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OK, but MMT is a fringe theory.

dctoedt
> MMT is a fringe theory.

MMT makes intuitive sense as long as you keep in mind its predicate assumptions: 1) The government borrows in the currency that it issues (dollars, pounds, yen), thus the goverment can inject more money into the economy at will — thus increasing "consumer" demand for goods and services; AND 2) there's enough slack productive capacity in the economy to meet the increased demand without causing price inflation.

Stephanie Kelton's book, The Deficit Myth, was a good read.

Disclaimer: I'm unburdened by any formal economics training at all (apart from what I picked up from antitrust law).

Quaere whether MMT critics are like Ptolemaic geocentric astronomers criticizing the Copernican / Keplerian model ....

addicted
MMT forgets that people won’t lend to the govt if the government is going around telling everyone the way they intend on paying the borrowers back is by making the currency they borrowed in worthless.

MMT can only work in a world where the government is explicitly not doing MMT. The moment the government makes MMT official policy no one is gonna lend to that government.

dctoedt
> MMT forgets that people won’t lend to the govt if the government is going around telling everyone the way they intend on paying the borrowers back is by making the currency they borrowed in worthless. ... The moment the government makes MMT official policy no one is gonna lend to that government.

Your premise about the currency becoming worthless is not self-evident. MMT's explicit predicate suggests the currency won't become worthless: MMT assumes there is enough slack productive capacity in the economy — or that additional capacity will be added — to accommodate the increase in demand from the additional money in the system. When that's the case, prices shouldn't rise unacceptably.

MMT makes intuitive sense, but right now we're all just speculating how the populace (and the bond market) would react to it. We also don't know whether the government has enough "instrumentation and control" to be able to manage it effectively.

tptacek OP
There's probably a better word that captures "fringe" without implying a value judgement (though: I'm not a fan) --- I'd just say, MMT was never operationalized in this administration (Janet Yellen is not an MMT-er).

What you do see is partisan claims that any kind of overspending represents "MMT", which is of course a transparently silly argument.

JamesBarney
If the government borrows and slack remains in the economy, standard economic theory also predicts limited effects on inflation. What about MMT is different?

The two concerns that standard economics seems to have around the government borrowing excess money is higher debt load, and crowding out.

digdugdirk
MMT likely leans heavier on both levers than you're imagining. Heavy government investment until there's no more productive capacity. Extra emphasis on the "productive" part. Picture the New Deal as a baseline, and add on whatever useful projects you can imagine.

The intuitive idea is to maximize human capital by investment in infrastructure, health, and education. Spend money in areas where the return to the country is exponentially improved over time.

As a extreme example - imagine if the government paid for high speed wireless data plans and ensured access for a poor rural community without internet access. It wouldn't be unreasonable to imagine a handful of people in that community find ways to generate income using that internet connection and therefore now are paying more in tax after year 1. At that point, it's just a math problem to argue about what should count as "value" in the equation.

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