What I call the ‘consensus assignment’ in modern macroeconomics is that monetary policy keeps output stable at a level that leaves inflation at target over the medium term, and fiscal policy stabilises the ratio of government debt to GDP. Most mainstream macroeconomists understand that assignment does not work at the Zero Lower Bound (ZLB), but a few disagree. To those that follow MMT fiscal rules that target the deficit are wrong because they think fiscal policy should do the job monetary policy is supposed to do in the consensus assignment, even outside the ZLB. They do not think monetary policy is predictable or reliable enough to do the job the consensus assignment gives it. That is a perfectly legitimate view, but one I and mainstream macro do not agree with. I discussed all this here in March.
Contrast this simple one paragraph explanation to this post, which takes 14 paragraphs to miss this basic point. Instead it says
- I assume that output is constant (my italics)
I prefer models about how the world should work rather than how it works
I am “a static kind of man living in a dynamic world”
I am “a proponent of waste”
People should question my veracity when I make my arguments
The first three are mistakes I can understand, because for some reason he has failed to grasp the point about monetary policy and has tried to come up with other rationalisations. But the final mistake is going too far: just because you cannot understand another point of view does not mean the other person must be lying. Is this acceptable discourse within MMT?