Category Economics

In a recent post, “Franc Thoughts On Long-Run Fiscal Issues”, Paul Krugman has once again engaged with Modern Monetary Theory (MMT). His main argument this time concerns the difference, if any, between issuing debt when the government net spends rather…

In “What are Taxes For?”, Paul Krugman chooses to mention Modern Monetary Theory (MMT) again, though only in passing on this occasion. Krugman’s post follows recent consideration of MMT by Brad DeLong, Nick Rowe and Steve Randy Waldman. Much of…

A number of earlier posts discuss issues relating either to investment/saving or interest rates or both. Many other posts relate to fiscal or monetary policy within a modern monetary system, and these posts also often end up involving discussions of…

One argument sometimes leveled at Modern Monetary Theory that is misplaced is that it puts too much emphasis on the monetary and too little on the real. The charge is misplaced for at least two reasons. On the one hand,…

In macroeconomics, it is often useful to start from accounting identities between aggregate magnitudes. Since identities are true by definition, they offer a good way to organize concepts. However, it is important to keep in mind that identities in themselves…

In a recent post it was noted that the central bank could dictate longer interest rates if this were deemed appropriate. This deserves brief elaboration. The relevance of the observation is not that it would necessarily be a desirable policy,…

Modern Monetary Theory (MMT) indicates that unemployment corresponds to a situation in which the non-government desires to hold net financial assets to an extent that is inconsistent with full employment given the government’s fiscal settings. Demand-pull inflation corresponds to the…

Economists working in distinct paradigms have focused on different questions and applied contrasting analytical methods. The questions raised within a paradigm are often strongly influenced by the historical context in which the theoretical approach is born, including the social and…

The government deficit equals the non-government surplus, by definition. Although the relationship is straightforward, it often meets with resistance. Two possible reasons for this resistance spring to mind. One is the way the identities are usually presented in introductory textbooks…

One of the most damaging misconceptions in the public policy debate is the likening of a currency-issuing government’s fiscal capacity to a household budget. In a sovereign currency system – i.e. one in which government issues the currency, preferably allowing…