Friday, April 19, 2019

MMT and political economy

One criticism of Modern Monetary Theory* is that raising taxes to control inflation is politically difficult. I think this criticism is correct in a sense, but it's incorrect in a more important sense.

*I am not an academic scholar of MMT. Any mistakes in descriptions and analyses here are my own and should not be attributed to scholars in the discipline.

Politics is a legitimate topic of study by economists, and it's correct to say that raising taxes is difficult given current political institutions. It follows that more abstract, technocratic, and less openly partisan monetary policy is probably a less bad choice today to control inflation. Indeed, I don't think MMT is a particularly valuable economic theory given current political institutions. Of course, I think our current political institutions are terrible. And that's where MMT has real value in my opinion: even if you don't like socialism, MMT is, I think, a better theoretical framework for a much more progressive agenda, an agenda that will require substantial change — a revolution if you like — in our political institutions.

One important aspect of MMT is that it subverts the notion that our capitalist democratic republics are built on apolitical, ahistorical economic truths. They are not. To no small extent, economics is just describes how our political economy in a particular historical social context actually works. A different political economy would work differently.

Simply adopting MMT and changing nothing else would have at best no effect and at worst fuck things up royally. We can't fight fascism with economic theories. We have to rethink and re-implement our whole political economy at a fundamental level. That's not going to be an easy fight, and it won't be economists who do the bulk of the fighting. However, I think having a set of valid progressive economic theories has substantial value, and MMT shows a lot of promise of delivering that value.

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