The Modern New Deal That ' s Too Good to Be True

This morning I responded to leading Modern Monetary Theory (MMT) proponentStephanie Kelton ’sHuffington Post op-ed, “How We Can Pay for a Green New Deal,” with a tweet observing thatMMT often boils down to nothing more than an especially naive sort of Keynesianism: assume an unlimited excess supply of every resource save money balances, and, voila! monetary expansion can costlessly finance all the projects we like!https://t.co/fHi4rpp2Vh # via@HuffPost— George Selgin (@GeorgeSelgin)February 8, 2019My comparison of basic MMT arguments with plain-vanilla Keynesianism is hardly novel: many others have made it, less succinctly but more compellingly: I recommend, in particular,the writings of Thomas Palley— who is himself a self-described (but not at all naïve) Keynesian — on the topic. As for “especially naïve,” that has simply to do with the fact that, unlike the situation in 1936, when Keynes published hisGeneral Theory, it is anything but obvious today that there ’s a vast supply of unemployed resources to be drawn upon.Unsurprisingly my post met with backlash from several MMT fans, starting withNathan Tankus, who replied that it appeared that I must not actually have read Professor Kelton’s piece, since its point was “precisely that our budgeting process needs toemphasize the conditions of the real economy and that the ability to extract dollar revenue tells us nothing about how close we are to full employment. ” Professor Kelton herself thereupon c...

Source: Cato-at-liberty - February 8, 2019 Category: American Health Authors: George Selgin Source Type: blogs