Credit and credibility
A couple of weeks ago I was spouting about the need to get back to the basics of what money is, and start to challenge deeply entrenched assumptions about the need to pay down debt, and hence the need to cut public spending.
Paul S and Barney, two of TCF’s coterie of intelligent commenters, have given interesting responses:
I just feel that the papers you refer to just aren’t convincing. They are almost pre-scientific in their analysis, and all of them are far too brief to adequately cover the ground (Barney).
But look how long and complicated your blog post it. In politics, if you’re explaining you’re losing. And if you’re explaining at that length in that detail (without accredited economics qualifications that enable you to argue from authority, however unfairly) you’re dead in the water (Paul).
Blimey, thought I, dammed if I write a lot; damned if I don’t. Mind you, at least they engaged with ideas, however dismissively. Sunny couldn’t even be bothered to do that (though I know he can’t follow all responses through).
In fact, even though Barney won’t take seriously what I say because I’ve not written enough, and Paul won’t take it on board because I’ve written too much, their point is substantially the same: Modern Monetary Theory, or any socialist variant of it, isn’t going to take off because it’s just not respectable.
It’s either ‘pre-scientific’ because it’s doesn’t belong to economic orthodoxy, or it’s not got ‘authority’ because it, erm, doesn’t belong to economic orthodoxy.
Kuhn was right, then (I think Barney’s making this point when he uses the Kuhnian term ‘prescientific’). It matters little whether what I’m saying is right. It’s just not within the paradigm of current economics.
Indeed, one of the main proponents of Modern Monetary Theory (MMT), Warren Mosler recognises this when he tells the tales of how he puts senior academics to shame for their lack of understanding of the basics of reserve banking or cheque clearing works. The reality of how money is made, moved about the system, and disposed of, is unimportant to them; they are focused on the loftier issues of how they think the economy might be ‘modelled’.
And from within ‘respectable’ academia itself, there’s a recognition from Mary Mellor that economic theory is even more constrained by convention than other social science, for the very reason that it has developed as a separate speciality:
Economics became separated from the other social sciences which meant that social and political questions about the nature of money were not posed (p.22, see also Red Pepper article).
So where does that leave us? Here’s a perfectly logical critical examination of the basic tenets of the way modern economies work, which if judged solely on its own merits should be taking the wold of economic and political science by storm.
More importantly the broader Left (and the Labour leadership candidates) should be seizing on it as a key argument, both against the current worldwide austerity wave (aka. class power).
MMT’s basic argument is, after all, that if governments understood what money is and how it works better, we could do all those things the Left is quite keen on – full utilisation of resources, full employment, that kind of thing.
I have been thinking a lot about the actual ability of government to withdraw demand from the economy by increasing taxes – a key assumption in Modern Monetary Theory (MMT) with which I have an issue, and critical to containing eventual inflation. But for now, I am on an MMT kick and their analyses demonstrate that sustained consumer price inflation is a long way off.
Even so, any leftie I know (internetly) who’s got as far as taking the stuff seriously, ends up being seriously impressed by what at first sight looks like counter-intuition, but which looks startlingly clear once the first concepts are grasped.
There are two broad choices then, it seems to me, for those of who believe there is something in MMT, and want to get it a wider hearing, or in Kuhnian terms, ensure that MMT is regarded not as ‘prescience’ but as ‘revolutionary science’.
The first is to continue what’s already happening. This is the marketing of MMT as an alternative economic model, using the traditional methods – setting out the logics of the model, contrasting it to the one currently in use, and keeping on saying it.
It’s difficult to say how much traction that approach is having, though perhaps we may know more in the autumn when Warren Mosler’s campaign to become a Senator, based on his promise to ‘fix the economy in 90 days’, is concluded. The book form of his ‘Seven Deadly Innoncent Frauds of Economic Policy should also be out then, and may have some impact.
But my suspicion is that none of this is going to get very far, for the very ‘Kuhnian’ reasons I’ve set out above. In political economy, it seems, being right will not be enough in itself.
So perhaps we need to take some tips from those who are wrong, but whom many people think are right.
The climate change denier brigade do a pretty good job, it seems, of being both utterly wrong and very believable to an awful lot of people. Again, our friend Paul S at Bad Conscience points us in the right direction:
We’re all familiar with the loony right, which simply denies that climate change is even happening. The sorts of people who with no climate science qualifications dismiss the findings of experts, and decry the international conspiracy which they, through their special powers, can see through and expose.
Perhaps the MMT and MMT-interested/post-Keynesian community could do with take a leaf out of the loony right’s book. Perhaps we’re too intent on respect for academy. Perhaps a bit more focus on the ‘international conspiracy’ which is modern capitalist economics might bring us a lot more attention and kudos than being right about stuff.
Is it time for Warren Mosler to shed the Mr Nice Economist image, and go for the jugular? There are signs that he’s thinking about it, when he quotes Fed Chairman Ben Bernanke admitting on 60 minutes that the US monetary system boils down to data entry on a spreadsheet:
SCOTT PELLEY: Is that tax money that the Fed is spending?
CHAIRMAN BERNANKE: It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.
So the lie is out, suggests Mosler, though – gentleman that he is – he doesn’t follow it right through; the Fed has inexhaustible cash, quite independent of tax revenue, because it is, well, the Fed, and everything every politician’s ever told you about countries only being able to spend what they earn is horse shit.
Why isn’t the fact that Bernanke has admitted he just logs on and adds a zero or two the banks’ money big news?
Why, as Mary Mellor points out, can we not see the blindingly obvious?
In Galbraith well-recorded works ‘the process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent’.
If new money can be created out of fresh air, like fresh air it should be seen as a resource available to everyone, or at least their availability should be open to democratic consideration’ (p.26-7, quoting Galbraith p.18-19).
Well, the slight drawback is that the MMT doesn’t have the loony right’s access to and control of the mass media, but we have to start somewhere. That’s where this comes back in……….(to be continued)
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