Clarification on the Nature of this Blog

Not all the views expressed in my posts remain strictly within the confines of MMT. This may have become more evident lately. This is of no importance, of course, other than to require a clarification on the purpose and viewpoint presented in the blog. This is especially so because many posts (in fact, most posts on the blog) are written explicitly as introductions to aspects of MMT. I therefore thought it worth clarifying matters so that material on this blog that sometimes veers outside of MMT (though is still intended to be compatible with it) is not interpreted as MMT or mistakenly thought to implicate the MMTers. Regular readers probably have already discerned this over the last month or so, but it might be less clear to newer readers, which is of some concern because readership, though still modest, appears to have risen sharply over the last couple of months.

It goes without saying that the originators of MMT – alphabetically Mitchell, Mosler, Wray – are the ones in a position accurately to define the approach. On their definition, I am not an MMTer. To my knowledge, there is nothing of substance in MMT that I disagree with, but there may be aspects of my own position that, when falling outside the definition of MMT, might be rejected by MMTers. Reading Randall Wray’s fascinating keynote address at a recent conference of the Centre of Full Employment and Equity (CofFEE), it is clear that he includes the specific policy prescriptions and theoretical heritage of the academic MMTers as part and parcel of MMT. This might be summarized as:

MMT = (1) an understanding of monetary operations + (2) stock-flow consistency + (3) Minsky + (4) Functional Finance + (5) Job Guarantee

I am in agreement with the MMT analysis in all these areas, although I would prefer the Job Guarantee to be combined with an unconditional basic income. But I am also interested in exploring: (i) the extent to which Marx and Kalecki can be made compatible with MMT; and (ii) the insights MMT might offer in thinking about a possible transition to a post-capitalist society.

Politically, I am left-libertarian or libertarian-communist in some sense. This has nothing to do with MMT or the views of its chief proponents. The leading MMTers want to bring corrupt bankers to account and tighten up regulations, employ functional finance, and introduce a Job Guarantee to deliver full employment with price stability. I agree with these objectives, but am interested in exploring political possibilities that go beyond them.

Needless to say, I find MMT very insightful and helpful, and will continue to draw on it and discuss it in the blog. It is the main reason for the blog’s existence, and will remain its main focus. In terms of the importance to my understanding of economic theory, I consider the key MMT insights right up there with Marx’s explanation of surplus value and the Keynesian/Kaleckian principle of effective demand. In my opinion, MMT constitutes a substantial theoretical stride forward. But the views expressed in my posts should not be taken as synonymous with MMT.

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31 thoughts on “Clarification on the Nature of this Blog

  1. Do you not want to jail a few bankers, tighten up regulations, and employ functional finance? You may want more than that, but given where we are today, it seems that MMT points in the right direction. I guess it boils down to what you want to be called, and you prefer communist. I can respect that…

  2. wow… good for youi Peter! And may I recommend that you call yourself not “communist” but “PeterCian” or something like that.

    It is helpful to me that you summarize an MMT= equation.

    I don’t think I ever saw anybody abandon MMT before.

  3. “It goes without saying that the originators of MMT – alphabetically Mitchell, Mosler, Wray – are the ones in a position accurately to define the approach. On their definition, I am not an MMTer.”

    I’d be very curious to hear how Mitchell and Wray would respond to that. It seems to me they are very conscientious in distinguishing between the descriptive portion (1) and (2) from the prescriptive/ideological portion (3)…

    As you demonstrated in your recent posts, once flat-earther monetary thinking is abandoned there are no limits to the political arrangements that can be sustained atop a state money system. (3) … can be just about any conceivable form of government or ideology.

    Having read quite a bit of JKH’s arguments, his differences seem to stem mostly from where he places his emphasis in the hierarchy of monetary authority. He gets down in the weeds, focusing on specific US fed and treasury institutional and legal arrangements.

    MMT descriptions tend to abstract those institutions and their arrangements as provisional, emphasizing the sovereign government as the principal actor. Where the government sits in the hierarchy of monetary authority being the most important consideration, not so much the particulars of how it delegates the authority it has.

