Becoming influential

The Economist has a long article on “economics in the blogoshere”:

From his perch on America’s periphery, Mr Mosler champions a doctrine on the edge of economics: neo-chartalism, sometimes called “Modern Monetary Theory”. The neo-chartalists believe that because paper currency is a creature of the state, governments enjoy more financial freedom than they recognise. The fiscal authorities are free to spend whatever is required to revive their economies and restore employment. They can spend without first collecting taxes; they can borrow without fear of default. Budget-makers need not cower before the bond-market vigilantes. In fact, they need not bother with bond markets at all.

The neo-chartalists are not the only people telling governments mired in the aftermath of the global financial crisis that they could make things better if they would shed old inhibitions. “Market monetarists” favour more audacity in the monetary realm. Tight money caused America’s Great Recession, they argue, and easy money can end it. They do not think the federal government can or should rescue the economy, because they believe the Federal Reserve can.

The “Austrian” school of economics, which traces its roots to 19th-century Vienna, is more sternly pre-Freudian: more inhibition, not less, is its prescription. Its adherents believe that part of the economy’s suffering is necessary, an inevitable consequence of past excesses. They do not think the Federal Reserve can rescue the economy. They seek instead to rescue the economy from the Fed.

Economics, perhaps more than any other discipline, has taken to blogs with gusto. Mainstream figures such as Paul Krugman and Greg Mankiw have commanded large online audiences for years, audiences which include many of their peers. But the crisis has made the academic establishment fractious and vulnerable. Highly credentialed economists now publicly mock each other’s ignorance and foolishness. That has created an opening for the less decorated members of the guild, and the truly peripheral.

The clearest example of the power of blogging as a way of getting fringe ideas noticed is “The Money Illusion”, a blog by Scott Sumner of Bentley University, in Waltham, Massachusetts. In the wake of the financial crisis Mr Sumner, a proponent of market monetarism, felt he had something to say, but no great hope of being heard.

“Austrians” have been around for ages, “Neo Chartalists” sound too much like “charlatans”. I´ll bet on “Market Monetarism” as the new “influential idea”.

HT David Levey

2 thoughts on “Becoming influential

  1. Pingback: The Economist comments on Market Monetarism « The Market Monetarist

  2. Sorry, erase previous post
    Neo chartalism sounds to me like an old Friedman´s article, that I commented here
    I think that is a very good idea, perhaps not very aceptable politically.
    On the other hand, I suspect MMT is pure monetarism disguised, as the article of Friedman is obviously, monetarist.
    So, the differences are not so scandalous.
    I wouldn´t like to close all the door to some elements of other schools that in the fundamentals are not so away from monetarism.
    I mean that reducing all the debate about monetary policy to the reasonably of NGDP objective is a little impoverishing.
    I am strongly attracted by the Friedman article and some coincidences with MMT, in the sense that fiscal and monetary policy would be coordinated, both pursuing a credible objective of estability. I don´t see why not to analyse the pros and cons of an idea of which Friedman was pioneer.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.