Sunday, April 14, 2019

MMT, money, and opportunity costs

Often, if we want one thing, there is some other thing we can't have. Economists call this an opportunity cost. We study the things we must choose between, and how people make those choices.

I am an economist. Opportunity costs are my faith, my creed, my dogma, my mantra. I believe. TANSTAAFL!

Money is a socially constructed institution (or collection of institutions) to quantify, manage, and distribute real opportunity costs. But money is not by itself an opportunity cost; to equate money and opportunity costs is to mistake the map for the territory.

I have been reading the "surface" of Modern Monetary Theory — popularizations, blog posts, etc. — for almost all of my career as an economist-in-training. And what I like about MMT is that these theorists make clear the institutional, socially constructed role of money as a mapping of opportunity costs.

Every popularization of MMT that I have read promotes the same message, a message that disturbs my economist's faith not even a little: production is constrained by real resources, i.e. natural resources and human labor; production is not constrained by money by itself.

MMT advocates do say there are things we can have cheap, and in this, yes, they say nothing new, nothing that is not part of bog standard orthodox economics. If there are idle resources, unused factories, unemployed labor, we can put those resources to productive use give up little more than excessive unwanted leisure.

I have never heard any MMT theorist ever say that we can have anything "for free". Never. Not once. Maybe I'm wrong. I will dig into the literature and find out.

But for now, the onus of any critic of MMT, at least if they're trying to convince me personally, is to convince me that MMT advocates really do say that we can have anything for free. As yet, none have done so.

It is a much different thing to say that money by itself should not constrain a society, especially a government. Technically, orthodox economists tepidly agree, but they seem to inexorably conflate money and real opportunity costs. MMT advocates are the only people who absolutely insist on conceptually separating money and opportunity costs. Even if there is nothing else new about MMT, even if all of their economic theories fall short of figuring out precisely how to quantify, and distribute real opportunity costs, MMT is still worthwhile because the orthodox view of money has failed us. We must rethink money.

The neoliberal project to make everything subject to money and markets, even were it undertaken in good faith, has decisively failed. Whatever good it has delivered has come at the cost of economic stagnation, intolerable inequality, nascent fascism, and ecological catastrophe.

Even if MMT has found nothing new, they are at least looking. And we must look, because we cannot keep what we have now.

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