HN Books @HNBooksMonth

If you want actual Macroeconomics rather than the myths from this article try

https://www.amazon.com/Macroeconomics-William-Mitchell/dp/11...

⬐ huitzitziltzin

This is not a good recommendation. Wray and the MMT school have a bizarre set of views which are wildly outside the mainstream of macroeconomic thinking.

Moreover, when serious macroeconomists have tried to engage with MMT on its own terms (which they do!) the MMT people always get evasive and vague in response to the very simple question: “why didn’t your monetary ideas work for Venezuela/Zimbabwe/Weimar Germany?”

There are much better textbooks available. Wolfers/Stephenson is a recent one I’ve thought about using in class.

⬐ specialist

I think this dismissal is unfair.

As someone who is the furthest from being an economist...

The conceptual difference between Keynesian and MMT comes down to:

- How much relative emphasis is placed on federal deficits vs interest rates wrt inflation. Keynesians don't decouple deficits and interest rates.

- Emphasis on monetarian vs fiscal management. MMTs focus on fiscal. Keynesians straddle the two. (Chicago/Austrian schoolers focus on monetarian.)

Said another way, the MMTs are simply pointing out that with 2008 and the aftermath, Keynesian models and predictions were not correct wrt to QE and inflation, and so are floating alternative theories, primarily explicitly adding interest rates to the models.

⬐ neilwilson

"“why didn’t your monetary ideas work for Venezuela/Zimbabwe/Weimar Germany?”"

What a bizarre response. They weren't even attempted there as the literature shows.

https://gimms.org.uk/2020/11/14/weimar-republic-hyperinflati...

Presumably you also believe heavier than air flight is theoretically impossible because bad pilots crash planes.

⬐ huitzitziltzin

The MMT claim, as far as any normal economist understands it, is that the government can print money indefinitely to pay for whatever it wants, because of a somewhat counterintuitive claim about the government being able to insist that people pay taxes in the currency it designates.

As I said, it's really hard to get MMT people to sit down and describe exactly what they are claiming, b/c they have to face up to these counterexamples. Like: "why couldn't Venezuela print money indefinitely to pay for what it wants?"

To which the MMT response is some version of: "Well, I didn't mean that!"

Well ok - WHAT did you mean? They are always slippery and evasive (at best) about what they do mean. They do not engage with conventional macroeconomists for the most part. And that's not because conventional macroeconomists don't try to engage with them! If it were possible to do what they propose, that would be amazing! You would have wide agreement on that within the profession.

I share many of their political goals - I'm on the left too. But I don't see how it is remotely possible to achieve the goals they propose in the manner they suggest.

⬐ notahacker

tbf MMT does have an explanation for Venezuela, Zimbabwe and the Weimar Republic (supply constraints). This isn't by itself implausible, but their overall inflation model is very handwavy. I can buy "job guarantee could act as an endogenous stabiliser if the proportion funded by new currency issue is calibrated correctly" but not "the existence of a buffer stock of labour compensated by a JG means that we don't need to consider printing less or making credit more expensive as if prices rise firms could always hire from this pool" which seems to be the preferred version

But yes, they seem to be preferring to talk past rather than engage with mainstream macroeconomists. The sheer rhetorical effort they devote to convincing their readers the money multiplier is the wrong foundation that underpins all modern macro and not a simple pedagogic device for explaining how leverage works and why deposit insurance became a thing....

⬐ RobertoG

The money multiplier model brings to mind a comment, in a Terry Pratchett book, where one of the characters says something like "everybody knows what the wind is, the wind is what happens when the trees move their branches".

If you have a model that have the components right but the causality going in total opposite direction, I think is kind of fair to criticize its pedagogic value.

⬐ notahacker

But all it does is say "this is how a banking system can create n dollars from x dollars". It's also historically correct: banks created leverage from a fixed currency supply exactly as described before the endogenous money era, and the whole reason endogenous money exists is because the government decided that facilitating this money creation with their own was better than bank runs and wildly fluctuating lending rates.

The week after, students learn about money markets, credit and money demand as liquidity preference.

And MMTers aren't saying "the second week of undergrad teaching could be improved by refining this model", they're saying "mainstream economics is built on this foundation that only we are clever enough to know isn't true".

Props for the Pratchett quote though. Sounds like something Detritus would have said. :)

⬐ RobertoG

The reason MMTers (and I'm not a religious man, but I suppose that, in a way I have been converted) have to fight the Money Multiplier thing is because of this conversation:

MMTer: Public debt can be monetized, inflation is created by spending (public or otherwise) not by more reserves, central banks can control the interest rate independently of the quantity of reserves in the system.

Anti-MMTer: Wait, if you add reserves to the system, banks can lend more! That's inflationary!

MMTer: Banks can lend always anyway if makes business sense. Their only limit is the capital requirements of every particular bank. If lending makes business sense, banks can find the legally required reserves, they are not constrained by reserves.

Anti-MMTer: But the Money Multiplier!

MMTer: Facepalm

I wish I could remember in what book was the Terry Pratchett quote. It's a great quote.

⬐ notahacker

I can't think of a single macroeconomist that would say "but the money multiplier" though. This is a straw man invented by MMTers to avoid debate.

Literally every single central bank's policies are designed and implemented by mainstream macroeconomists, as were the capital requirements. "Banks can lend always anyway if it makes business sense" is the system mainstream macro built. Of course, mainstream economists also consider the "if it makes business sense" bit (and to a degree the "capital requirements" bit) matters, and have models observing that the flow of money actually injected into the economy at a given interest rate being finite and relatively predictable, and they can make it go up or down in different circumstances by changing that interest rate. They also (since the 80s, at least) have a sophisticated enough grasp of inflation to figure that how the dollars are injected into the economy matters rather a lot.

⬐ RobertoG

>"The MMT claim, as far as any normal economist understands it, is that the government can print money indefinitely to pay for whatever it wants, because of a somewhat counterintuitive claim about the government being able to insist that people pay taxes in the currency it designates."

MMT doesn't claim anything like that. MMT says that a government that have its own floating currency its not financially constrained (the key word here is financially). They also claim that the size of the public debt (but not the deficit!) of such a government it's irrelevant.

Governments (that spend its own floating currency) can't spend indefinitely in a period of time because they are constrained by the real capacity of economy of the country. If they spend beyond that capacity inflation happens. This is cannon in MMT, it's not a complicated idea, it's even in the most superficial introduction to MMT and it's beyond me why somebody, acting in good faith, would keep changing, what the MMT economists are saying.

Your hyperinflation comments have been answered elsewhere in this thread.

>>"Given that even the proponents of MMT don't agree on what it is [..]"

I'm not an economist but I have read a lot of the MMT literature, including the available textbook (1) and it's a totally coherent framework.

Can you point me to some of those contradictions that you have observed?

(1) - https://www.amazon.com/Macroeconomics-William-Mitchell/dp/11...