Saturday, March 2, 2013

A clueless Stephanie Kelton on the Thom Hartmann show: Modern Monetary Theory as Marxism lite


MMT Queen Stephanie Kelton was on the Thom Hartmann show this week asserting that "infrastructure" cannot be provided by "the private sector" and because the government can never run out of dollars, it  can never really run out of the ability to construct "infrastructure".  Just as with the Marxists, production happens "SOMEHOW", and the only thing holding it back is a mistaken belief that we still live under a "gold standard".  The law of scarcity and the problems of economic calculation and pricing magically disappear as the result of the unlimited supply of funny money dollars (actually, MMTers lack the mental capacity to recognize and/or understand the concepts of scarcity, economic calculation and the pricing process).  

For a comparison to Marxism, let's examine this review of Thomas Sowell’s Marxism: Philosophy and Economics:

Perhaps the most telling example of Marx’s ideas in practice is the results of Lenin’s early acceptance of the SOMEHOW approach to all but labor, as indicated by this quote from State and Revolution cited by Sowell:

Capitalist culture has created large-scale production, factories, railways, the postal service, telephones, etc., and on this basis the great majority of the functions of the old “state power” have become so simplified and can be reduced to such exceedingly simple operations of registration, filing, and checking that they can be easily performed by every literate person, can quite easily be performed for ordinary “workmen’s wages”, and that these functions can (and must) be stripped of every shadow of privilege, of every semblance of “official grandeur.”

In fact, Sowell observes that:

The early history of the Soviet Union provided the most dramatic empirical refutation of the Marxian assumption that management of economic enterprises is something to be taken for granted as occurring SOMEHOW. When economic incentives were drastically reduce or abolished in the heady egalitarian period following the Bolshevik revolution, the Soviet economy ground to a halt. Widespread hunger and a halt to vital services forced Lenin to resort to his “New Economic Policy” that restored the hated capitalist practices. The later nationalizing of all industry under Stalin and his successors did not restore egalitarianism. Quite the contrary. There were highly unequal rewards to management, including today whole systems of special privilege stores to which ordinary Soviet workers have no access. Moreover, the managers of Soviet industry have been disproportionately the descendants of the managerial class of earlier Soviet and czarist times (193).

Then comes the noteworthy conclusion:

Many observers have seen these developments as mere betrayals of Marxist ideals, missing the more fundamental point that a crucial false assumption must be corrected in practice if people are to survive. Its continuing sacredness in theory can only produce hypocrisy. The betrayal may be real, but in Marxian terminology, “no accident.” A similar process is occurring in China, to which many Western Marxists transferred their hopes after disillusionment with the Soviet Union. This too is seen as simply a betrayal of Mao by Deng, rather than a nation’s painful learning from experience that a key assumption of Marxian economics is false (193-4).

The gross falsehoods of Marx’s communism is why the lament commonly heard from so many communist sympathizers — that “true” communism was never put into practice — ought to be rejected. In fact, the ideals of communism — collectivism, dialectical materialism, the evils of capitalism, the idea of labor as the source of all surplus value, the goal of reshaping of man’s nature, the principle of “from each according to his ability to each according to his need,” and so on — were substantially put into practice by the communist regimes of the 20th century. The fact that the result was widespread starvation, forced labor camps, unbearable misery, totalitarian police states, and mass death is hardly a reason to think that the more consistent application of these ideas would result in blissful paradise.

I have pried and prodded these MMTers until I'm blue in the face. While they understand how the various squirtings of funny money appear within our nefarious fiat money system, they have no conception of how the underlying economy actually works because they do not understand production or pricing and they believe that the entire society is held together by these allegedly essential squirtings of funny money by the fiat funny money system.

28 comments:

  1. http://bilbo.economicoutlook.net/blog/?p=4870

    ReplyDelete
    Replies
    1. Let's review some nonsense that Billyblog spouts:

      "My statements about the Austrian school are aimed at their pronouncements on macroeconomics issues. Their ideas about individual markets are beyond my attention and interest. I am not, however, ignorant of the literature. I have studied the writings of Von Mises, Böhm-Bawerk, Van Hayek, Rothbard, and more in considerable depth over the course of my career as a student and then academic. In fact I have spent too much time given the relevance their ideas have to anything. I find their reasoning at the micro level to be tantamount to an obsession against socialism which reflects the period that the ideas were developed and the people who were developing them.