    This leads to a bit of talking past each other sometimes but I can’t recall seeing any conflicts that couldn’t be reconciled in terms of scope.

  4. As I recently said on a facebook comment (assuming I’m not repeating myself here) – rightly or wrongly, I attribute anyone that has an understand modern monetary operations correctly with Neochartalism (MMT).

  5. Don’t get the wrong idea, guys. There is nothing of substance in MMT that I disagree with, as far as it goes. I just don’t want to be tied to it or risk harming the credibility of MMT by implicating it if my arguments go outside MMT but are interpreted as remaining inside it by learners or critics of MMT. In other words, I don’t want where my thoughts take me to impact negatively on perceptions of MMT.

    geerussell: Thanks for your insight. I would stand corrected, of course, if one of the academic MMTers disagreed with my interpretation of their definition. My interpretation is based on the keynote address by Wray and the twofold definition (descriptive/prescriptive) by Fullwiler.

  6. Detroit Dan wrote:

    Do you not want to jail a few bankers, tighten up regulations, and employ functional finance? You may want more than that, but given where we are today, it seems that MMT points in the right direction.

    This is peripheral to the point of the post, and the following has no bearing on the validity of MMT, but since you ask, no, I do not particularly want to send anyone to jail. That is not to say that, given we have jails and some people are sent there that some bankers should not be the ones singled out. But jailing bankers is not a solution to much at all. It is just a hot button issue that some people choose to exploit in an effort to get the public on side.

    I am not in favor of scapegoating, even if the goat is not so innocent. In my opinion, the rest of us are not all just innocent victims in all that has happened. We are responsible too. Many people voted for the types of policies introduced during the neo-liberal period, and those of us who opposed them were not sufficiently effective in our efforts to prevent them. I am not interested in taking out our woes on a few individuals, or trying to make it “personal”. The problems are systemic.

    Regarding regulation and functional finance, I think it is clear from what I have written that I agree that such policies can enable capitalism to work better if judged on its own terms. That does not mean I agree with putting my political efforts behind supporting that course of action. In my opinion, if we put in a new New Deal, but in essentially the same system of wage labor we have now and still driven by the logic of capital, things will be a bit more tolerable for a while, and then the general community will begin to get complacent while the capitalist class remains vigilant. A couple of decades from now, capitalists will still be pushing as hard as they can to eradicate the new New Deal, and everyone else will be starting to forget why the new New Deal was introduced in the first place. Many in the middle will be feeling safe and cosy, and see no reason to care about the plight of those lower down the income scale, because the current system encourages and reinforces selfish behavior. Many of those who do care will feel powerless to have any impact, because the current system produces feelings of helplessness. Safety nets will be removed, regulations relaxed, etc. Do we really need to repeat the last eighty years? Personally, I am not going to put my energies into that.

  7. Good point regarding the jailing of bankers.

    You make a good case for fundamental change. But it’s uncharted waters. I feel better about MMT in that there is a fundamental change in mindset involved, but the practical change can be more gradual and therefore less violent…

  8. I very much agree about the change in mindset made possible by an understanding of MMT. That is what most motivated me to get involved in trying to spread the word in whatever small way I could. The understanding is liberating. And with an open mind, the basic insight is easily understood. (As opposed to following a discussion of the finer points of monetary operations between Scott Fullwiler, JKH and Ramanan. :-))

    I also agree about the potential for non-violent change, quite possibly in steps. At least, that has been the point I have been exploring in some of my recent posts on the social “possibilities” of fiat money.

  9. I agree with Senexx. A thorough understanding of the operational aspects of the monetary system including stock-flow consistency and accurate accounting is “MMT” to me. The policy prescriptions and politics can come after the mechanics of the system are understood.

    This view may be a bastardization of the pure “MMT” school of thought as conceptualized by the founders but, IMHO, it is the only qualification that need be understood to qualify as an “MMTer”. Maybe this is incorrect and we should not be co-opting the term “MMT” to describe the operational mechanics alone but I think the term has already taken hold in the blogosphere and changing terminology now would just lead to greater confusion. Unfortunately, I think the founding fathers of “MMT” will just have to tolerate the emergence of many mongrel offspring that bear the family name.

