Modern Monetary Theory

{{economics}}

'''Modern Monetary Theory''' ('''MMT''',  previously known as '''Mosler Economics''' and the '''Kansas City Approach'''<ref>https://neweconomicperspectives.org/2012/01/mmp-blog-30-what-is-modern-money-theory.html</ref>) is a {{W|Chartalist}}, heterodox economic theory primarily aimed at developed countries that issue their own free-floating currency (a, "sovereign currency"). The theory states countries with a sovereign currency cannot involuntarily default on debt denominated in that currency.  Further, it states that any inflation in those countries from federal deficits would have more to do with the amount of real resources available than the fact that a deficit exists.  MMT also argues the initial purpose of [[tax]]es denominated in a sovereign currency is to forcibly coerce people to [[work]] for an otherwise worthless currency, and allow a government to continue directing human behavior through policy choices (for example, to promote general welfare).<ref name = "Mosler MMT Basics">https://moslereconomics.com/wp-content/powerpoints/7DIF.pdf</ref>

MMT's proponents claim their theory has no political agenda, and is instead a descriptive economics theory that people may apply however they please. MMT proponents don't claim the system as they analyze it to be the best possible economic system, contrary to criticisms as such. Contrary to [[Milton Friedman|Friedmanite]] economics, MMT proponents consider most inflation in the USA to be "cost-push" rather than "demand-pull".  Exceptions, they note, include when the economy reaches full employment, or in unusual cases where the government distributes cash handouts which are so large and widespread that there runs a risk of a total disengagement from government work. Despite stereotypes, MMT economists warn against an inflation-adjusted [[UBI|universal basic income]], at least if avoiding a total collapse of the value of the payments is a concern.<ref>''Environment and Employment A Reconciliation'', by Pavlina Tcherneva, page 190</ref>  Further contrary to Friedmanite politics, MMT proponents argue for lowering the federal funds rate as a general political principle influenced by their theory, (the theory founder wants it at 0 forever). They claim this would reduce inflationary pressure by lowering Treasury interest income, what they call a "UBI for the wealthy."<ref>https://www.bloomberg.com/news/articles/2024-07-08/warren-mosler-godfather-of-mmt-says-us-is-spending-too-much</ref>

MMT has often been criticized as lacking broad academic support.  Additionally, many institutions have been getting increasingly obsessed with appropriating "MMT" as a catch-all [[snarl word]] to refer to literally anything even remotely ambivalent towards debt as "MMT". <ref>[https://www.bloomberg.com/news/articles/2020-06-30/modern-monetary-theory-what-marxists-and-keynesians-love-to-hate Modern Monetary Theory: What Marxists and Keneysians love to hate]</ref><ref> [https://www.marketwatch.com/story/modern-monetary-theory-is-nonsense-just-more-voodoo-economics-2019-03-04 Modern Monetary Theory is nonsense, just more voodoo economics]</ref><ref> [https://www.cnbc.com/2020/04/29/op-ed-pandemic-moves-modern-monetary-theory-from-the-fringes-to-actual-us-policy.html The Pandemic moves MMT from the fringes to actual US government policy]</ref><ref>[https://www.beaumontenterprise.com/news/article/Taylor-The-monetary-theory-revolution-will-not-15345131.php The Monetary Theory revolution will not be televised]</ref><ref>[https://iea.org.uk/beware-the-siren-call-of-modern-monetary-theory/ Beware the siren call of Modern Monetary Theory]</ref>

==Basic views==
*A country that issues its own currency (either via minting coins, printing paper money, or crediting bank accounts) can't default on its debt. It can always issue more money.<ref name = "MMT Basics">[https://modernmoneybasics.com/facts/ Modern Money Basics's Expanation of MMT]</ref>.
*Taxation destroys money, and therefore reduces {{W|demand-pull inflation}} (too much money chasing too little goods).<ref name = "MMT Basics"/>
*An increase in the money supply does not necessitate inflation, nor does it cause inflation on its own, even when it plays a role, and many major sources of inflation have little to do with the money supply.<ref name = "MMT Basics"/> (rejection of the Quantity Theory of Money.) Instead, inflation arises from supply shocks, price-setting behavior, demand pressures, and wage growth outpacing productivity.
*The money supply is endogenous and is controlled by the demand for loans. Therefore, the central bank is incapable of controlling the money supply.
*The central bank controls the interest rate.
*The rejection of the {{wpl | money multiplier}}.
*There is not always a direct relationship between unemployment and inflation. (Rejection of the [[Phillips curve | Phillips Curve]])<ref name = "Phillips Curve Critique">[http://www.fullemployment.net/publications/wp/2020/wp_20_06.pdf Full Employment's critique of the Phillip's Curve]</ref>
*There is no natural rate of unemployment. (Rejection of the [[Phillips curve#The Model#Long-run Phillips Curve | Expectations Augmented Phillips Curve]])<ref name = "Phillips Curve Critique"/>
*The free market has no tendency towards equilibrium/full employment. (Rejection of the Invisible Hand theory)
*Rejection of [[Homo economicus | Homo Economicus]].
*Rejection of the crowding out effect. Government spending instead creates a crowding in effect that spurs business growth.
*The "natural rate of interest" of a government monopolized currency is 0.  MMT proponents use this claim to further argue that the federal funds rate<ref>https://www.tandfonline.com/doi/abs/10.1080/00213624.2005.11506832</ref> and the short-term interest rate should be zero<ref name=mitchell>Bill Mitchell, [http://bilbo.economicoutlook.net/blog/?p=1961 The interest rate should be set at zero]. bilbo.economicoutlook.net, 4 May 2009.</ref> to avoid inflation and unnecessary "handouts to the rich" forever (otherwise known as ZIRP forever).
*Like other Post-Keynesians, MMT uses stock flow consistent models.

