Arjun Jayadev Together With J. W. Bricklayer — Mainstream Macroeconomics Together With Modern Monetary Theory: What Actually Divides Them?

Abstract

An increasingly visible schoolhouse of heterodox macroeconomics, Modern Monetary Theory (MMT), makes the illustration for functional finance – the sentiment that governments should fix their financial position at whatever degree is consistent amongst cost stability too sum employment, regardless of electrical flow debt or deficits. Functional finance is widely understood, past times both supporters too opponents, every bit a divergence from orthodox macroeconomics. We fighting that this perception is mistaken: While MMT’s policy proposals are unorthodox, the analysis underlying them is solely orthodox. H5N1 cardinal banking concern able to command domestic involvement rates is a sufficient status to permit a authorities to freely pursue countercyclical financial policy amongst no danger of a runaway growth inwards the debt ratio. The difference betwixt MMT too orthodox policy tin flaming endure idea of every bit a unlike assignment of the ii instruments of financial position too involvement charge per unit of measurement to the ii targets of cost stability too debt stability. As such, the debate betwixt them hinges non on whatever fundamental difference of analysis, exactly rather on unlike practical judgements – inwards detail what kinds of errors are almost probable from policymakers.

Mainstream Macroeconomics too Modern Monetary Theory: What Really Divides Them?

Arjun Jayadev too J. W. Mason

August 22, 2018

John Jay College - CUNY 

Department of Economics Working Paper 2018-8

Also available at INET