I watched my first “Webinar” recently (which was about MMT). Never again, thankyou.
While speeches at Webinars could potentially be high quality and worth listening to, the quality at this one, which I watched before nearly dying of boredom and giving up, was not up to much.
To make a speech or the written word worthwhile, it has to be very carefully prepared. In contrast, the speeches at this Webinar were very much off the cuff.
I’ll concentrate on Ann Pettifor’s speech, though I’m not saying her speech was necessarily the worst, as (to repeat) I gave up listening after an hour (i.e. after her speech).
I’ll deal with her points in chronological order. The numbers before each point refer the approximate number of minutes and seconds after the start of her speech. Anyway, she started with a trite jibe at Modern Monetary Theory, which was to say MMT is “neither modern, nor a theory”.
Well as regards “not modern”, the answer to that is that MMTers are more than happy to acknowledge their debt to Keynes, Abba Lerner and other economists from long ago. Keynes said in the early 1930s that one way out of a recession is for the state to create and spend money. MMT says the same. Ann Pettifor actually cites John Law as someone who was clued up about money long ago, rather than Keynes or Lerner. But never mind: that doesn’t detract from my point that MMTers are happy to acknowledge their debt to economists who lived long ago. Indeed, Abba Lerner has featured at the top of this pro-MMT blog for the last ten years!
Now if there were no need to re-emphasise Keynes’s or Lerner's ideas, then Ann Pettifor would have an argument. But the reality is that large swaths of the economics profession, particularly after the 2007 bank crisis, reverted to what might be called “pre-Keynsian / “Treasury View” / household budget” thinking. Thus MMT has been quite right to re-emphasis Keynes’s insights, while of course adding a few ideas over and above those put by Keynes.
Interest.
1.30. She then complains that MMT does not explain interest, by which she means the forces that determine the rate of interest in the economy as a whole rather than the rate on government debt, which central banks can manipulate.
The flaw in that argument, and this is a mistake she makes over and over, is that MMT (gasps of amazement) does not claim to explain absolutely everything about twenty first century economies!! MMT concentrates on a relatively narrow set of problems / issues, which roughly speaking are the relationships between unemployment, inflation, government debts, central banks and deficits, plus of course there’s the Job Guarantee.
There has certainly been a big fall in the rate of interest over the last twenty years world-wide, and certainly that needs to be explained. Contrary to Ann Pettifor’s claims, the fact that MMTers do not devote much effort to trying to explain it is no weakness at all in MMT.
If Ann Pettifor went into a hospital that concentrated on brain surgery, doubtless she’d criticise it for ignoring cancer, broken bones, mumps and jaundice.
2.15. Next, she claims high interest rates are undesirable and that MMT ignores this great insight of hers. Actually most MMTers advocate a permanent or more or less permanent zero rate of interest on government debt, which will tend to keep interest rates in general down! Doh!
She’s out by 180 degrees there.
Deficits and government debts.
4.10. Then she says MMT pays too much attention to the deficit and debt, and not enough attention to the “real” economy. Well that’s just another example of the mistake referred to above. I.e. MMT does not claim to address every economic problem and issue!!
4.30. Next, she says that the deficit is a “reflection of the weakness” of a real economy. Well you don’t say! I think we’ve all worked out that deficits become necessary in recessions, i.e. when “real economies” falter.
MMT advocates deficits without limits?
5.00. Then she makes a very common straw man criticism of MMT, namely that MMTers claim deficits can rise without limit or “almost exponentially” to use her actual words.
Actually MMTers have repeated till they’re blue in the face that inflation places a limit to the size of the deficit. Maybe some MMTers have not made it sufficiently clear (for the benefit of simple souls like Ann Pettifor) that they are aware that excessive deficits can lead to inflation. In future, and speaking as an MMT supporter, I’ll admit to possibly being guilty there, and promise in future to spell out everything using mono-syllabic words and very short sentences for the benefit of Ann Pettifor and other simple souls.
The household fallacy.
5.30. Next, she claims that MMT “plays into” the household fallacy, i.e. the idea that government accounts can be compared to the accounts of a household.
Well that’s the direct opposite of the truth! MMTers have over and over and over and over again attacked the household fallacy. Moreover, expressing concern about the household fallacy is to criticise a particular set of ideas on the relationship between – wait for it - between inflation, unemployment, debts, deficits etc. Does that phrase ring a bell? It’s exactly what Ann Pettifor criticises MMT for concentrating on!!
