The previous thread on political openness and MMT has drawn some interesting and diverse comments. Thank you to everyone who has contributed. Having seen how the thread has proceeded in numerous directions at once, it occurred to me that I should clarify what I had in mind in posting, as it may be that the way I am thinking of the topic is idiosyncratic and not what others think of as “MMT”. Reading the thread has been a curious experience for me, in that I find myself agreeing with most things being written, even though in some ways we are discussing different things.
From the outset, I want to state explicitly that if policy prescriptions such as the job guarantee or zero interest rate policy are to be considered integral to MMT, then I think MMT would undoubtedly be seen as political, and not so open. This is not the way I have been thinking of MMT, though perhaps I should have been. I am not sure.
Personally, I find it more useful to separate (at least as much as possible) the MMT understanding of the monetary system and accounting identities from the policy prescriptions and even theories that can be shown to be consistent with this understanding. Any policy or theory that did not contradict this understanding could then be considered among the possibilities conceivable within the framework.
For example, the MMT understanding of a sovereign currency issuer suggests that the aim of full employment (a political choice) might be met by government policies, of which there are alternative policy approaches, including a job guarantee or generalized deficit expenditure. Politics comes in when deciding whether we want full employment (some people may prefer unemployment along with a basic income guarantee, or simply the current system), and politics also comes in to the choice over the method of delivering full employment, if it is desired.
Lots of policies consistent with the MMT understanding of the monetary system are possible. That is not to say strong arguments cannot be made for some policies over others. For example, the leading MMTers have pointed out certain beneficial features of a job guarantee (e.g. automatic stabilization, a claimed price anchoring effect, non-competing wage). The merits of this policy option can be studied and compared with the merits of any alternative policies that are shown to be consistent with the MMT understanding of the monetary system. Ultimately, the policy selected will be influenced by political factors and the arguments and evidence provided for each alternative.
In other words, I prefer to see MMT as an open framework (basically an understanding of the monetary system and national accounting) within which – or out of which – various policy approaches could be developed and pursued. The policies, however, need to be consistent with the MMT understanding of monetary and accounting matters, and theoretical arguments for the various policy alternatives also need to be consistent with this understanding. For example, if a policy’s viability hinges on money multiplier reasoning, it is not consistent with MMT. If the argument for a policy violates the sectoral balances identity, it is not consistent with MMT, and from the MMT perspective would not be a viable policy.
I also prefer to view theory in the same way. To me, MMT seems theoretically open on many questions. In the previous thread, I gave the example of the cause of unemployment. MMT in itself indicates that unemployment occurs whenever the non-government wishes to net save more than is possible given fiscal settings. However, in itself, MMT does not explain whether non-government net saving behavior would be likely to adjust in such a way as to generate full employment, or if not, why not. To address this, it is necessary to theorize or incorporate the insights of a theory that is compatible (or at least can be made compatible) with the MMT understanding of the monetary system. Most MMTers tend to be informed by Keynes influenced theories on this question, but other approaches may also be possible.
In sum, I prefer to think of MMT as open both theoretically and politically (including policy wise). Any theory or policy that is compatible with the MMT monetary understanding can be considered a possibility within the framework. It then requires further argument and analysis (and political preferences) to determine which of the various possibilities are pursued by a particular economist (in the case of theory) and society (in the case of policy).
But maybe this is not the way most view MMT, or the way the leading MMTers prefer to conceive of the approach. I thought I should clarify my thinking, because I do not mean to suggest that MMT, if defined to include the leading MMTers’ policy prescriptions, is politically open. It is the understanding of modern monetary systems and sectoral balances analysis that I think opens up possibilities (across different theoretical approaches and the political spectrum) while disqualifying theories or policies only if they contradict that understanding.