Sorry MMTers, the Economy Doesn't Exist and GDP is Bogus

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Wed, 07/20/2011 - 11:28 | 1473836 Vinz Klortho
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I don't understand your point.  People would have the same motivation to work as they do now.  To produce something useful and gain income to purchase the useful work of others.  MMT doesn't require some socialist utopia to operate, where do you come up with this stuff?

Vinz Klortho

Wed, 07/20/2011 - 01:34 | 1472951 Chinese Busboy
Chinese Busboy's picture

So sorry, this criticism of MMT is weak and doesn't work. A Mr. Frank Shostak writes a 1800 word article in 2001 that says, "GDP framework is an empty abstraction devoid of any link to the real world" and that is the death knell for MMT?  Are there any other Austrian economists or any economists for that matter in the last ten years who have built on Mr. Shostak's work and provided further proof that the "GDP framework is an empty abstraction"? Has Mr. Shostak even come back to this topic? Can you cite any other scholarly publications that prove that hypothesis? Who made Mr. Shostak the lord of economics, who has single handedly slain the the GDP dragon? Where are the monuments to this great man? Why hasn't he published a book to cement his claim to fame? Isn't GDP the foundation of all mainstream economics? It really looks like Shostak made a one-off rant that has gotten no traction with anyone.

In fact, Shostak recently wrote an article at Mises entitled "The Depression is Not Over" . His conclusion in that article: " A sharp fall in the current growth momentum of AMS poses a threat to economic growth in terms of GDP in quarters ahead." So Mr. Shostak uses the term GDP 20 times in his recent article, and it is just an "empty abstraction"? It seems that the current Shostak has a need to use GDP or the "empty abstraction" to discuss the economy.

And taking old quotes from Abba Ptachya Lerner to say that the MMT of Wray, Mosler, and Mitchell is about "central planning and price fixing" does not work. Sorry.


Tue, 07/19/2011 - 19:05 | 1472253 Vinz Klortho
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Work is necessary, because even though money can be spent by the government at will, there would be nothing to buy.

Vinz Klortho

Tue, 07/19/2011 - 22:21 | 1472701 MrPike
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Correct, nothing to buy.  So the motivation to work would be to produce goods for the sake of producing goods, not for profit, but for the betterment of society?  I believe MMT'ers must be dreaming of a "great socialist man" one who works for others, and not for himself.  

In my office, people are hardly even able to work for themselves, how could they possibly be persuaded to work for another?

Tue, 07/19/2011 - 19:03 | 1472250 Vinz Klortho
Vinz Klortho's picture

As an interested MMT reader and observer, I have read most of the recent stuff from Mitchell, Auerback, Mosler, Hudson, et. al.

If the theory is invalid, I have been wondering when someone would come along and dissect it, and show where it is flawed and/or invalid.

Unfortunately, this post did not do that.  Instead, it makes a couple of strawman arguments that MMT==socialism/big government.  I'm not really into knocking down strawmen, especially weak ones based on ignorance of the basics.

Big fail. Try again.

Vinz Klortho.

Tue, 07/19/2011 - 21:12 | 1472452 EB
EB's picture

As the "top operating Thetans of MMT" have declared, MMT is not a "theory", so you might want to adjust your second paragraph and get your facts straight. 

As I clearly demonstrated, MMT relies on national accounting identities, which are meaningless constructs.  Real bears no resemblence to nominal. It's a slight of hand shell game.  

If you want a dissection from a differet direction, read Bob Murphy's take (linked to toward the beginning).

The use of the word "strawman" has become the most popular incarnation of the intellectually lazy argument.  Congratulations.  Demonstrate that MMT does not justify government spending.  Big or little, however that might be mearsured, matters naught.

MMT treats the savings/investment/consuption activites of the public and private sectors as equal.  As though the entrepreneur risking his own capital is on an equal footing with the state looting its subjects to foot its bills, and wherein the state suffers no repercussions for malinvestments (and is often rewarded with larger budgets to "get it right").

Tue, 07/19/2011 - 16:23 | 1471698 ping
ping's picture

Great Post. One of the best I've read on ZH. No waffle. No purple prose. No attempts to be cool. Just tells it like it is. And it's better for it. 

Hope to see more of EB. Plus he has a cool top hat.

Tue, 07/19/2011 - 16:19 | 1471685 Donlast
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This is absolutely right GDP accounting is a farce and the debt crisis has revealed what I would term its atrocious fallacies, namely the "G" in the standard textbook equation contributes to economic growth; or that a rise in nominal GDP induced solely by an incremental rise in national debt represents growth. It does not. It never has, it never will. Economic growth is based on the private sector, people, productivity, investment, technology, enterprise and risk taking. Always. Debt unless used for productive, properly costed endeavours simply grabs from the future to consume scarce resources in the present. The real cost of the debt is the interest obligation incurred over the life of the debt, and that should be deducted AT THE TIME of the debt creation in calculating the nominal GDP.? It never is deducted. Simply ignored. Real long-term economic growth cannot possibly be achieved by accumulations of sovereign debt. The only time such debt-created government spending serves a useful purpose is when the inevitable business cycle causes a fall in investment and then it serves as a VERY SHORT-TERM measure to bridge the gap while creative destruction works its beneficial effect and investment revives.? Then it should fall away entirely. But instead it has been continued year in and year out to support unsustainable entitlements, pensions, interest groups and ideological fantasies and so created dysfunctional Western societies and government which pursue vacuous and meaningless notions of fairness, equality and social justice. This is the fallacy that lies at the heart of the failed policies that have been pursued for the last 50 or so years in the West. We now face their nemesis. Keynes would NEVER have supported what was is done in his name by the likes of Krugman.