  10. Excellent post Peter, and outside of me *leaving* MMT I am in full agreement.

    I cant leave MMT, its just become my new paradigm for understanding our economic world. I cant leave MMT anymore than I could leave my framework for understanding cardiovascular physiology which I use each day.

    Without MMT I wouldnt be able to shake my head and tsk when I hear one of the surgeons at work complain about us borrowing money from China to pay for our war in Iraq.

    Without MMT I wouldnt be able to confidently ask one of my right wing colleagues to explicitly describe how he would introduce a gold standard in the his country after secession and then sit there waiting what seemed like an hour as he couldnt even answer my first question 1) How will you acquire all the gold youll need to “back” your currency?

    Without MMT I would have to sit silently knowing that it didnt sound right but not being exactly sure how to attack his argument when another right wing colleague who is giving his investment advice to everyone says ” Just stay in cash baby, CASH IS KING . You dont want to be anywhere near the stock market when the dollar hyperinflates out of existence” I was able to say “So your telling us all to convert to cash which will be essentially worthless in your scenario!? I think you need to stick to perfusion and not investment advice”

    MMT is a big place with lots of idea space but it is based on avoiding stupid phraseology like “borrowing money form China” or “keeping cash so youll be ok when the dollar hyperinflates out of existence” or ” converting back to a gold standard is what we need to do”. You have to understand what money is in a modern economy before one can understand how to fix problems when the accounting of our monetary aggregates makes us nervous.

    Thanks to MMT I now know that it is better to be an importer than an exporter (but I also understand that it is foolish to prescribe that EVERYONE be an importer). I now know that if I think that every American should save more our govt will necessarily run a deficit to meet that desire ….. and that is fine… it is what I want. I now know that banks are not intermediaries between savers and borrowers but instead they create their own money, with the backing of the govt, I now know that bond vigilantes need the govts money not the other way around.

    Theres lots more Ive learned but I will stop there for now.

  11. I would like to add to Peters point about the jailing of bankers as well. I completely concur that if I had by druthers, jailing would be a far less common practice. I view this much the same way as I view “taxing the rich”. I dont think taxing the rich solves our problems because our problems stem from not applying the proper principles in the management of a fiat currency. But given the political realities and the paradigm our society chooses to use…… I am in favor of taxing the rich. If we are going to insist that balancing the budget is a priority then we must tax the rich more. I will continue to argue that balancing the budget is s stupid goal.

    Given the realities of our society, where we jail people for fraudulently collecting UI benefits, we need to jail a few banksters.

    Peter,

    Have you ever seen this site?

    http://thdrussell.blogspot.com/

    His writing reminds me of yours in a lot of ways. I think you would enjoy reading him. Toby (the author of that site) is a big fan of this guy as well

    http://ascentofhumanity.com/

    Ascent of Humanity is a fascinating book that explores a post monetary economy world. This is your kind of stuff

  12. Hi PeterC, thanks for some very interesting posts on the MMT politics boundary issue. I have a couple of questions.

    1. What, in your view makes you “a Communist, in some sense . . . “?

    2. “and the following has no bearing on the validity of MMT, but since you ask, no, I do not particularly want to send anyone to jail. That is not to say that, given we have jails and some people are sent there that some bankers should not be the ones singled out. But jailing bankers is not a solution to much at all. It is just a hot button issue that some people choose to exploit in an effort to get the public on side.”

    I don’t think the issue is “jailing banksters” or politicians, or fraudsters, like AIG Executives. It’s the larger issues of restoring the rule of law and renewing justice in the land. I don’t think a society can endure without justice. Do you?

    I know we can’t have perfect justice; but the control frauds are outstanding events in the history of infamy. If the perps escape without punishment people will continue to believe that justice and fairness don’t exist in America. We can’t have that and have democracy too. 100,000 banksters, politicians and fraudsters may have to go to jail make society’s air clean again. We really need to get on with that very big job.