==Explanation of views==
===Rejection of the Quantity Theory of Money===
MMTers reject the Quantity Theory of Money (QTM), which states that MV = PY, where M is the supply of money, V is the velocity of money (how often money changes hands), P is the price level of money, and Y is the total output of the economy. It also states that M is only controlled by the central bank, V is constant (because people will develop consistent spending habits), and Y is at the full employment of resources.<ref name = "QTM">[https://www.economicshelp.org/macroeconomics/inflation/monetarist-theory-inflation/ Economics Help on the Quantity Theory of Money]</ref> MMT rejects all of these assertions. MMT believes that the money supply is endogenous, and thus non-central banks can create and destroy money via loans/credit/debit at will, therefore controlling M via the central bank is meaningless. V can't be constant because of the {{wpl|paradox of thrift}} and people may change their spending habits over time. Y also may not be at full employment, especially in a recession. The idea that money printing causes inflation comes from believing the QTM. If V and Y are constant, then changes in M directly cause changes in P, and so an increase in the money supply causes an increases in prices.<ref name = "Debunking QTM">[https://www.forbes.com/sites/johntharvey/2011/05/14/money-growth-does-not-cause-inflation/?sh=53d5c55542f5 John Harvey on Forbes Debunking the Quantity Theory of Money]</ref>.

===MMT's theory of inflation===
Here is a simple equation for MMT inflation: g<sub>P</sub> = (g<sub>w</sub> - g<sub>Apl</sub>)s<sub>W</sub>+(g<sub>U</sub>-g<sub>Q</sub>)s<sub>U</sub>. g represents the growth of the subscript variable, P represents price level, w represents the wage rate (how much workers are paid), Apl is the average productivity of labor, s represents the share of the national income of the subscript variable, W represents the amount of money paid to workers (wage rate * time worked), U represents the gross profits of capitalists (business owners),and Q represents the total output of the economy. As seen an increase in the growth of prices (inflation) can be caused by an increase in the growth of worker wages, a decrease in the growth of average labor productivity, an increase in the growth of capitalist profits, or a decrease in the growth of total output. 

MMTers argue that the inflation the USA saw after getting off the gold standard was not due to inflation from government spending and {{W|demand-pull inflation}}.  They instead argue that 1970's US price inflation was mostly caused instead by {{W|cost-push inflation}} from the OPEC monopoly which the US government allowed to affect their own domestic prices by not using long-term oil contracts with foreign countries.  MMTers argue that US inflation after the 1970s was also almost exclusively cost-push inflation, the government allowed to occur, including through the government permitting enormous business monopolies and increased land scarcity in certain areas.  Therefore, as MMTers don't see current inflation as coming from government spending, ''at all'', US income taxes are currently unnecessary from an inflation perspective according to MMT.  MMTers, like other Keynesians and most of the world, see mild inflation as desirable in order to increase consumer spending.

There's another part to MMT's theory of inflation, and it involves a concept called Monetary Sovereignty.

====Monetary sovereignty====
Countries that have monetary sovereignty have the following characteristics: 
*The government issues currency and requires taxes to be paid in that currency.
*The government's currency is neither pegged to a resource nor another currency. The currency operates via a floating exchange rate (The value of the currency is determined via supply and demand relative to other currencies)
*The government owns minimal debt in foreign currency.<ref name = "Monetary Sovereignty">[http://www.paecon.net/PAEReview/issue89/Bonizzi-et-al89.pdf Paecon on MMT's view of Monetary Sovereignty and how developing countries may still be constrained]</ref>
Countries that have monetary sovereignty will only experience dangerous levels of inflation when the government attempts to increase deficit spending when the full capacity of resources within a monetarily sovereign country are used. This does mean that developing countries may be constrained by inflation, as they often won't have enough resources and will need to import them at the cost of borrowing from a foreign currency. However, countries like the U.S, Japan, U.K., China, and Australia are capable of maintaining high deficits that by themselves, won't cause inflation. Additionally, it is possible for all of these countries to pay back any debt they owe.<ref name = "Monetary Sovereignty"/>

===Countries that don't have monetary sovereignty are financially constrained===
*Countries that don't issue their own currency are incapable of paying off their own debt. A good example of this are the countries within the European Union. When the Great Recession happened, E.U. countries were unable to pay back their own debts without outside assistance. This led to the {{wpl|European Debt Crisis}}.
*Countries that peg their currency are vulnerable to price shocks. A great example of this is Venezuela. Venezuela pegged their currency to the U.S. Dollar and they were highly dependent on oil exports. Unfortunately, when oil prices dropped, the value of Venezuela's currency also dropped as oil exports were no longer as valuable to sell in the U.S. dollar.<ref>https://www.youtube.com/watch?v=tvgKbSuI5kY</ref>
*Countries that own foreign debt in other currencies cannot repay that debt instantly without their currency losing value. For example, after World War I, the Weimar Republic gained a lot of foreign debt. They tried to instantly repay that debt, but were unable to and eventually defaulted. Eventually production slowed, devaluing the currency, and forced to still pay the debt, the Weimar Republic started printing money. This increase in the money supply didn't really lead to an increase in productivity, and so it devalued the currency even more.<ref name = "Zimbabwe Weimar Republic Inflation">https://modernmoney.wordpress.com/2011/01/17/reasons-behind-zimbabwe-hyperinflation%c2%a0political/</ref>

