The General and the Specific in MMT

Scott Fullwiler discusses, in a recent paper, the distinction in Modern Monetary Theory (MMT) between the ‘general’ and ‘specific’ cases. Analysis of the general case concerns a sovereign currency issuer prior to the imposition of any self-imposed constraints. Analysis of specific cases will be grounded in the particular operational realities of whatever monetary system happens to be the focus of attention. In part, Fullwiler’s paper is a response to those who question the appropriateness of giving priority, in theory, to the general case rather than specific cases.

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Kalecki’s “Political Aspects of Full Employment”

In my previous post, it was mentioned in passing that although Kalecki agreed with a “solid majority” of economists that, economically, full employment could be maintained through a government spending program, he argued in his famous 1943 essay, Political Aspects of Full Employment, that political factors would prevent such a policy from being viable under capitalism. He then used this argument to explain what is now known as the ‘political business cycle’. Here, I will just focus on Kalecki’s explanations for political opposition to full employment. Although I don’t necessarily agree with his conclusions on this point, I do think he identifies genuine political obstacles that help to explain resistance to full-employment policies.

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Kalecki in Relation to MMT

I am interested in how Modern Monetary Theory (MMT) relates to other macroeconomic approaches. There are strong connections to chartalism and credit theories of money (Knapp and Mitchell-Innes); Keynes and the principle of effective demand; Lerner’s functional finance; Minsky’s analysis of financial instability; circuitist and horizontalist Post Keynesian theories of endogenous money; and Wynne Godley’s stock-flow consistent sectoral balances framework. Individual Modern Monetary Theorists also cite other influences. Bill Mitchell, for instance, emphasizes the importance of Marx and Kalecki.

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Vertical/Horizontal vs Exogenous/Endogenous

In Modern Monetary Theory (MMT), a distinction is made between ‘vertical’ and ‘horizontal’ transactions. The former refer to transactions between government and non-government; the latter to transactions within non-government. I thought it might be helpful to clarify the significance of this distinction, and also what it does and does not imply about the modern monetary system and real economy.

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