  13. Great comment, Greg. You really expanded on an important point, that MMT is of great, even vital use to the layman. Those of us who aren’t economists, policy makers or political theorists still need a reality-based framework in which to evaluate claims.

    MMT provides that framework. The various bloggers and commenters who have done the heavy lifting to present this information, to illustrate how it applies to the issues of the day and patiently help new people work through MMT’s basics are doing a tremendous public service.

    On the aside of jailing bankers, I’m with Joe Firestone. Control frauds undermine the system and can’t be allowed to fester. William K. Black lays out a very meticulous and thorough case of why this can and really must be done.

  14. Of course gaoling the bankers is to get the public on side but as Joe says, of course, it is to ensure the rule of law is followed (actually a rather conservative view in this country – that) but how often do white collar criminals get away with a fine, a slap on the wrist for having to part with a bit of chump change.

    That said John Quiggin seems sympathetic to your viewpoint referencing the lack of indictments over the Dot Com bubble.

  15. Joe, thanks for your thoughts. I consider myself communist in the sense that my conception of the ideal society is perhaps best described as communistic. Here is an earlier attempt I made to sketch out what I have in mind (the excerpt comes from this post):

    I’m sure everybody has their own pet notion of the ideal society. Mine goes something like this. The means of production should be owned in common and production planned to ensure everyone in the world is well fed, housed, educated, and supplied with appropriate care (including healthcare, childcare, old-aged care, etc.) as well as public communications, information, and recreational facilities. Environmental sustainability should be a central consideration in how production, transportation, and consumption items are designed. As much as possible, and increasingly over time, the menial aspects of the production processes involved in meeting these basic physical needs should be automated, freeing up individuals to focus on vocations of their own choosing, whether physical, nature-oriented, sporting, intellectual, scientific, artistic, social, spiritual, or whatever, as long as the chosen activities don’t infringe on the liberty of others or cause unacceptable harm to the environment. These vocations would be reward in themselves and not require material compensation. For instance, in this ideal society, scientists would work for the pleasure of the job and receive the same basic amenities as everybody else. Their minimum labor-time commitment could, however, be met through their research activities. Similarly, the recordings of musicians or the books of authors would be made freely available (e.g. though free internet download), but the facilities for producing the recordings or books would be made available free of charge to suitably qualified individuals (perhaps on the basis of proficiency, popularity of output, or some combination). There would also be facilities provided for dabblers in the various vocations, but not necessarily to the extent made available to the experts in the respective fields where cost in terms of resources remained a constraint. Even so, over time, technological improvements would tend to increase availability of desired facilities.

    I take your point about accountability being necessary to underpin society’s confidence in democracy. I certainly did not mean to minimize all the hard work being done to bring those who have behaved fraudulently to account.

  16. Nice answer, PeterC, but what do you mean by “the means of production” in this statement:

    “The means of production should be owned in common and production planned to ensure everyone in the world is well fed, housed, educated, and supplied with appropriate care (including healthcare, childcare, old-aged care, etc.) as well as public communications, information, and recreational facilities.”

    Also, based on your answer, I think I can infer that you’re not a Marxist-Leninist, are you?

  17. By “means of production” I mean the main equipment and plant, infrastructure, and natural resources.

    You are right, I am not Marxist-Leninist. I am not exactly sure how to define myself. Maybe something like “left-libertarian-communist”? But left-libertarians and communists might both object to my position. So, I don’t know.

  18. Peter C. In the traditional economic classification there was a three-way classification, Land, Labor, and Capital. Natural Resources came under the heading of Land because they were not human-made, Labor referred to the efforts of people. Capital was produced by humans from Labor and Land, to produce valued outcomes. It did include plant, equipment, and “infrastructure” depending on how we define that, and it was the stuff that produced things valued by human beings.