===Summarizing and combating inflation===	
Essentially inflation can be caused by one of six things: an increase in growth of worker wages, a decrease in growth of worker productivity, an increase in growth of capitalist profits, a decrease in total output,<ref>[https://neweconomicperspectives.org/2011/07/two-theories-of-prices.html New Economics Perspectives on MMT's view of Prices]</ref> a currency peg, or excessive debt in foreign currency. Therefore, policies to combat inflation can be derived and include:	
*Wage and income policies to combat the increase in growth of worker wages
*A Job Guarantee and improved education to increase the growth of labor productivity
*Higher taxes on capitalists to combat the increase in growth of capitalist profits
*More government spending on infrastructure and technology development to increase total output of the economy
*A floating exchange rate to prevent price shocks from a currency peg<ref name = "Monetary Sovereignty"/>
*Debt relief on countries that owe debt in foreign currencies<ref name = "Monetary Sovereignty"/>
Essentially inflation becomes a political problem. Some of these policies may be politically hard to implement. For example wage and income policies are generally despised by workers and unions (since they prevent the growth of worker wages).<ref name = "Wage Policy">[https://www.economicshelp.org/blog/164672/economics/prices-and-incomes-policy/ Economics Help on Price and Income policies]</ref>Capitalists will probably try to shoot down higher tax policy. Another issue is that each of the policies above only really works for a specific inflation cause. If the wrong policy is used to fight inflation, then inflation will continue to occur. For example, in the 1970's, the Nixon administration attempted to fight inflation using wage and income policies (known as the "Nixon Shock"). However, the inflation was actually caused by increases in labor costs due to supply shocks, so inflation continued to rise, and workers ended up getting hurt.<ref name = "Wage Policy"/> Many of these supply shocks were due to large amounts of the male labor force being sent over to Vietnam... who knew that sending your workers to a foreign war (the U.S. had 500k troops in Vietnam at one point) means fewer products made at home, crunching supply and raising prices on the fewer products that remain on the shelves? Certainly not the Democratic and Republican Presidential administrations who both supported the mass wars. Ditto for Iraq and Afghanistan, not to mention that many of those sent to war died or became disabled, which meant they often couldn't come back and raise supply by doing what they did before.

==MMT vs. other economic schools==
===MMT vs. New Keynesians===

====Mitchell vs. Mankiw====
A response from the conservative branch of the New Keynesian School came from the Harvard Professor and bestselling author Greg Mankiw, who berated MMT.<ref>https://scholar.harvard.edu/files/mankiw/files/skeptics_guide_to_modern_monetary_theory.pdf</ref> According to professor Mankiw, MMT gained support in the world of politics despite its alleged academic irrelevance because it has a cool name and it gives easy answers that some politicians are looking forward to. Mankiw's analysis concludes that MMT advocates for inflation, and its proponents are just unaware of that:

{{cquote|I agree that the government can always print money to pay its bills. But that fact does not free the government from its intertemporal budget constraint. I agree that the economy normally operates with excess capacity, in the sense that the economy’s output often falls short of its optimum. But that conclusion does not mean that policymakers only rarely need to worry about inflationary pressures. I agree that, in a world of pervasive market power, government price setting might improve private price setting as a matter of economic theory. But that deduction does not imply that actual governments in actual economies can increase welfare by inserting themselves extensively in the price-setting process.
Put simply, MMT contains some kernels of truth, but its most novel policy prescriptions do not follow cogently from its premises.|||}}

Prominent MMTer William Mitchell attempted to publicly engage with Mankiw after being contacted by him for input on a paper, but Mankiw cut off correspondence early; as a result, Mitchell had to argue with Mankiw indirectly, rather than in a continuing conversation/debate.<ref>http://bilbo.economicoutlook.net/blog/?p=43900</ref><ref>http://bilbo.economicoutlook.net/blog/?p=43961</ref><ref>http://bilbo.economicoutlook.net/blog/?p=43997</ref> One of Mitchell's main arguments was that Mankiw didn’t understand MMT rejects an accounting identity (the "GBC") which states inflation operationally limits the governments ability to purchase real goods and services.<ref>http://bilbo.economicoutlook.net/blog/?p=43961</ref>

====MMT vs. Centrist New Keynesians====
MIT professor and ex-IMF Chief Economist Olivier Blanchard said that MMT is “plain wrong” while discussing the problems and benefits of a public debt in a lecture, claiming, just like Mankiw, that MMTers don't understand the mainstream views on public deficit <ref> [https://www.youtube.com/watch?v=dwcF_uLC6Tc Rising Debt in a Growing Economy: Perspectives on America's Fiscal and Economic Dynamic] </ref>  Blanchard wasn’t also impressed with the MMT views on Japan even if we consider them cherry picking:

