversially, even taxes paying for Medicare for all would cost half what we pay private insurance now.
2. Krugman also cites "Okun's Law" about unemployment, but that law does not anticipate a job guarantee (JG). which the Green New Deal proposes. Short of a JG, the current labor surplus, and downward pressure on wages will continue to dominate the employment scene.
What remains stunning is Krugman's continuing embrace of his own DSGE/pseudo-Keynesianism. Hicks himself, the inventor of IS/LM--a calculation frequently cited by Krugman--withdrew his support of that tool because, he confessed, it was *not* Keynesian. Incidentally, the "E" in DSGE signifies an assumed equilibrium...not exactly what happened in 2007-8.
Krugman's neoclassical economics' advice not only did not anticipate the Great Recession--as MMT did--it has put us in the perilous position of blessing the rentiers as the "productive" members of society--exactly the opposite of classical economics!
What is astonishing is how far pundits like Krugman will go to avoid admitting their own mistakes. They're too busy picking the mote out of MMT's eye to deal with the beam in their own.
Here's what Krugman gets wrong:
"But you don’t have to be a deficit scold to suggest that progressives should be thinking about how to pay for their policies. ....some progressives appear to believe means that they don’t need to worry about how to pay for their initiatives." -- Krugman
...and he basically criticizes MMT for believing their spending wouldn't raise the specter of inflation, and higher Fed interest rates, effectively "crowding out" private investment, ignoring that shortages of goods and services are really what initiate inflation (e.g. oil in the U.S. in the '70s, or food in Zimbabwe).
1. Taxes manage demand, they do not provision the government. If they really provisioned Federal programs, where would taxpayers get the dollars they use if government doesn't spend them out into the economy first?...
Then...uncontroversially, even taxes paying for Medicare for all would cost half what we pay private insurance now.
2. Krugman also cites "Okun's Law" about unemployment, but that law does not anticipate a job guarantee (JG). which the Green New Deal proposes. Short of a JG, the current labor surplus, and downward pressure on wages will continue to dominate the employment scene.
What remains stunning is Krugman's continuing embrace of his own DSGE/pseudo-Keynesianism. Hicks himself, the inventor of IS/LM--a calculation frequently cited by Krugman--withdrew his support of that tool because, he confessed, it was *not* Keynesian. Incidentally, the "E" in DSGE signifies an assumed equilibrium...not exactly what happened in 2007-8.
Krugman's neoclassical economics' advice not only did not anticipate the Great Recession--as MMT did--it has put us in the perilous position of blessing the rentiers as the "productive" members of society--exactly the opposite of classical economics!
What is astonishing is how far pundits like Krugman will go to avoid admitting their own mistakes. They're too busy picking the mote out of MMT's eye to deal with the beam in their own.
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