The critics of modern money theory (MMT) are right

Thomas Palley

No 132-2014, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: Eric Tymoigne and Randall Wray's (T&W, 2013) defense of MMT leaves the MMT emperor even more naked than before (excuse the Yogi Berra-ism). The criticism of MMT is not that it has produced nothing new. The criticism is that MMT is a mix of old and new, the old is correct and well understood, while the new is substantially wrong. Among many failings, T&W fail to provide an explanation of how MMT generates full employment with price stability; lack a credible theory of inflation; and fail to justify the claim that the natural rate of interest is zero. MMT currently has appeal because it is a policy polemic for depressed times. That makes for good politics but, unfortunately, MMT's policy claims are based on unsubstantiated economics.

Keywords: modern money theory; money financed budget deficits; fiscal policy (search for similar items in EconPapers)
JEL-codes: E00 E02 E10 E12 E24 E40 E58 E62 E63 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014
New Economics Papers: this item is included in nep-hpe, nep-mac, nep-mon and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: The Critics of Modern Money Theory (MMT) are Right (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:132-2014

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