{{cquote|The day on which Japan has to pay a positive interest rate on bonds, it will have to pay a positive interest rate on the money, otherwise people will not hold it, or there will be hyperinflation.|||}}

Latter on his Twitter account, Blanchard also claimed that the MMT idea that government spending is automatically financed by money creation is “both right, and utterly irrelevant"<ref>https://twitter.com/ojblanchard1/status/1191443049160880133.</ref>

Blanchard is not the only the only [[centrist]] mainstream economist with mild opinions over the public debt  that criticizes  MMT: the former US Treasure Secretary and ex-president of the Harvard University Larry Summers said that MMT is “fallacious”. <ref>[https://www.bloomberg.com/news/articles/2019-03-05/summers-slams-mmt-as-fallacious-as-economics-battle-heats-up Larry Summers Slams MMT as ‘Fallacious’]</ref> and a “recipe for a disaster that violates the laws of arithmetic” <ref> [https://www.youtube.com/watch?v=g6iB6QzuQ70 Larry Summers: Modern Monetary Theory is a recipe for a disaster] </ref>. Summers stated that MMT is pretty much what governments in the UK, France, Germany and even the US tried to do at different moments during the 70s 80s and 90s with alleged failed results, adding  that the valid opinion that government spending might help the economy in many cases was transmuted by MMTers into the idea that deficits are almost irrelevant, adding that appropriate fiscal stimulus is totally different than saying that all the government debts can be paid by printing money. Just like Mankiw and Blanchard, Summers also finds MMT views on inflation wanting.

===MMT vs. Austrian economics===

{{main|Austrian school}}
MMTers argue that Austrian economics is merely [[Broken clock|a blueprint for a gold standard from an era already bygone]]. Individual Austrian school proponents like Bob Murphy have very mixed opinions on MMT, as Austrians share the opinion with MMTers that government is a violent imposition on people rather than a naturally peaceful phenomenon. 

For example, in a debate Bob Murphy had with prominent MMTer Warren Mosler, Murphy argued that MMTers are "not wrong necessarily", and that their ideas encourage what Austrians consider government overreach or personal fiscal irresponsibility.<ref>https://www.youtube.com/watch?v=cUTLCDBONok</ref> However, Murphy would later go on to contradict himself on Mises.org, where he wrote:

{{cquote|Unfortunately, it seems to me to be dead wrong. The MMTers concentrate on accounting tautologies that do not mean what they think.|||Bob Murphy<ref>https://mises.org/library/upside-down-world-mmt</ref>}}

===MMT vs other Post-Keynesian===

====MMT vs. Palley====
Prominent Post-Keynesian economist Thomas Palley panned MMT heavily quite a few times,<ref>Thomas I. Palley, 2019.. "What's Wrong With Modern Money Theory (MMT): A Critical Primer," FMM Working Paper 44-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
</ref><ref>http://www.thomaspalley.com/docs/articles/macro_theory/mmt_response_to_wray.pdf</ref><ref>http://www.thomaspalley.com/docs/articles/macro_theory/mmt.pdf</ref> claiming that "MMT adds nothing new warranting its own theoretical label.  Instead, its over-simplifications represent a step-back in understanding.". According to professor Palley, MMT proponents "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".

Palley argues that MMT is wrong that money ultimately comes from the state and cites central banks as a possible counter-example.<ref>https://www.boeckler.de/pdf/p_fmm_imk_wp_44_2019.pdf</ref> MMTers counter that, "banks are designated agents of government".<ref>https://www.youtube.com/watch?v=M7OQ-nVGQ9w 22:00</ref>  This is a common area of disagreement between MMT and economists from others schools, for example this topic took up most of a debate between MMTer Warren Mosler and economist Michele Boldrin.  MMT is "neo-Chartalist", and they believe money doesn't naturally arise from individuals peacefully, but is rather imposed on individuals.  MMTers believe group violence (typically in the form of government) is the source of money, (note: not "value") rather than, "a tool invented peacefully to enhance natural barter", or whatever.<ref>https://www.youtube.com/watch?v=X-D5FERQzU4</ref>  Most MMTers believe that if inflation should ever show signs of rising during a public works program, it could likely be easily controlled by the government of a more developed country that uses the sovereign currency system, through explicit price controls, taxation, and/or simply slowing the program.

====MMT vs. Baker====
MMT proponents have been at odds with the prominent Post-Keynesian {{W|Dean Baker}} as well, including a few public debates. Their primary beef with Baker is over the government's ability to effectively provision resources for large-scale public works programs during economic booms when most of the country is already employed to begin with.  MMT proponents are more dovish on the government's ability to, say, retrain large segments of the work force for a restructuring of the economy, whereas economists like Baker are more hawkish and warn such a thing would create too much inflation.

==Academic spread==
The theory lacks academic institutional support, finding more support in blogs and among Democratic congresspeople. You likely won’t find any MMT supporters among the most well-known economics scholars. However, the theory appears to have gained ''a little'' traction among a few professors of economics at some state colleges; among these, its physical capital is arguably the University of Missouri-Kansas City's Center for Full Employment and Price Stability.<ref>https://edirc.repec.org/data/cfepsus.html</ref>
Another major MMT stronghold is Bard College's Levy Economics Institute- which Prof. Hyman Minsky, a major influence on MMT, taught at.

