To explain MMT to people

It’s often said that people disagree just because they don’t understand each other. I do indeed understand MMT, and I don’t think proponents understand humans. The varied “if this, then do that” in the theory all work. It’s just humans don’t tend to do the things the theory requires. Sure, we can stimulate the economy with more money printing. It’s just that people with the taste for that never do stop nor tax back the resultant inflation.

We can even explain this to people who have no idea of economics at all. Here’s one way of putting it: Politicians can spend as much as they like on whatever, and if it goes too far they can just raise taxes. Sound like a deal? It could also be described as follows: Giving politicians a blank checkbook and telling them to go have fun is likely to work out well, right?

3 thoughts on “To explain MMT to people”

  1. Good points. Some of us also apply them to a carbon tax. Nice technical idea but, you know, humans and politicians, etc.

  2. 1. How do they know the taxes they raise will reduce the resulting inflation – would raising income tax reduce rampant house inflation as everyone piles into property with this new money?

    2. Raising taxes is unpopular. Governments are going to say, “oh the theory requires us to raise taxes now – don’t worry, the public will understand”

    3. Murphy et all have been whining non stop about ‘austerity’ for a decade. They’ll be happy with deflation to cope with problems with MMT though. Somehow. Er, yeah.

  3. @ Rob
    We could run an experiment to see if that worked. Oh wait! We did run an experiment – it was called a Labour Government and it *invented* rampant house price inflation by making your house the only safe storage place for your savings by having top marginal income tax rates of 98% with a one-off surcharge lifting above 100%, inflation >100% in five years, capital gains taxes on the nominal rise in price of any asset except owner-occupied houses so you were paying tax on a real loss; house price inflation never fully disappeared under Mrs Thatcher but it declined, the house prices much more than doubled in ten years 1997-2007 under “New Labour” (they were still more than double the 1997 level in 2010 after a “crash”).

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