Not on the money

There is an interesting report in Business Insider of a survey of America’s economists. It states

In the latest survey of 42 of America’s top economists by the Chicago Booth School of Business, not a single respondent agreed with the basic tenants [I think they meant tenets!] of Modern Monetary Theory (MMT):

36% of economists disagreed and 52% strongly disagreed with the statement, “Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt.” (2% had no opinion.)
26% of economists disagreed and 57% of economists strongly disagreed with the statement, “Countries that borrow in their own currency can finance as much real government spending as they want by creating money.” (7% had no opinion.)

Apart from finding it alternately hilarious and depressing that up to 7% of these professors of economics had NO OPINION on these statements, it has to be admitted that the questions themselves were not the best, and so for example, Larry Samuelson from Yale, whilst he ‘disagreed’ with both statements, his comments indicate that he considers MMT is actually correct:

Deficits can be financed by creating money, but still have disadvantages as well as advantages that should be carefully considered.”

Creating money can finance a great deal of spending, but incidents of hyperinflation, collapse and other crises indicate there are limits.

So although the questions were poorly thought through most of the economists are themselves thinking poorly  – because more than half ‘strongly disagreed’ with both statements. That tends to suggest that in American Universities most Economics Professors don’t understand money. Indeed some of their comments appear to suggest they don’t even understand Quantitative Easing! And it is both interesting and lamentable that none at all mention tax.

I rather fear that a similar survey in Britain might not be too dissimilar.

Comments

  1. Bill Hughes -

    Yes it does seem that public opinion (in the form of press and media coverage) in both the US, UK and probably most other countries in the world have had the mantra of a government being like a household and must ensure that income covers expenditure and that debt must be avoided at all costs drummed into them over decades if not centuries. With the public so (indoctrinated?) in believing that the household analogy is the golden rule of economics, it is no wonder that economists are loath to admit there is another explanation of the way money and taxation works. Anyone publicly raising their head above this overwhelming public opinion parapet is bound to get a lot of stick and their university funding may be put at risk with any view that could be regarded as wacky or subversive.

  2. Andrew Dickie -

    When one considers that these are economists who are living in the country that saw the successful effects of FDR’s New Deal, set against the current tragicomedy of Trump’s baleful $1.5 trillion tax giveaway to the 1% – actually, the 0.1% are less – to be followed by a punitive threatened slashing of Social Security by $2.5 trillion, one wonders what planet, or even universe/dimension they’re living in, given that, by their reasoning, the New Deal should have bankrupted the USA, while Trump’s tax cuts should have “raised all boats”.

    One’s reminded of the alleged argument between two ancient Greek philosophers over how many teeth a horse has, based on their adherence to ideas of divine perfection. After some argument, a third person intervened to posit their view on the matter, giving their assessment of the matter.

    “How do you know?”, asked one philosopher.

    “I counted them”, said the third person!

    Enough said.

  3. Peter May -

    I’ll take a look!

  4. Michael Green -

    Crazy! If a government has its own currency, the amount of money it can borrow is still limited, just not limited by the difference between spending and taxes.

  5. Alan Luchetti -

    Bad faith much? MMT economists, to a man and woman, would all have answered “strongly disagree” to both statements, for reasons offered by the more enlightened of the economists surveyed”. Those were straw man statements.

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