While both of these schools are considered mediocre, Bard College is more relevant overall.<ref>https://www.usnews.com/best-colleges/rankings/national-universities?schoolName=Kansas+City</ref> Few prominent, academic economists agree with MMT <ref>[https://www.businessinsider.com/economist-survey-alexandria-ocasio-cortez-modern-monetary-theory-2019-3 A new survey shows that not a single top US economist polled agreed with the basic principles of an economic theory supported by Alexandria Ocasio-Cortez]</ref>.  Prominent economist outside the MMT lecture circuit who support the theory include {{W|James Galbraith}}<ref>https://www.project-syndicate.org/commentary/why-central-bankers-fear-modern-monetary-theory-by-james-k-galbraith-2020-12</ref> and {{W|Bernard Lietaer}}.<ref>https://www.youtube.com/watch?v=zjzjxAWKGd8</ref>

Outside the US, a major MMT center is the  University of Newcastle, Australia, where Bill Mitchell, one of the founders of the theory, and Martin Watts, teach.

MMT economist Bill Mitchell has been an international fellow at Kyoto University, Japan, which may explain the MMT anime.<ref>https://www.mmted.org/smithfamily/</ref>

==Criticism==
===Accusations of not addressing inflation enough===
====Monetarism vs. MMT====


According to MMT, inflation generally does not result from government spending in, "monetarily sovereign nations", when there is spare productive capacity, and that the size of the total supply of money is not a chief determinant of inflation. According to MMT, the ''availability of real resources in proportion to spending'' is the determinant of inflation from government spending ("demand-pull inflation").  MMT also agrees with Keynesians that {{W|cost-push inflation}}, or inflation as a result of business monopoly, cartel, production price-increases etc, exists.

Milton Friedman disciples, who often call themselves 'monetarists', usually assert to the contrary, that ''the size of the money supply in proportion to economic output'' is the chief determinant of inflation.<ref>https://www.imf.org/external/pubs/ft/fandd/2014/03/basics.htm</ref><ref>https://www.investopedia.com/articles/economics/08/monetarism.asp</ref>  Friedman and his disciples also do not believe cost-push inflation exists,<ref>https://www.investopedia.com/articles/economics/08/1970-stagflation.asp</ref> which is convenient for business monopolies.

MMT does not hold a mainstream monopoly on the rejection of monetarism, or the rejection of the idea that large money growth necessarily causes inflation.<ref name="Microeconomic theory">https://vdoc.pub/documents/microeconomic-theory-old-and-new-a-students-guide-11e9j894ne60</ref><ref>https://www.forbes.com/sites/johntharvey/2011/05/14/money-growth-does-not-cause-inflation/?sh=6b6ccf5942f5</ref><ref>https://www.ineteconomics.org/perspectives/blog/rapid-money-supply-growth-does-not-cause-inflation</ref><ref>Minsky, Hyman P. John Maynard Keynes, McGraw-Hill. 2008. p.2</ref><ref>https://www.taxresearch.org.uk/Blog/2015/09/05/increasing-the-money-supply-does-not-create-inflation/</ref>  In fact, monetarism has fallen out of academic favor in general, even though the microeconomic New Keynesian school is still academically dominant.<ref name="Microeconomic theory"/>

{{cquote|Monetarism has fallen out of favor because, among other things, it has been shown that neither basic assumption of the quantity equation holds—V is not constant and the real economy, Q, is affected by changes in the money supply, M.|||Microeconomic Theory Old And New: A Student's Guide, by John Gowdy}}

====Debt hawks vs. MMT====
According to Professor Wray, the most important conclusion of Modern Monetary Theory is that:

{{cquote|(...) the issuer of a currency faces no financial constraints. Put simply, a country that issues its own currency can never run out and can never become insolvent in its own currency. (…) [F]or most governments, there is no default risk on government debt.|||Professor L. Randall Wray<ref>Mitchell, William, L. Randall Wray, and Martin Watts. 2019. Macroeconomics, London: Red</ref>}}

Another common criticism regarding MMT is the belief that money growth is not sustainable over the long term and is an indicator of incoming hyperinflation and/or federal government default.

A quick look at Japan and the fact that it's had a large growth in the money supply since going off the gold standard, and has been running a larger debt/GDP ratio than most countries for decades, and has been battling ''deflation'' for decades disproves this argument.   It's safe to assume therefore that, "large growth of the money supply", does not necessarily lead to inflation or government default.  This is a form of empiricism that proponents of this critique dislike, as they are not fans of the [[real world]].  Debt/deficit hawks may consider Japan or similar countries to be examples of [[cherry picking]], due to the history of countries with pegged currencies inflating their currency by increasing the money supply.  However, MMT only has the most dovish federal deficit position for developed countries that issue their own free-floating currency and have a trade deficit.  This includes countries such as Japan, the UK, Canada, and the USA.

===Price control wariness===
MMT disciples say  that:

*The government can prevent inflation  during full productive capacity by 
seizing the means of production
 taxing the rich and controlling the prices.

*Economies typically operate with spare productive capacity.

On the other hand, MMT's critics point out that its proponents fail to provide [[evidence]] to any of their points, instead pointing to thousands of years of failed price setting as "evidence".<ref>Forty Centuries of Wage and Price Controls: How Not to Fight Inflation, Robert L. Schuettinger</ref> 
MMT proponents often do prescribe explicit price setting during times when the government spends massively on extensive public works programs, while also arguing that in modern countries with a "sovereign currency", the government itself is ''always'' the price setter, whether people like it or lump it.