      There is no presumption of “socialist calculation” in modern monetary theory. There is a presumption that the non-government sector will save and that that spending gap has to be filled. The only other sector left is the government sector. It will make mistakes inevitably in doing so – this is social science after all. But in my view the order of the mistakes will be smaller than the costs that are incurred by those who allow unemployment to persist at high levels indefinitely.However, on socialist calculation, I wonder how Oskar Lange would see the world now with the computer networks and instantaneous transfer of information that is possible. The socialist calculation was solved analytically it was just problematic due to information insufficiency. We can solve that problem now easily. So most of the Austrian critique from that time would lapse in my view. But that is another story."

      I'm perfectly fine if that is the MMT response to the problem of economic calculation, price distortions and the problem of knowledge in society. You are all worse than clueless.

      Delete
    2. Besides, the poor grammar, I'm struck by this bit:

      "...on socialist calculation, I wonder how Oskar Lange would see the world now with the computer networks and instantaneous transfer of information that is possible."

      Oh my, did he really say that?!?

      ::bangs head repeatedly against the desk::

      So much for "extensively studying" the Austrian literature...

      Delete
    3. He's Australian. They talk funny.

      Tie me kangaroo down sport.

      Delete
  2. Here's a few snips you forgot.

    "You seem to be saying that macroeconomics is not a legitimate area of economics – so I guess you have nothing to say about budgets, public debt levels, inflation, national income, external trade, and the rest of the aggregates that occupy our attention. But moreover, if you think you can make statements about the economy by focusing on the micro level then you will quickly fall foul of the fallacy of composition which renders all such statements erroneous.

    Economists prior to the Great Depression thought they could make macro statements by simply summing their micro statements (person to market to economy reasoning). They applied tools they considered would work for an individual firm to the economy and what did they find – they didn’t work. There is a macroeconomic sphere that goes beyond the micro and which needs separate and distinct theorising. Even the Austrian School recognises that in their business cycle theories."

    and more:

    "Further, there is no presumption that private markets do not operate or are extinguished in modern monetary theory. Where do you get that from? As an example (of many), if you really understood the Job Guarantee you would see it doesn’t interfere with the private labour market at all. It just hires workers who have zero bid in the private market at a wage below the private market wage structure (the effective minimum wage). The private sector can at any time they like hire those workers away from the Job Guarantee pool. Further, if the private markets do not like the size of the budget deficit they have total control over reducing it – invest and spend more themselves."


    and even more:

    "But the issues I write about here are so problematic for the Austrian school that wants to get rid of most of government spending and taxation that it is actually hard for them to stay on topic."

    ReplyDelete
    Replies
    1. The "issues" he writes about are imaginary or else are caused by interventionist policies in the first place. The proposed "cure" is the cause of whatever problems he thinks he has identified. If I have time later, I'll comb through his every sentence.

      There are no economic issues that Austrians have missed, much less ducked and we can always stay "on topic".

      Delete
    2. There is a macroeconomic sphere that goes beyond the micro and which needs separate and distinct theorising.

      I deny that statement. It's the "Emperor's New Clothes" of economics. The baseless assertion is that only us anointed ones can see these alleged "macro" effects which you puny individual humans cannot. Pure garbage.

      Further, government works exactly like a household. A household of thieves and murderers.

      Delete
  3. "Further, government works exactly like a household. A household of thieves and murderers."


    Well, now I know I wasted a few seconds of my time on an imbecile.

    ReplyDelete
    Replies
    1. I always expect the name calling to start when an MMTer starts to lose the argument. My hobby is actually collecting examples of "progressive" starting to lose their arguments and proceeding on to a petulant snit.

      I've added you to my collection. Thanks.

      Delete
  4. I don't even have to expect name calling when dealing with austerity Austrians. I know they always start with it, but somehow can't handle it when it comes back to them, and you are of course no exception.

    I shouldn't be wasting my time on you but I'll book it on the enjoyment account.
    Since you most likely subscribe to Mises Dailies here's some more reading for you:
    http://bilbo.economicoutlook.net/blog/?p=15842

    ReplyDelete
    Replies
    1. I'm sure I've read all the Billblog stuff before. But I'll read it again.

      Why don't you take a deep breath and tell me why a government isn't like a household full of criminals, thugs, thieves and mass murderers? I mean, that's the definition of a government, after all.

      Delete
  5. James Juniper and William Mitchell wrote*:

    "The crisis has once again exposed the fallacy of the notion that free markets can regulate and generate sustained growth and prosperity. It has been categorically reaffirmed that “free markets” do not work effectively." Page 2:

    http://e1.newcastle.edu.au/coffee/pubs/wp/2008/08-10.pdf

    That is total garbage. There was no "free market". There was a regime of fiat money created out of nothing by bank loans which distorted the price structure, and thus the investment and capital structure. The Billyblog "analysis", such as it is, is fraudulent and dishonest.

