Unhelpful, Misguided, Amateurish

A reader responds to my MMT post:

[t]he above is a terrible unhelpful, misguided and amateurish review of MMT. Your understanding of the role of inflation and the actual operational positions espoused by its proponents is useless. Perhaps it’s driven by politics or some ideology but you could probably learn a bit by spending a bit more time on it all.

Fair enough.

Look. I’m not an economist. I write as a practitioner in financial markets. As such, I’m mainly concerned with incentive systems and how they impact strategic decision making by individuals and institutions.

Politicians are always and everywhere incentivized to run deficits and print money. Hand politicians a license to run deficits of arbitrary size and they will print and print and print. This isn’t left versus right political thing. This is a human nature thing.

Under MMT, it would be up to self-interested politicians and their appointed bureaucrats to ensure we don’t end up with hyperinflation. Self-interested politicians and appointed bureaucrats hardly have an unblemished track record when it comes to economic management.

Now, I should be clear here that my commenter is correct. My opposition to MMT is absolutely ideological. Specifically:

  • I don’t believe bureaucrats are capable of pulling off the operational balancing act MMT requires.
  • More importantly, I don’t believe bureaucrats ought to be empowered to try and pull off the operational balancing act MMT requires in the first place.

In my estimation, the downside risks are catastrophic. We could end up on The Road To Serfdom. We could end up with hyperinflation. Anyone regularly involved in decision making under uncertainty knows that the way you manage the risk of ruin is either to hedge it or to avoid taking it in the first place.

That’s not to say MMT can’t work. The theoretical viability of MMT is something for economists to argue over.

My argument is much, much simpler. Given what we know about human nature and fallibility, and given the historical track record of economic planners and administrators, the potential negative outcomes from a real-world implementation of MMT (you know, total economic collapse) far outweigh the potential benefits.

As a wiser man than me once said: “you were so preoccupied with whether you could, you didn’t stop to think whether you should.”

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