===MMT doesn't apply much to countries that are still developing===
MMT as a prescriptive theory is, simply put, about as wrong for third world countries as the ideas of [[Murray Rothbard]] and [[Walter Block]] are for money.<ref>[https://www.businessinsider.com/modern-monetary-theory-mmt-explained-aoc-2019-3]</ref> Prominent opponents of MMT like [[Hillary Clinton]] and anarcho-capitalists often cite developing countries like [[Zimbabwe]] and [[Venezuela]] as examples of how large government deficits do not work (in their minds) for developed, first-world nations.

===Argued as too conservative on human nature===
UBI proponents, left-wing small government advocates, and communists, sometimes argue that MMTers believe too much in traditional wage-work being necessary for human happiness.  According to the MMTer Warren Mosler, nothing would ever get done without a government forcefully making people work, often enacting a thought experiment where he tells the audience to clean the lecture hall after his talk, and asserts there are no volunteers before pretending there are armed gunmen waiting outside should the audience not collect his business cards from him as payment for cleaning the room.<ref>http://heteconomist.com/transcripts-of-warren-moslers-talk-and-qa-session-in-sofia-bulgaria/</ref>  Mosler simply asserts that grown adults avoid work naturally, but never provides [[evidence]] for the assumption.  Contradicting himself, Warren Mosler has also acknowledged that many tribal societies have achieved, "full employment", without traditional wage-work or a state for thousands of years.

Similarly, the MMTer Stephanie Kelton was in a few debates with UBI proponents and was accused of conservativism by the UBI proponents for assuming that people have a natural tendency to avoid traditional work.  Kelton did something of an apology saying that the job of an economist is to increase employment, and she didn't argue further with the UBI proponent on that point. Stephanie has at times tweeted insinuating that a lack of traditional wage labor leads to drug addiction and despair, while not providing sufficient [[evidence]] for this being a ''natural'', human response to a lack of traditional work.

===Argued as an elaborate workfare excuse===
Liberal columnists such as Matt Bruenig argue MMT is a sophisticated excuse for meritocracy, wageslavery, and workfare due to MMT's preference for a national jobs program over money handouts.<ref>https://www.jacobinmag.com/2018/05/full-employment-job-guarantee-bernie-bruenig</ref>  While conservatives deride MMT as a "free lunch", many left wingers point out MMT is in fact a, "costly lunch", and too much for them.  Left-wing critics of MMT bring up 20th century economist Hyman Minsky being a primary influence on MMT, and Minsky's obsession with traditional work over a transition away from such.  Minsky, for example, once derided government food programs as, "overly sentimental" and to be done away with.

===The Calvinball problem===
Some MMT critics state that they are told that they simply don't understand MMT. When critics refute one aspect of MMT, MMT proponents will respond by saying that the critic hasn't understood MMT enough. Paul Krugman has labelled this the [[Calvinball]] problem, a type of [[moving the goalposts]] fallacy.<ref>[https://archive.ph/s8VBu#selection-319.0-323.44 Running on MMT (Wonkish): Trying to get this debate beyond Calvinball.] by Paul Krugman (Feb. 25, 2019) ''The New York Times'' (archived from 25 Jan 2022 05:50:44 UTC). responding to Stephanie Kelton]</ref>

===Controversy over the origins of money===
Adam Smith's - a father of the "free market" - economic theory is often credited with popularizing a theory that money arose out of inefficiencies of "natural", "barter economies".<ref>https://www.theatlantic.com/business/archive/2016/02/barter-society-myth/471051/</ref>  This is the mainstream narrative about money origins.  MMT (among others) argues that this story is entirely wrong.

A number of anthropologists, including {{W|Caroline Humphrey}},<ref>http://www.jstor.org/stable/2802221?seq=1#page_scan_tab_contents</ref><ref>https://garagemca.org/en/publishing/david-graeber-debt-the-first-5-000-years</ref> have made the argument that no example of a pure and simple full-fledged barter economy in the sense of a crude proxy for modern money as Adam Smith formulated, has ever existed, even in the undeveloped world, and is entirely a hypothesis without [[evidence]].<ref>https://www.theatlantic.com/business/archive/2016/02/barter-society-myth/471051/</ref>  

{{cquote|No example of a barter economy, pure and simple, has ever been described, let alone the emergence of money… . All available ethnography suggests that there has never been such a thing.|||Anthropologist Caroline Humphrey<ref>https://www.cato.org/blog/myth-myth-barter</ref>}}

An academic argument against Adam Smith's conception of money in, "The Wealth of Nations", was summarized by Randall Wray, an MMTer, in an academic paper called, ''Introduction to an Alternative History of Money''.  In his academic texts, Wray borrows from 20th century economics texts specializing in the prehistory of money from economists including {{W|Gunnar_Heinsohn|Gunnar Heinsohn}}, {{W|Otto_Steiger_(economist)|Otto Steiger}}, {{w|David K. Levine|David Levine}}, George Dalton, as well as the aforementioned anthropologist Caroline Humphrey.<ref>Introduction to an Alternative History of Money Levy Economics Institute, Working Paper No. 717</ref>