    * "For now, this blog introduces what is called stock-flow consistent macroeconomic accounting structures. It is based on a paper I wrote last year with James Juniper called There is no financial crisis so deep that cannot be dealt with by public spending".

    ReplyDelete
  6. You mean fight your straw men army? I already wasted enough time, so I´ll pass on that.

    While you're at it, here's a post about debunking myths.
    http://bilbo.economicoutlook.net/blog/?p=19265

    You should be touched.

    ReplyDelete
    Replies
    1. You haven't wasted any time because you haven't offered any arguments. And that's because you have no arguments to offer. So you quit.

      Delete
  7. These MMT cultists just repeat whatever Warren Mosler or Mike Norman said. They've probably never even cracked open a standard macro textbook. I also love the straw men of right-libertarian economic theory.

    Look at this post and notice the condescending tone that a certain Philip Pilkington takes when trying to discuss economics with a non Post-Keynesian and assumes that he's some Austrian studying praxeology.

    http://socialdemocracy21stcentury.blogspot.com/2013/03/jonathan-catalan-puzzles-over-hayekian.html#comment-form

    Priceless.

    What do you think about mutualism?

    ReplyDelete
    Replies
    1. Also here:

      http://mikenormaneconomics.blogspot.com/2013/02/226-am-philip-pilkington-fear-industry.html

      Delete
  8. Pilkington understands nothing. I've tangled with him and his "ideas" before.

    http://mikenormaneconomics.blogspot.com/2013/02/lord-keynes-philip-pilkington-on-hayek.html

    I have no interest in mutualism. If people in a voluntary relationship want to bind up each other this way through contracts, it's none of my business.

    ReplyDelete
  9. And here:

    http://mikenormaneconomics.blogspot.com/2012/10/philip-pilkington-three-reasons-why.html

    ReplyDelete
  10. Thanks for the kind reply, Mr. Roddis. Your opponents have underestimated you from how they childishly responded to your arguments. I thought some mutualists followed Murray Rothbard but also identified themselves as left-libertarians, if that's even possible. I really like Roderick Long and his work.

    Did you watch the two YouTube videos I mentioned in my other comment? I thought you needed a good laugh at another ridiculous straw man of libertarianism.

    ReplyDelete
    Replies
    1. 1. I'm officially neutral on what one does with one's freedom.

      2. What YouTube videos?

      Delete
    2. Some reactionary on YouTube said something really stupid about anarcho-capitalism and claimed that Ancaps wanted the end of society and another YT user pointed out the fallacy he had made here.

      http://www.youtube.com/watch?v=uor20NaAd3E

      Delete
  11. Bob,

    What do you believe MMT'ers would have to say about this? Lol!

    http://www.economicpolicyjournal.com/2013/03/the-best-kept-secret-in-financial-world.html

    ReplyDelete
  12. Roddis,

    You are an absolute buffoon.

    [Cue the endless whining about not understanding or engaging in austrian concepts]

    ReplyDelete
    Replies
    1. Well..... You don't and you didn't.

      Asshole.

      Delete
  13. Maybe it's best to ignore LK. You've been arguing with the guy for years now. What's the point exactly?

    ReplyDelete
    Replies
    1. I find him entertaining and informative. He actually reads Austrian writings and then makes mountains out of molehills. Like here.

      http://socialdemocracy21stcentury.blogspot.com/2013/03/mises-and-hayek-dehomogenized-note-on.html

      After reading this, I realized that I like to take a few things from Hayek and a few things from Mises and that each has a slightly different insight on the same phenomena. And I feel that the Austrians have won another round because LK has found the need to distort the essence of our position without ever really understanding the essential concept of economic calculation.

      Let's look at all the Austrian stuff LK has read.

      http://socialdemocracy21stcentury.blogspot.com/2012/06/debunking-austrian-economics-101.html

      After all that, his definitive critique is that Austrians ALWAYS PREDICT that businesses will ALWAYS slash prices, and not production? That's it? It means we've won the debate and that I have induced LK's ridiculous, dishonest and pathetic arguments.

      I become more informed due LK's discoveries from the sacred scrolls while knowing that Austrian analysis is still safe from refutation.

      Delete
    2. I have seen LK's blog cited by the guy who runs the Maoist Rebel News YouTube channel as an attempt to refute Mises Institute people.

      Delete
    3. I'll agree that LK is one seriously disturbed individual. I've avoided him for weeks. Then yesterday, he wanted to pick a fight over the fact that I corrected one of his poorly worded examples. Engaging him is probably not healthy.

      http://mikenormaneconomics.blogspot.com/2013/06/lord-keynes-gardiner-means-on.html?showComment=1371916141429#c6220343557252103024

      Delete