Saturday, 5 October 2013

MMTers want solutions to economic problems. Academic economists just play with models.

I’m exaggerating to make a point. But here goes….
It’s striking the number of leading advocates of Modern Monetary Theory (MMT) who are, or have been self-employed or run businesses: e.g. Warren Mosler, Mike Norman, Roger Mitchell, Neil Wilson and last and least: me.
People who run businesses are in the habit of GETTING THINGS DONE. If there’s a problem (like unemployment) they tend to want the problem “effing” solved by this time yesterday.
In contrast, for academic economists, an economic problem like unemployment is an excuse to write a paper or book designed to further their careers. There’s no urgency to solve the problem. Quite the reverse: the longer the problem remains, the more work there is for academics.
And academics welcome any additional and unimportant complexities: those complexities can be used to pad out their papers and books. The complexities can be used to make the problem they address more complex than they really are. That makes the author look technically competent. 
For people who want problems effing solved by this time yesterday, unimportant complexities get chucked out of the window.
Of course the above are caricatures. For example there are plenty of academics who are MMTers.  Plus simply running a business gives one some sort of insight into real world microeconomics, but it does not give one an insight into macroeconomics. But there’s more than a grain of truth in the above caricatures. So a basic grasp of economic theory, plus an ability or desire to run a business isn't a bad combination of skills or character attributes.

Ricardian equivalence.
One of the worst examples of academics’ love of irrelevant complexities is Ricardian equivalence. Academics love working Ricardianism into their discussions or equations.
But the EVIDENCE seems to be that the Ricardian effect is feeble or non-existent. E.g. see here or here.
But in fairness to academics, some have been screaming from the rooftops that Ricardianism is nonsense. Joseph Stiglitz said, “Ricardian equivalence is taught in every graduate school in the country. It is also sheer nonsense.” And Bill Mitchell described Ricardianism as an idea from “La-la” land.

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