Heinsohn and Steiger (1983) argued that credit/fiat money predated commodity money, and that the unit of account function of money predated money as medium-of-exchange or payment, in other words, that money did not develop out of primitive "exchange/barter".<ref>Heinsohn, Gunnar, and Otto Steiger. 1983. “Private Property, Debts and Interest, Or: The
Origin of Money and the Rise and Fall of Monetary Economies.” Studi Economici 21:
3–56 page 21</ref>

MMT also cites George Dalton, an internationally known expert on the economies of Third World countries as well as pre-industrial societies,<ref>https://www.chicagotribune.com/news/ct-xpm-1991-08-29-9103040562-story.html</ref> who argued that primitive barter exchange was not market exchange “without money” and that the primitive “monies” do not emerge from the reduction of transactions costs in the exchange process.<ref>https://www.tandfonline.com/doi/abs/10.1080/00213624.1982.11503968 '''Barter''', Dalton 1982, p. 183</ref>  

Keynes himself argued that post-civilizational money was Chartalist, but not pre-civilizational money, differing from MMT in origin stories, but not modern conclusions on Chartalism.<ref>John Maynard Keynes. Vol. I: The Pure Theory of Money. P 12</ref>

Barter economy assumes that individuals “organize their activities with the idea of marketing in mind”, as they make things that they don't need in order to satisfy a barter.<ref>Levine, David. 1983. “Two Options for the Theory of Money.” Social Concept 1 (1: 20–29.</ref>  MMT and various non-MMT economists differ from Keynes and argue that pre-civilizational exchange not only was not barter, but wasn't a market and instead took the form of gift economies.<ref>Dalton, George. 1967. “Primitive Money.” In George Dalton, ed. Tribal and Peasant Economies. Austin, TX and London, UK: University of Texas Press: 254–81.</ref>   

====Cato Institute====
The right-wing libertarian [[Cato Institute]] has explicitly pushed back on this narrative from Randall Wray, obsessing over a book by a 21st century anthropologist named David Graeber who had summarized much of the anti-Adam-Smith conception of the origins of money.  In their critique, Cato asserted that absence of evidence is not evidence of absence and that the existence of gift economies doesn't nullify the barter-origin-story as articulated by Adam Smith.<ref>https://www.cato.org/blog/myth-myth-barter</ref>

Direct criticism of MMTs story of the origin of money seems to be sparse and also hyper-focuses on Graeber like Cato does.  It's worth noting that MMT proponents do not cite Graeber in their academic literature (although Randall has acknowledged him in a lecture once) and Graeber is a much later thinker than those who MMT cite in their literature.  Another person who has piled onto the Cato criticism of MMT, while referencing Cato, includes the blogger Jeff Hummel.<ref>https://www.econlib.org/archives/2012/07/hummel_on_graeb.html</ref>

==Mosler, the MMT founder==
[[File:Warren mosler and racecar 1990s.png|thumb|right|<center>Warren Mosler, theory founder.<br>Called his blog:<br> "The Center of the Universe".<ref>https://archive.ph/owU41</ref><br>Has compared himself to Marx and Keynes<ref>https://www.youtube.com/watch?v=W97s3zbFKvc 00:43</ref>]][[File:1990_Consulier_GTP-LX,_John_Fitch's_car_(fR_low).jpg|thumb|right|The Mosler Consulier GTP, the MMT founders second most famous creation.<br>Retro, hated by journalists, and banned from many official venues.<ref>https://silodrome.com/mosler-consulier-gtp-car/</ref><br>Somewhat similar to his political goals.]]
MMT arguably began with a short book in 1993 authored by Warren Mosler, in cooperation with [[Arthur Laffer]] and Mark McNary, called [https://econpapers.repec.org/paper/wpawuwpma/9502007.htm Soft Currency Economics].  The book attempted to debunk the 'money multiplier' and argued that exports are the cost of imports.  It also argued that today's fiat money system is not operationally constrained by the federal budget deficit and the federal debt, particularly in the way that 'well meaning and patriotic but mistaken debtphobes' proclaim. Shortly afterward, Mosler set up a blog to promote his work.  Mosler was a hedge fund manager and race-car manufacturer.  

Mosler was disturbed by the statements of American Senators in the 1980s to early 1990s and statements made by presidential candidate [[Ross Perot]], a billionaire who convinced at least 20% of the American population that the federal government debt needed to be paid down to avoid catastrophe.  Mosler also claimed his theories evolved from analysis he claimed helped his trading.  Despite MMT being cited as inherently left-wing, Mosler initially tried to market his theory to the [[Tea Party]], which failed.  He found better reception among post-Keynesian economists, federal politicians, and progressive activists.  Warren now self-identifies as a "progressive economist".

A few years into the Biden administration, where there was very low unemployment, and very good traditional economic indicators, but large price increases of specific goods, MMT's founder, Mosler was interviewed a few times to casually discuss what he thought the issues and solutions were.