    One problem, however: it’s pretty clear that this classification is antiquated due to the development of service economies and still later knowledge/technology-based economies. There’s a tendency among theoreticians today to call everything that gets used in producing outcomes we value, as “capital.” So we get discussions about “knowledge capital,” “human capital,” “intellectual capital.” That tendency certainly makes the notion of “capital” useless relative to classical theories using the idea because it completely changes the meaning of “capital” in those theories. But, an even more important point is that the tendency reflects the reality that the “means of production” of the various things we value now is much more diverse than it was in the 18th and 19th centuries. What we’d have to hold in common now is not only factories, equipment, and infrastructure, but also processes and methods of all kinds as well as ideas. In other words, where does the idea of man-made instruments for producing value end and ourselves begin. The distinction between labor and capital seems increasingly fuzzy as we progress.

    But that’s not the only problem, when we talk about “owning the means of production in common, ” what does that really mean? That all of us have an equal share in anything any person makes that can be used to add value for society? And if so, then what does having an “equal share” mean for having a right to nominal financial resources issued by the system? And even more importantly what does “ownership” mean for CONTROLLING “means of production?” That is, who will make the planning decisions, and how will these decisions be made? isn’t this the rock on which previous efforts at Communism foundered? Legally, all the important things were owned in common, except, of course, for decision making authority, which turned out to be the only important thing in the end. So the question here is does establishing a system in which everyone holds things in common, prevent a few from controlling the system and getting effective control over the outcomes it has to offer. Can a framework for formulating a plan using the all the current means of production possibly be formulated. is it within our capacity to do that?

    Third, even if all the above could be overcome, would such a plan have any validity at all since it would have to postulate incredibly complex causal connections among millions of factors affecting economic interaction? In addition, is the economic system even deterministic, so that we can postulate causal connections that will inform a predictive plan if we perform the various actions outlined in such a plan? What, if, as people nowadays seem to believe it is not a mechanism at all but a complex adaptive system in which new collective outcomes are emerging all the time in unpredictable ways? How will one do the kind of planning you seem to be calling for when the macro-economic system is continuously adapting to new emergent conditions?

    Finally, is the conceptual framework of “communism” and the idea of “common ownership of the means of production” a broad enough paradigm to encompass 21st century reality. A friend and previous frequent co-author of mine, Mark McElroy, offers the following classification of types of capital in his new book Corporate Sustainability Management:

    — Capital: stocks of resources that humans use to produce valuable goods and services

    Natural Capital

    — Human-created (or Anthro) Capital

    — Human capital

    — Social Capital

    — Constructed Capital

    Only constructed capital, the world of material objects and physical systems humans use to make other things corresponds to the traditional use of the term “capital.” The other three categories of capital don’t correspond to traditional uses and traditional theories in economics.

    So, my question is” what is the relevance of the traditional term “communism” to new frameworks for looking at the “means of production” like this one?

    Not to put too fine a point on all this, but don’t you think it’s about time we used new conceptual frameworks to see reality with rather than ideas and frameworks developed for use in the 18th and 19th centuries?

  19. Joe, interesting comments. Thanks.

    I certainly include technology, ideas, etc., in what can be owned in common. Actually, it might be preferable to think in terms of stewardship rather than ownership. In my opinion, technology and ideas are among the most important resources to “own” in common, because then everyone has access to society’s accumulated knowledge from which to attempt to bring about further knowledge and progress. As simple examples, I see no reason why any book ever written and any piece of music ever recorded couldn’t be made freely available online.

    However, I am not trying to draw some hard dividing line between private and public ownership. This can be determined democratically with a view to liberty of individuals. I am not referring to an elimination of all possessions or the removal of privacy of thought, etc. If somebody wants to keep a secret breakthrough to themselves, that would be up to them, but I would not favor allowing them to protect future material gains from that breakthrough by way of intellectual property rights, etc.

    Others are free to come up with a new term for their idealized future society. Personally, I find communism a sufficient term for the kind of society I have in mind (as briefly described in my earlier comment), but if a better term were proposed, I would be happy to adopt it. The type of society I have in mind is not a social system that can be feasible, in reality, until people reach a point where they want to act cooperatively of their own volition to a large extent. That is why my recent posts are concerned with the path from here to there. I am considering whether fiat money provides a potential to move toward a more socialistic society, which could be quite similar to Marx’s “lower form” of communism, but formally different in that there would still be fiat money. The conceived path need not be tied to nineteenth or twentieth century conceptions. Similarly, the conception of communism changes over time.

