MMT Again

I thought we’d made peace on this topic a long time ago, but I guess not according to these comments….Against my better judgment I am going to respond to some of them….

I don’t really align myself with any particular school of economics because I believe there is enough gray area in economics that it’s dangerous to pigeonhole one’s self into a fixed set of ideas. I learned this lesson the hard way in 2011 when I briefly promoted Modern Monetary Theory (MMT) online. Although I never fully adopted all of their ideas I did promote many of the general ideas. And as a Post-Keynesian sympathizer I still think many of these ideas are good. But it was my mistake in misunderstanding the entirety of the theory and I should have known better than to endorse something that was so new and not widely accepted by, well, anyone in the mainstream. That said, I think my critique is more valid than ever even if MMT advocates will dismiss a partial critique entirely. But let’s look at some of the comments there because a few are good (even though most are just nonsensical ad hominems of the type we, unfortunately, still see at MMT websites).

“Kristjan” writes:

” Some involuntary unemployment is the natural state of a capitalist system where capitalists will hoard profits over time and fail to maintain zero involuntary unemployment because it would be unprofitable for them to always maintain such an environment. ”

What an idiot Cullen has become. This garbage doesn’t deserve a reply.

What an idiot I must be! There is vast empirical and historical evidence showing that capitalist systems do not maintain full employment on their own. My theory is that this is largely due to capitalists unintentionally maintaining a buffer of unemployed people because capitalists cannot perfectly predict the future, tend to operate irrationally at times, do not sell all of their goods and services available, prefer to maximize profits and tend to monopolize profits if not regulated. Capitalists would prefer to be able to sell their goods and services without any costs which is now unfolding in the form of automation and other technological efficiencies we’re seeing across the economy. In an extreme sense, capitalists would love to be able to sell their goods and services without hiring even a single employee which means that full employment is a goal that is inherently at odds with maximizing profits. I am not saying that’s right or moral or anything like that. It just is what it is. Perhaps my theory is wrong, but there is still zero evidence supporting the idea that a capitalist system can maintain full employment at a living wage for any sustained period of time. In fact, I am not sure it has ever happened for even an instant, but I could be wrong….but what’s weird is that, if my theory is right, then the argument for government intervention is actually enhanced. That would seem to be in-line with the MMT Job Guarantee, no?

“Ignacio” writes:

So he basically is throwing the NAIRU argument around? What a fool…

Actually unemployment is not a feature of a capitalist system, with no wage floor there can be zero involuntary unemployment. It would be slavery in anything but name (well, worse than slavery, because you don’t receive anything on exchange, at least slaves have to be feed), but hey, they would be employed…

What a fool I must be!  Except, slavery isn’t employment so I don’t think we really need to respond there. And no, I’ve rejected NAIRU vehemently. Again, I disagree with the idea that full employment can be maintained by capitalists on their own. And I don’t know of any empirical evidence proving this wrong….

“Bob” writes:

What is Roche up to nowadays? How’s that Monetary Realism working out for him?

How nice of you to ask Bob! This site has slowed because, well, none of us are economists!  So, we write about econ theory on occasion and probably not nearly as much as we wish. Me personally, I am focusing on the same stuff I’ve always been doing – helping people build and maintain low fee diversified portfolios and financial plans. I’m trying to fight off all those bad guys in the financial space that we don’t like so much – you know, the high fee hedge fund guys, mutual fund guys and other high fee types who I don’t believe add much value.

Further, I am not an economist and largely dabble in this stuff because it overlaps with bits of my professional work. Importantly, I don’t care for theory or policy so much and tend to focus on the operational nature of these ideas since, as a market practitioner, I am more concerned with how the markets work and not necessarily how theory and politics can make them work better.  Not that I think that stuff isn’t important, but I am a big believer in the idea that you can’t fix something you don’t fully understand. So, if anything I hope some of my work helps people better understand some of the operational aspects so they can endorse better policy ideas.


Over on the linked to website, an MMT advocate writes:

There is no claim that MMT is “inherently progressive”.

This is common with MMT laypeople who say things that are just wrong. One of the MMT founders once said this very clearly:

MMT is inherently progressive.

That’s. Pretty. Clear. Economics should be progressive. So I don’t see what the beef is there. What I find disturbing about some MMT commentary is how they sometimes try to convince people that it isn’t aligned with a political narrative and instead can be embraced by Conservatives and Liberals. It’s great that MMT is inherently progressive, but what I don’t understand is that they sometimes shy away from this. If you’re going to directly endorse policy then we should clarify what those policies are so people can fully understand them. But who cares if MMT is progressive? It’s a theory that is much more likely to be embraced by Marxists, Socialists and Liberals. That’s totally fine. I don’t see what the fuss is about!

Anyhow, none of this actually touched on my actual critique which is a shame because I think there are some fairly solid points there. But the flaws I highlight shouldn’t overshadow the many good points that MMT makes. After all, there is much more good in MMT than bad. The fact that it isn’t a perfect theory doesn’t make it a useless theory. Personally, I find MMT very useful, but I also think they overreach on some things. I probably do that also and I suspect that most econ schools do. So what. Now, can we all stop the mud slinging and name calling so we can make sure that a racist egomaniac doesn’t end up in the White House?


Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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2 Comments on "MMT Again"

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Cullen, thanks for your clear thinking on this. I’ve found your view on economics very balanced and fair. Don’t let the haters get to you. They dislike that you understand their weak points. Keep up the good work.