In the midst of the current deficit-cutting frenzy, the “deficit owls” of Modern Monetary Theory are finally getting some attention within mainstream media.
The latest is the article by Dylan Matthews in the Washington Post. It’s a good first primer on the historical roots (in Keynes) and basic ideas (including the links among money, the government, and taxes) of Modern Monetary Theory as well as its policy implications:
In contrast to “deficit hawks” who want spending cuts and revenue increases now in order to temper the deficit, and “deficit doves” who want to hold off on austerity measures until the economy has recovered, Galbraith is a deficit owl. Owls certainly don’t think we need to balance the budget soon. Indeed, they don’t concede we need to balance it at all. Owls see government spending that leads to deficits as integral to economic growth, even in good times.
I’ll be interested in reading Bill Mitchell’s response. In the meantime, Mike Norman includes links to a variety of commentaries. Philip Pilkington discusses the idea of the liquidity trap and explains the differences between two types of Keynesianism (basically, the Hicks/ISLM Keynesianism of the neoclassical synthesis and what we now refer to as Post Keynesian economics). Jared Bernstein dips his toe in the water. And Yves Smith exposes the Roosevelt Institute’s decision (under pressure from the Peterson Foundation) to distance itself from Modern Monetary Theory.
One can only hope that the deficit owls of Modern Monetary Theory, like the owl of Minerva, can spread their wings and fly before the dusk starts to fall.
