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Bisin on MMT Rhetoric

Summary:
Alberto Bisin has written an intriguing short review of Stephanie Kelton's The Deficit Myth. Alberto focuses on the rhetoric of MMT and the book. (My review here FYI.) MMT's rhetoric is surely its most salient feature. It has been phenomenally successful in terms of gaining attention, and it has eschewed all the traditional rhetoric of economics -- academic articles, conference presentations, monographs full ...

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Alberto Bisin has written an intriguing short review of Stephanie Kelton's The Deficit Myth. Alberto focuses on the rhetoric of MMT and the book. (My review here FYI.) 

MMT's rhetoric is surely its most salient feature. It has been phenomenally successful in terms of gaining attention, and it has eschewed all the traditional rhetoric of economics -- academic articles, conference presentations, monographs full of equations, econometric estimates and tests, or even mountains of charts and graphs, PhD students fanning out to develop it. 

[In response to JZ comment, that is not necessarily good or bad, it's just a fact. The conventional economic rhetoric produces a lot of garbage, too.  Bryan Caplan has a point. The major distinction may be engagement with critics, which happens in conventional discourse and so far has been largely absent with MMT  

Kelton's book is unusual in MMT rhetoric for appearing to be one definitive source that would lay it out, following standard rhetoric. The trouble with writing a book is that sometimes people read it carefully, and are emboldened that they aren't missing something in the usual flurry of blog posts tweets and videos. Then the world finds out the ideas in it are empty, the rhetoric artifice rather than explanatory. 

(NB, "rhetoric" has gained an unfortunate pejorative in common usage. I mean no such pejorative. How we structure economic discussion is hugely important. If you have not read Deirdre McCloskey's Rhetoric of Economics article or subsequent books, do so immediately.)    

Alberto: 

The book should be seen as a rhetorical exercise. Indeed, it is the core of MMT that appears as merely a rhetorical exercise. As such it is interesting, but not a theory in any meaningful sense I can make of the word. The T in MMT is more like a collection of interrelated statements floating in fluid arguments. Never is its logical structure expressed in a direct, clear way, from head to toe.

In particular, 

Some of these statements are literally correct but used for incorrect or misleading implica- tions—plays on words, effectively. They seem taken directly from the book of tricks of the Greek sophists (the ones Aristophanes makes fun of). For instance, statements to the effect that any monetary sovereign cannot default on its debt because it can always monetize it are of course literally correct. This does not imply that the consequences of monetizing the debt, in real terms for bondholders, are much different from those of a literally defaulted-upon debt.

Later, 

These general components of the rhetorical exercise of MMT are sprinkled with a flurry of more standard tricks:

(i) Straw men arguments: mainstream economists are presented as thinking that deficit spending is, in and of itself, overspending; that deficits necessarily crowd out private assets, that is, that the economy’s savings are exogenously given, etc.

(ii) Identities used as behavioral relationships: government deficit = nongovernment surplus, current account deficit = capital account surplus, etc.

(iii) Irrelevant details playing with the imagination of the reader: how can the monetization of the debt be so damaging if it can simply be “accomplished using nothing more than a keyboard at the New York Federal Reserve Bank” (p. 83)?...

Alberto has some nice things to say about one rhetorical trick:  

I also find the rhetorical innovation of using the word “deficit” to stress lack of social insurance in the US political economy (“the good-jobs deficit,” “the education deficit,” “the health-care deficit,” and so on, in contrast to government deficit) intelligent and witty.
I found this deliberate misusage of technical language annoying. 
 
Alberto is more favorable to Kelton's spending plans than I am. The book, he notes,  
contains provisions for infrastructure, education, health care, job guarantees, etc. These are large but generally worthwhile public-spending objectives. 
I disagree, but this is pure opinion on all sides. 

Neither Alberto nor Kelton got to the implications of her argument however -- if spending is free, and federal debt is free, why should any of us pay back debts? Why not cancel student loans, car loans, mortgages, state and local debts, pay for all pensions? Why not just borrow money and send people checks and we can all stay at home and order from Amazon? 

Alberto notes that there is a serious debate on these issues
low interest rates and low inflation might really be calling for more debt in the United States at the present time. These are all issues currently studied and debated in (mainstream) academic and policy circles.

Circles that Kelton seems completely unaware of, and they completely unaffected by MMT. 

Bottom line, well expressed: 

MMT, as exposed in the book, appears to be a very poor attempt at supporting this political [spending] agenda, with no coherent theoretical support.

(Of course Alberto also notices logical contradictions as well as rhetoric; that Kelton acknowledges inflation as a "limitation," but never talks about when or how inflation might happen,

Inflation is never built in the structure of the arguments; it is mentioned and quickly for- gotten. ... never is the inflation of the 1970s in the United States discussed...

But the review is most distinctive for analyzing the rhetoric.)  


John H. Cochrane
In real life I'm a Senior Fellow of the Hoover Institution at Stanford. I was formerly a professor at the University of Chicago Booth School of Business. I'm also an adjunct scholar of the Cato Institute. I'm not really grumpy by the way!

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