Debate over MMT takes a dumb but not surprising turn

Over the weekend the NY Times published a profile of Stephanie Kelton, the leading proponent of Modern Monetary Theory. The profile proclaimed that Kelton was now taking a “victory lap” albeit one with a big asterisk.


Ms. Kelton, 52, is the most familiar public face of Modern Monetary Theory, which posits that if a government controls its own currency and needs money — to make sure its citizens have food and places to live when, say, a global pandemic pushes many out of work — it can just print it, as long as its economy has the ability to churn out the needed goods and services.

In the M.M.T. view of the world, “How will you pay for it?” is a vapid policy question. Real-world resources and political priorities determine how much lawmakers can and should spend.

The asterisk in the story, in case you haven’t guessed already, is inflation.

When Ms. Kelton’s book, “The Deficit Myth,” was published in June 2020 and shot onto best seller lists, inflation had been weak for decades and had dropped below 1 percent as consumers retrenched in the pandemic. The government had begun to spend rapidly to try to prop up flailing households…

But by a chilly January afternoon, as ducks flew over the frosty estuary outside Ms. Kelton’s house near Stony Brook University, where she teaches, inflation had rocketed up to 7 percent. The government’s debt pile has exploded to $30 trillion, up from about $10 trillion at the start of the 2008 downturn and $5 trillion in the mid-1990s…

Some economists blame big spending in the pandemic for today’s rapid price increases. The government will release fresh Consumer Price Index data this week, and it is expected to show inflation running at its fastest pace since 1982.


Some traditional economists have criticized the Times’ piece for a number of reasons. Larry Summers did a Twitter thread saying he was sorry the NY Times was taking MMT seriously.

Additional criticism came in the form of this Substack piece by economist Noah Smith. It was titled, “The NYT article on MMT is really bad.” He points out that the article contains one substantial criticism of MMT from Jason Furman but says there’s no follow-up to the points raised.


Even though Furman notes that Kelton did a bad job of characterizing the difference between MMT and Keynesian thinking, the NYT writer doesn’t follow up on this at all; she makes no effort to clarify where MMT actually does differ from other forms of economic thought. Nor does she quote any other macroeconomists.

This is important because any attempt to engage with the actual substance of MMT quickly finds that such substance is curiously lacking. MMT proponents almost always refuse to specify exactly how they think the economy works. They offer a package of policy prescriptions, but these prescriptions can only be learned by consulting the MMT proponents themselves. There is no model here — no set of equations or definite formal statements that a layperson could use to generate their own MMT policy prescriptions without appealing directly to the gurus.

…maybe MMT people don’t write down models of the economy because they can’t. Because as Françoise, Christian, Rondina, Palley, and others have concluded, MMT is not a theory of how the economy works, but rather a set of political memes to push for more deficit spending.

Had Smialek looked more deeply into MMT instead of taking her info on it directly from its leading proponent, she would probably have discovered this!


He particularly took issue with the idea that either Kelton or MMT more broadly were in a position to take a victory lap.

…there was no conceivable state of the Universe in which MMT people would not have taken a victory lap. They always take victory laps, all day long, rain or shine. When you have an unfalsifiable meme complex instead of a concrete and falsifiable theory, it’s easy to claim that your ideas cannot fail, they can only be failed.

But to the rest of the world, inflation gave a reason to be skeptical of MMT’s constant advocacy of yet more deficit spending.

Real MMT, like real communism, has never been tried. But today, Axios has published a piece titled “Male economists are freaking out over a NYT profile” that suggests the pushback against MMT is akin to mansplaining.

This Twitter-based econ fight is about more than one economist. It’s an argument over a natural economic experiment — the U.S. government spending unprecedented sums to keep the economy from free-falling during COVID.

And the gender dynamics — male economists piling on against a female economist and a female journalist, Times’ reporter Jeanna Smialek, in ways distinctive from typical academic arguments — look terrible here.

The author quotes two economists who back up this idea. One says the critics showed “disdain” for Kelton. The other took issue with Noah Smith calling the initial story a “puff piece.” And just like that, you can’t criticize MMT anymore. I guess this is where every argument ends up these days, in a meta-debate over the relative privilege of the debaters.


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