Imagine if I had a theory called Modern Gun Theory which was Keynesianism but in addition made gun ownership legal. And then I kept saying "But MGT is Keynesianism? I don't understand what the problem is? " and "MGT explains how modern money works! MGT proves that an economy that prints its own currency cannot go bankrupt!"
I don't think that is true. They argue that interest rates are a bad way for using monetary policy for affecting aggregate demand and think we should use deficit spending instead. Keynesians agree with this when we are stuck at the zero bound, but also believe that interest rates are an effective tool when the economy is operating normally. This is why they think MMT abandons the use of interest rates as a stabilisation mechanism.
Because Keynesians have models for (amongst other things) understanding how much extra spending is possible safely (both simple pedagogical models and maths based models) and no such modelling exists for MMT. Which begs the question, How will MMT know?
But they haven't taken them on. The whole point of the Krugman Kelton back and forth was that Krugman claimed the questions never get answered in a straightforward way and Kelton answered them in a way Krugman claimed confirmed his point.
Of course you can choose to believe Kelton (and two other economists) over Krugman (and 100s of other economists) but I find the case unconvincing.
We seem to be going backwards and forwards over the same ground, perhaps because we’re talking about different things. We seem to be getting bogged down in economic theories and forgetting the main point, the central point, that government spending is not dependant on tax. Until we have an economic understanding that tax is not the centre of the universe, arguing about various academic niceties it putting the cart before the horse.
If I can use my own metaphor, it’s a bit like arguing about the nature of sub atomic particles in quantum mechanics before the principle that the earth goes around the sun has been established. We need to over-turn the idea that the earth is the centre of the universe, that is, we need a real world understanding of planetary movements, before Newton, Einstein, and Nils Bohr are even possible.
Likewise, until we have a proper understanding of where money comes from in the real world, we cannot have a proper economy based on reality.
So
if MMT and Keynesianism agree that government spending is not dependant on an income like a household is, what’s the problem? That central point has to be established and accepted by mainstream reporters
before arguments over finer points like the nature of sub atomic particles can have any meaning or relevance. If MMT and Keynesianism agree on the fundamental truth of where money comes from, what’s the problem? There really should not be a problem on that fundamental truth.
The danger of the Keynesian argument with MMT is that it will serve to undermine a proper understanding of how the economy works at a basic level, and we will, to continue the metaphor, remain in a medieval understanding of the universe that is plain wrong
All other arguments are academic in every sense of the word.
You insist that MMT says that a country that prints its own money cannot go bankrupt. I say MMT does not say that.
You insist MMT abandons interest rate, I say it does not.
We can go round and around on those arguments, but if we agree on the fundamental argument that Thatcher’s ‘there is no government money, there is only taxpayer money’ is a lie, I don’t see the point,
until that truth is more widely understood.
Getting that truth out there has to come first