    For others who may disagree with a significant degree of common ownership (or stewardship) of nature, plant, equipment and technology, they may want society to progress to something other than communism. That’s fine. That better society they have in mind can have a different name. One of the main points I take from the MMT understanding of the monetary system is that fiat money opens up paths to all kinds of different societies.

    I should clarify that I am not necessarily talking about centralized decision making, even in any move to fiat money socialism prior to higher form communism. Some decisions may be centralized, others highly decentralized. It may be that most decisions are made at the local level, democratically by the local community. Centralized decision making would be necessary, but much could be delegated to the local communities. For example, the currency issuer would be the only entity in a position to make appropriate fiscal transfers for that currency region, whether it is the world as a whole or a much smaller geographical (?) area.

  20. Clonal, thanks for the links. By coincidence I recently followed a link to the interesting book by Eisenstein and have started to read it. (Maybe you provided the link elsewhere and I clicked on it. I can’t remember.) Cheers.

  21. Peter,

    You might also find Eisenstein’s essay A Circle of Gifts interesting.

    Wherever I go and ask people what is missing from their lives, the most common answer (if they are not impoverished or seriously ill) is “community.” What happened to community, and why don’t we have it any more? There are many reasons – the layout of suburbia, the disappearance of public space, the automobile and the television, the high mobility of people and jobs – and, if you trace the “why’s” a few levels down, they all implicate the money system.

    More directly posed: community is nearly impossible in a highly monetized society like our own.
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  22. PeterC, Nice reply to my comment. But I don’t think you really answered my questions about: planning and complex adaptive systems; ownership vs. control, and whether we don’t need broader conceptual frameworks to deal with different kinds of resources, and whether all such resources are “means of production”, that should be owned in common, in your view.

    I’m not raising these questions to be difficult, but rather to point out that the use of old terms like “communism” and “means of production, and may add nothing to our understanding of current reality, while they at the same time they create a barrier to communicating what we’re really talking about.

    In saying this I’m not holding a brief for private ownership, or capitalism, or the so-called free market system. In fact, I don’t think those terms are very descriptive of current realities either. I think we need new categories, networks, and paradigms that aren’t tied to our traditional disciplines, so that we can get by the inevitable framings that are associated with the old categories.

  23. You could be right, Joe. I am certainly open to the development of new terminology and categories as appropriate.

    By the same token, simply changing terms because the current one has become a “dirty word” in the eyes of many may just create a new dirty word. I think on the left we have achieved this in the past by successively making “socialist”, then “liberal”, then “progressive” dirty words in the eyes of our political opponents.

    But I take the point that presentation of ideas is important if we want people to consider them with an open mind. I will give the matter some thought and perhaps try to re-frame my future posts.

    Regarding your question about ownership versus control, my own view is that ownership matters, not just control, and that certain patterns of ownership will require different methods of control than others. If the accumulated knowledge and technology of society is the private property of relatively few individuals or private-sector organizations, that suggests a largely undemocratic employment of that accumulated knowledge on the basis of private rather than social assessments of costs and benefits. Methods of control will then tend to be defensive, such as regulations, and taxes and subsidies to induce certain behavior from the owners of society’s knowledge, etc. If, instead, the sum knowledge is treated as a free public good, not only are all individuals free to make whatever (legal) use of it they can (in every sense, including economically) but it opens the way for directly democratic determination of any large investments of society-wide significance.

    In some ways, I think this is also relevant to your other question about planning and complex adaptive systems. Some things are staples. We need shelter, good healthy foods, clean drinking water, education, health care, etc., whatever the future holds. Other desires beyond basic needs are open to dramatic change, shifts, fluctuations, and even occasional reversals, over time. To facilitate this dynamism, we need flexible arrangements that enable a great deal of freedom of action and thought within the overall institutional framework. The flexibility and dynamism relates back also to the staples. To take one very simple example, yes we always need good healthy foods, but the nature of these foods, the way they are produced, and the way they are made available and consumed can change over time. We want to be open to new influences in what and how we eat.

