Covid shows that MMT is in the E=MC2 league.

 

Science attaches importance to ideas and equations in proportion to their simplicity and how much they explain. For example Einstein’s theory explains stuff about the orbit and planets round the Sun, plus stuff about why time runs slower for clocks on satellites orbiting the Earth than for clocks which are stationary on the surface of the Earth, and stuff about the behaviour of atoms and similar elementary particles. That’s some achievement.

Likewise, the basic rules of MMT do not need changing or adjusting or adding to in anyway so as to deal with Covid.

That is, the basic rule is that the deficit should be the maximum that is compatible with minimising unemployment while not exceeding the inflation target and not resulting in an excessive rise in interest rates.

Of course Covid has proved a bonanza for windbags with allegedly original ideas as to how to deal with Covid. But arguable that’s all a waste of time.

For example, take furloughing. That has the obvious benefit that it preserves jobs and helps some firms avoid bankruptcy. On the other hand there’s much to be said for abandoning furlough and simply sticking to the basic MMT rule set out just above.

A problem with furlough is that it tends to preserve the economy in aspic. That is, there are some big changes coming our way like an express train: first there is Brexit. Second there is global warming. And third there are quite possibly some PERMANENT changes to work practices stemming from Covid: i.e. more people working from home even if the virus is totally defeated.

That being the case, there is much to be said for letting firms which can’t make it thru Covid unassisted go the wall. After all the assets of such firms won’t vanish into thin air, nor will the skills possessed by those working for them. And that lack of assistance releases assets, skilled labour etc which can be used by firms engaged in the above mentioned new forms of employment.  

As for the UK’s “Eat out to help out” scheme, which was supposed to encourage people to go out to restaurants when Covid had allegedly been beaten in the middle of 2020, what that scheme actually did was to increase social mixing, which helped exacerbate the virus problem.