{{blockquote|''On COVID response'': Look at what happened with the COVID response.  Within two weeks we could see China from space for the first time. Emissions dropped 50%, right, so like we [temporarily] won the war against global warming, and it was all done by dropping non-essential work.  There was enough food [...]  But what did we try to do afterward?  Was there any discussion?  Look we won the war [temporarily] against climate change and everything else so let's bring this back in a way that doesn't bring us back to where we were.  No, instead we just went full speed ahead.}}
--Warren Mosler, MMT founder<ref>https://www.youtube.com/watch?v=e-VC5Dfd4_A 47:50</ref>

{{blockquote|''Hinting that inflation may be a paradoxical barometer for economic vs political health in certain countries'': There's been no economic study that's shown that levels of inflation hurt the real wealth of the country or the economic growth.  They effect distribution, who gets the money and who doesn't.  But they're just changing the numeraire.  And you have countries like Argentina that are running 100% inflation and low unemployment and good growth and that's been going on for a long time, but people '''don't like inflation'''.  So it does a lot of political damage.  President Biden is taking a lot of heat for allowing the CPI to go up.  He could lose the election from that like other presidents have.  It's political poison. [...] politicians are better off with higher unemployment and lower inflation}}
--Warren Mosler, MMT founder<ref>https://www.youtube.com/watch?v=e-VC5Dfd4_A 22:22</ref>

{{blockquote|''On his opinion of the inflation term being misused to distract from accomplishing goals:'' We're using this word 'inflation', but it's a very casual, casual, casual word.  If the price of cars goes up we have "car inflation".  If the price of food goes up we have "food inflation".  It used to be a continuous change in the price level.  The Consumer Price Index (CPI) is a very practically oriented political tool [...] and if it goes up we know what people's standard of living is and whatnot, and that became "inflation", but that doesn't meet the academic definition at all.  So when you say "inflation this" or "inflation that" if you're asking me for specific proposals, you have to ask what specifically you are looking at.  If you want to alter CPI I can just say well "we can just start reducing the tobacco tax and that will go down".  And you can say "well that's not what I want", but that's what your question was originally so what is it we're trying to do? And you can't get a good answer from people in authority about what that is. They just say "everyone knows what it means and it's too high and we have to bring it down".  It's hard to answer how I would propose bringing down inflation when you don't have a target.}}
--Warren Mosler, MMT founder<ref>https://www.youtube.com/watch?v=e-VC5Dfd4_A 22:22</ref>

(A few pushed back on Mosler for implicitly downplaying or perhaps ignoring the negative reaction among the poor to rising food prices, including increased overall poverty in certain areas.  Mosler would later sorta, but not really address by later adding that inflation has too much of a negative psychological effect on people during good economic indicators, and that that was bad in and of itself.  He also added that economic growth during Biden was "massively regressive", due in part to the high federal funds rate allegedly spewing money at only the rich and acting as a "basic income for the wealthy")

Mosler however had some more straightforward and good things to say about tarrifs and government spending

{{blockquote|''On government spending and tariffs under Biden:'' It's hard to say that excess spending was causing what they call this "inflation".  Particularly with the supply shocks, with the oil price increases, with what's going on in the housing market.  You have Trump deciding Canada is a bad country and they need to be punished because they're not charging us enough for lumber.  It's like ok, I'm not going to send you shopping for me.  So he puts a 17% tariff on lumber, and lumber prices go up and so housing prices go up because that's the cost of building a house.  And then Biden comes along and decides they're not charging us enough and puts another 17% tariff on lumber.  So now we have a 34% tarrif on imported lumber.  So they say ok we have inflation now so we have to take money away from people to get the price of lumber down.   It's like, what are you trying to do here?  It's an incoherent policy.}}
--Warren Mosler, MMT founder<ref>https://www.youtube.com/watch?v=e-VC5Dfd4_A 42:46</ref>

Mosler's policy prescriptions are way too numerous but the core of it typically includes an elimination of the federal income tax, long-term oil price contracts at the federal level to prevent inflation, lowering the federal funds rate to 0 permanently, and limiting treasury security issuance to nothing but 3 months treasury bills (as a compromise, as he is categorically against the issuance of treasury securities).

==Prominent MMT authors, professors, and activists==
[[File:Public figure mmters.png|thumb|right|<center>The MMTers</center>]]
While MMT critics are well known, it's prominent figures include:
* Warren Mosler - III capital executive, financier, arguable founder
* Core MMT economists - been at it for decades, also all professors
** Stephanie Kelton - 2015 Chief Economist on the U.S. Senate Budget Committee and former Sanders advisor<ref>https://www.ucl.ac.uk/bartlett/public-purpose/people/stephanie-kelton</ref>
** Randall Wray
** Bill Mitchell
** Pavlina Tcherneva
** Mathew Forstater 
* Steven Grumbine - A progressive podcaster with a near-cult-like worship of the theory and treats Mosler like a literal God
* Irida TV - A conservative podcaster who promotes MMT and thinks MMT can by synthesized with conservative thought
* Mike Norman - Trading advisor and pundit, and one of the first to comment on Mosler's first blog - he is particularly evangelical, his initial reaction was negative, calling it socialism in a pejorative way, but changed his mind
* Andres Bernal - New School professor and occasionally official Alexandria-Ocasio Cortez advisor
* Steve Keen, post-keynesian and self-described leading economist. (is now distancing from being a full proponent of this school due to disagreements on trade)
* Nathan Tankus - A blogger who may qualify as a core MMT economist at this point as he's been treated as such
* Patricia Pino and Christian Reilly - hosts of "The MMT Podcast"

==See also==
*[[Post-Keynesian economics]]

==References==
{{reflist|2|90%}}

[[Category:Economics]]
[[Category:Pseudoscience]]
[[Category:Woo]]

Categories: Economics, Pseudoscience, Woo