I.e. she says one minute that getting the relationship between inflation, unemployment, deficits etc is unimportant compared to the “real economy”, then two minutes later she says it’s important to get the latter relationship right (which of course it is). Does she know whether she’s coming or going?
Incidentally this is nowhere near the first time Ann Pettifor has attacked a set of idea without having the faintest idea what the set of ideas actually consists of. She attacked Positive Money’s ideas here, without having the faintest idea what Positive Money’s ideas actually are.
6.00. Here, she says the "biggest problem" with MMT is that it considers just money and financial matters "on top of" the existing system, i.e. it does not consider the merits or otherwise of the existing system. Well that’s just repetition: she made the same point above, and the answer to the latter point is the same: MMT does not consider, and does not claim to consider every conceivable economic problem or issue.
The Green New Deal.
37.00 Another defect in MMT is apparently that it is inferior to the Green New Deal in that the GND deals with a very serious worldwide problem, namely global warming and other environmental problems.
Well the answer to that is that most MMTers are perfectly well aware of the problem that global warning etc poses. Doubtless many of them support the GND. Certainly I do. But that has nothing to do with the relationships between inflation, unemployment, debts, deficits etc that MMT concentrates on!
That is, if there were no global warming or other environmental problems, or, going the other way, if environmental problems are actually much worse than we think they are, attempts by MMTers to get the latter relationships between deficits, inflation etc right would be equally relevant.
Treasuries around the world do not consider environmental issues, except in as far as they are expected to deal with environment related spending if told to do so by their political masters. Does that mean the work that Treasuries do is no good?
Of course, the touchy, feely, brainless section of the environment lobby will be impressed by Ann Pettifor’s concern for the environment, and will fall for her false logic, namely that all considerations other than the environment, MMT in particular should therefore be pretty much ignored.
Well that’s about it. Do you blame me for almost dying or boredom and giving up listening at that stage?
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P.S. Added on 26th May. There's a video of this event now available here:
The comment system on this blog is kaput at the moment, but one commentator, Vincent Richardson, has sent me a comment by email which he would have put here himself had he been able to. It's as follows.
ReplyDeleteAt 3 and a half hours ,this was a marathon webinar. But I persevered till the end and was rewarded with an interesting frank exchange of views at the end.
What you say about Ann Pettifor is a good appraisal. She really needs to understand what she is commenting on before speaking in public about it. She thinks MMT is nothing new and so dismisses it as just the same as what we have, when it obviously is not the same as what we have, or else why would MMT economists spend so much time advocating it?
She however was not the only critical presenter on there. Kotlikoff and the two ex central bankers also expressed concerns about MMT. Personally I think MMT has something very positive to offer, my only concern is that it fails to address an Important monetary issue, that of money creation by private banks. If MMT is a “money theory” it needs to be considered. This issue was indeed brought up by the ex ECB vice president, who said that MMT did not address the problem of private banks who needed to be “tamed” and that MMT as it stands would allow banks to carry on with their reckless behaviours, because of a low interest fixation and we would thus remain with boom bust cycles. MMT does not so enough to address this moral hazard.
Vincent,
DeleteI agree it would be nice if MMT had an agreed policy on money creation: preferably the one that you and I support, i.e. that money creation by private banks should be banned. Unfortunately there's about as much disagreement on this issue in MMT circles (in as far as MMTers actually consider the issue, which is not very often) as there is among economists in general and the population in general.
Bill Mitchell (co-founder of MMT) positively hates Positive Money (pun not intended). He doesn’t give any clear reasons. As to Warren Mosler, he has definite views on how commercial banks should be run, which is not surprising given that he used to run one. However I find his idea that deposit insurance should be available for free to banks totally absurd: commercial banks should stand on their own feet and pay for all the costs they incur in my view.
In contrast to that, there’s an MMT supporter, Andrew Anderson, who supports a ban on private money creation. He often leaves comments on Mike Norman’s MMT blog saying as much.
Also, the fact that MMTers do not have an agreed position on private money creation doesn’t matter too much in that MMT works perfectly well under the existing system, where private money creation is allowed, and would work perfectly well under a “ban private money” system, i.e. full reserve banking. In fact that’s one of the beauties of MMT: it works under a variety of different scenarios.
I'm pretty sure the comment system on this blog is now working. Could easily be that the problem arose from someone hacking into this blog: I'm pretty sure my Instagram and Facebook pages have been hacked in the past. Though clearly I'm nowhere near the only person that hackers / time wasters / non-entities have tried to f*ck up.
ReplyDelete