    I think one key to enabling flexibility and dynamism is to free up space at the local level for considerable variability in individual and group behavior. Experiences at this level can then react back on decision-making at the central level, as well as providing information for other localities, as new ways of doing things are learned and found to be effective. In this way, the central democratic decision making not only shapes local and individual environments but can be sensitive to evolving needs at these levels, enabling institutional evolution at all levels over time to changing needs and concerns.

    Exactly how this might be done is not clear to me at this stage. But I think it should be possible to devise an institutional structure in which some decisions of society-wide importance are made centrally (e.g. protections of individual rights, wide-scale investments, fiscal transfers); a substantial degree of autonomy is left to local communities (or categories within society) to decide how they wish to operate within this framework (e.g. small business based? co-operatives? communes? some combination?); and in which there is also as much scope as possible for individuals to pursue their own interests (safeguarded both at the central and local level) and influence wider society through their creativity and global connectedness with others.

    I should reiterate that I am kind of stretching in these latest threads. I don’t mean to pretend that there is any authority to my thinking on these matters. I greatly appreciate the ideas and arguments being expressed in response.

  24. On the nature of MMT, your assertions now seem correct given what I have recently read of Bill and Randy, however for the lack of better words I would say there is a factional split in MMT.

    Bill & Randy on the Left with what you’ve described in your post & Warren on the Right who does not see a JG as integral to MMT but is supportive of the principle as a policy prescription.

  25. peterc,

    For the record, here’s a comment I left elsewhere. It probably fits better here, as it concerns certain dimensional aspects that are in addition to what we discussed previously regarding the logical structure of MMT:

    …………….

    “I often get the view expressed in E-mails etc that the JG is all very nice but peripheral to the deep financial and monetary insights that MMT provides and should be culled from the writings or de-emphasised”

    This may reflect differences in framing, with different perceptions of symmetry/asymmetry.

    That view as quoted above sees JG as peripheral, in the sense that a JG policy prescription is peripheral or logically dependent on understanding the nature of the monetary system and its possibilities. One might be tempted to think of the JG proposal as a “distraction”, in the sense that it is not an inherent feature of existing fiat monetary operations. It means brand new policy architecture in most cases.

    By contrast, your perspective as an MMT creator is that the JG is central to MMT, based on the analytical generality of the buffer stock idea. The buffer stock idea seems entirely symmetric with respect to its position within the complete set of ways that government can affect aggregate demand through monopoly pricing power. This seems like a pretty powerful idea that deserves to be central in MMT analysis.

    So an outside interpreter of MMT may grapple between these two perspectives on symmetry, within the overall MMT logical structure.

    There’s a kind of matrix at work here. Along the dimension of understanding monetary operations, there’s mainstream versus MMT. Along the dimension of policy prescription, there’s status quo versus MTM policy options.

    That final aspect of “MMT policy options” introduces yet a further complication of asymmetry. As far as I can tell, the JG proposal, or some variation of it, is pretty much standard across the MMT “early writers”. This seems to be a reflection of the profound penetration of the buffer stock idea in MMT thinking, and the importance of full employment as a general policy aim. That seems very central indeed, as per the post. On the other hand, there are a number of other proposals that are not so standard in the same way – zero interest rates and no bonds among them. As far as I can tell, MMT leaders don’t all insist on a zero interest rate policy or no bonds as required policy objectives, but I believe they do adhere to JG or some variation of it. This difference in policy optionality, although based on the same type of monetary analysis, may make the JG further stand out as a potential “distraction” for those who focus more on the correct and basic understanding of monetary operations as per MMT.

