Noah said, and I think it is a fair assessment:
“On those rare occasions when a heterodox person does link me to a PDF purporting to explain the new methodologies, the content of the document is usually just more criticism of mainstream methodologies (see here, for example). Suppose I already believe that mainstream methodologies suck, and that something better is needed, and all I want now is to see people’s ideas for that something? These documents will be mostly useless to me. Critiquing the old is fine and good, but it is not the same as inventing the new.
There’s an even more fundamental problem here. If you’re going to introduce a new methodology into a discipline, you really don’t want to keep it behind a curtain of mystery. You do not want to force people to do massive amounts of work or pay money in order to grasp even the basics of the new methods. That kind of obscurantism — forcing people to commit time, effort, and money before they can be enlightened with the True Way — is the behavior of a cult, not of an academic school of thought.”
This happens way too much from the heterodox people. They think everyone should drop what they are doing for the next year and slog through papers so finally the important idea can be uncovered. I had to go through this for a few years just to understand some of the core ideas.
The only reason I dove into MMT was I happened to stumble across Mosler exactly as I was beginning to have some real doubts about how the bond markets worked. I also needed to find out how to structure my futures product for the swaps market, and so I thought it would be useful to have a new perspective on interest rates. I was talking with one of the guys who was a futures broker for Moslers fund, and he pointed me to Mosler. Never would have heard of him otherwise!
Cullen is a great writer, so is able to write clearly and concisely about everything he decides to write about. He has slogged through all the hetrodox papers, so was able to give Noah a great response:
Now, Noah has a different perspective on things than I do because he teaches economics in a university, but as far as market practitioners go I don’t see heterodox economics as being all that heterodox anymore. I personally know dozens of people at large banks and financial institutions who use a heterodox model for understanding the financial system and the economy. Some more public figures include:
- Jan Hatzius, Chief Economist of Goldman Sachs.
- Paul Sheard, Chief Economist of Standard and Poors.
- James Montier, Market Strategist at GMO.
Those aren’t exactly lightweights. We’re talking about some of the heaviest hitters in the most important institutions in the world. This makes sense since heterodox theories like Post-Keynesian Economics focus a good deal on accounting, stock-flow consistent models, banking, etc. The fact is, A LOT of people on Wall Street find PKE insights to be very useful because they reflect a highly accurate description of the way the financial system works. In my opinion, if you work on Wall Street and you don’t understand Post-Keynesian Econ then you’re at a major disadvantage.
Cullen flatly states it is worth your time to slog through the papers as an academic, because some of the very best and brightest practitioners did it and think the PK model is worthy of time and effort.
I will add:
- the Bank of England fully supports Endogenous money – a core Heterodox position. Honestly, this paper reads like the monetary realism position.
- Paul McCulley – one of the best out there – has repeated used something close to the PK model to talk about the world of finance
These heterodox ideas have become completely mainstream. Prominent mainstream people and institutions are endorsing core parts of the Post-keynesian model. The central bank of England and the chief economist for the most prominent investment bank in the world both use important parts of the PK model as how they think about the economy.
It’s worth getting into the details to find out more, it really is, just to keep up with what is happening in the world.