    I think some of these nuances could be reasons why outsiders find it challenging to get their arms around, and reflect accurately, what MMT is saying in full.

    http://bilbo.economicoutlook.net/blog/?p=17528&cpage=1#comment-22266

  26. PeterC, Very good discussion of my last reply.

    I very much agree with what you’ve said above about complex adaptive systems and the need for variety and variability in them. Also, knowledge sharing, transparency, and inclusiveness are very important in open and adaptive societies and organizations. I’ve written about that in other contexts in previous blog series here: http://bit.ly/uij5Ru

    here: http://bit.ly/rpIZC3 here:

    http://bit.ly/twTfoG

    and here:

    http://bit.ly/tARoq4

    Regarding your question about ownership versus control, my own view is that ownership matters, not just control, and that certain patterns of ownership will require different methods of control than others. If the accumulated knowledge and technology of society is the private property of relatively few individuals or private-sector organizations, that suggests a largely undemocratic employment of that accumulated knowledge on the basis of private rather than social assessments of costs and benefits. Methods of control will then tend to be defensive, such as regulations, and taxes and subsidies to induce certain behavior from the owners of society’s knowledge, etc. If, instead, the sum knowledge is treated as a free public good, not only are all individuals free to make whatever (legal) use of it they can (in every sense, including economically) but it opens the way for directly democratic determination of any large investments of society-wide significance.

    I agree with this in the large, but will comment on it further.

    First, ownership has proven ineffective as a means of control in large corporations. It is a long sad story that management, which frequently owns a very small share of stock is nevertheless able to run large public corporations in its interest and in an increasingly oligarchical mode. Few enterprises are open enterprises, especially large ones.

    That’s not to say that ownership doesn’t matter, but it’s also true that it matters very much in some contexts and not so much in others, and I think that whether ownership of organizations should be public or private needs to be evaluated on a case-by-case basis, and ought to very much depend on whether an organization competes in a truly free market, or whether it has accumulated extreme market power. When it’s done the latter, I think there’s no further justification for private ownership.

    Second, ownership of intellectual property is very two-faced in its implications. It is a means for large powerful organizations to restrict competition and extract huge financial gains. On the other hand, if intellectual property were held in common, the same large organizations would use their current financial positions to seize on new inventions and then use their size to monopolize the financial gains they bring.

    So, it seems clear to me that before we pass laws that hold intellectual property in common, we first have to equalize power relations between organizations and individuals, so that people who create new inventions are rewarded for the inventions.

    I’m not advocating for extreme rewards here such as the ones we allow and celebrate now. There’s no way I think that people like Bill Gates, Steve Jobs, Zuckerberg, and celebrity performers of various kinds “deserve” the financial rewards they’ve been able to accumulate. But people who invent outcomes delivering high value do deserve extraordinary rewards, both financial and of other types for what they’ve added to human culture.

    Finally, on “dirty words.” I’m really not much for avoiding them. I think that “liberals” here did us all a great disservice by running away from their labeling. They should have fought hard for it during the 1970s. If they had the political system would be very different today. I also have no problem with “socialism.” In relation to “communism” though, I think the label is just too closely associated with Marxist-Leninist and Maoist totalitarianism, and I also think the conceptual frames associated with the term are pretty intellectually bankrupt.

    “Class” and “Class Consciousness” in the Marxian sense, were never very coherent concepts even in the 19th century. By the middle of the 20th century, the idea of Marxian classes just wasn’t applicable to reality. Even today when we talk about “class warfare” we’re talking about conflicts between the 1% and the 99%, which right now aren’t really classes in the Marxian sense of the term, but just statistical aggregates. If we don’t change things pretty fast, we may, indeed find class or caste hierarchies hardening within a few generations, but right now I think we’re talking primarily about ruling elites and others and that the categories we use are more akin to Aristotle’s than they are to Marx’s.

    I could go on with other Marxian concepts and argue that they too, aren’t very relevant in our present conditions, but my point here is that if the conceptual frameworks and theories of Marx and Lenin really don’t apply to our present circumstances, then why label oneself with a term that immediately evokes those conceptual frameworks and theories. It makes sense to me to get a completely new term and forget about the old one

    Anyway, thanks for a very good discussion.

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