Tue, 07/19/2011 - 15:35 | 1471459 Zero Govt
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Good article EB ...always interesting to see the historical path of economics and where this largely useless and almost worthless 'profession' (paid soap box for windbags) sprang from!


"Never forget that MMT godfather Abba Ptachya Lerner’s magnum opus was “The Economics of Control : Chapter l. ..The fundamental aim of socialism is not the abolition of private property but the extension of democracy... The benefits of both the capitalist economy and the collectivist economy can be reaped in the controlled economy." The "controlled economy" is an idea that springs from the same ignorant vacuum of high-IQ but running-empty-on-reality (delusion) of the ancient Greek philosophers, academia and those humans that seek authority over others (parasites like Royalty, tribal leaders and politicians). You put it so well with these statements:
"...the GDP framework is an empty abstraction devoid of any link to the real world... the GDP framework is in big demand by governments and central bank officials since it provides justification for their interference with businesses... It's simply another system for central planning and price fixing." Spot on. And society is framed (mentally hed-fuked) by vast arrays of political (parasitical) fabrications, lies and liberal intellectual horseshit. Amongst the greatest fabrications (that do not exist) are; countries and the nation State, national security, public health, equality, social security, the average man, average life expectiency, foreign policy, home office policy, pretty much every political policy in fact and as you mention, 'the economy' and GDP. The biggest fabrication is Government itself. It is a complete and utter sham of a construct and a heady delusional mix of parasites needing a front to rob society and live of its back and idiot academics and liberals suckered into its vacuous window dressing to do 'good' for society (hard when most academics are human train-wrecks themselves!). There is no collective, there is no society, there is no economy, there is no national anything. We are, exist and experience the world as individuals. Period. We sometimes herd or pack when it suites us as individuals. But we cannot be corralled, tagged or policied (or policed) like a flock of sheep. Individuals drive enterprise. Society follows and benefits from those individuals. Politicians and their academic morons have nothing to do with it, cannot improve on it, have no value to add. But they attempt to tap into it, rob it and ride on others backs like they were the wizards. ALL political interference is a negative. All and every Govt sucks.
Look around at the absolute bankrupt shambles East and West 'democratic Government' has made of this planet. It is a trainwreck of Govt corruption, ignorance and incomptence.  The free market and a free society are the only systems that work for the benefit of us all (as individuals). 


Tue, 07/19/2011 - 15:38 | 1471542 EB
EB's picture

Thanks, ZG.

Tue, 07/19/2011 - 13:54 | 1471046 MrPike
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I wish an MMTer would explain to me why work is necessary at all.  If wealth can be created with a printing press, and inflation controlled with taxes, why work at all?  Why not print everyone money, then control inflation with a VAT?  Prosperity without work is a dream of the ages.  MMT survives as a theory because the ultimate consequences of money printing by the reserve currency country have yet to be realized. Theoretically, the reserve currency country can print indefinitely, that is until the rest of the world stops accepting it.  Then it becomes an even bigger inflationary disaster when dollars are unloaded by everyone for anything of value at any price.  

Unfortunately people will just say that "infectious greed of businesses" are responsible for the increased prices, and the all knowing benevolent hand of government will take over even more then they are now.  What is more, is the majority of the people will beg for it, and applause it when we are nationalized completely.  They will say the free market is broken and needs regulation to keep prices fair, and the public will nod knowingly.  Central Banking will not be blamed because understanding it requires patience and discipline, not the average Westerner's strong suits..  

Thu, 07/21/2011 - 18:33 | 1478925 halfacanuck
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For most people labor is necessary in order to earn money, because taxes must be paid if prison is to be avoided. It is this which ultimately creates demand for, and thereby gives value to, a nonconvertible fiat currency. The fact that the input of labor also serves to grow the economy (e.g. by pulling minerals out of the ground, planting corn, taking care of frisky IMF chiefs, etc.) is a bonus, but doesn't really fall within the domain of the MMT framework because it is - as the name implies - more concerned with the monetary system than economics in general.

MMT does not advocate the transference of net assets to the private sector (i.e. "money-printing" or running a budget deficit) under all circumstances, nor vice versa. It advocates conducting fiscal and monetary policy in such a way as is most appropriate given the current state of the economy. Budget deficits/surpluses are only "bad" if they are inappropriate wrt achieving the desired effect on the economy (e.g. increasing the savings rate or decreasing inflation). See "functional finance" for more detail:

Tue, 07/19/2011 - 13:34 | 1470933 Smiddywesson
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People wonder what the world would have been like if Hitler were never born, I used to wonder what would have happend if Keynes were never born.  I even thought of a book based on "It's a Wonderful Life" in which Keynes is forced to view the effects of his miserable works. 

I gave up on the book.  The world is full of idiots, and even if you could go back in time and stop Keynes (with a .45 perhaps?) some other idiot would step up to the plate to empower the Boyzz.

Tue, 07/19/2011 - 13:18 | 1470842 lins216
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THANK YOU Tyler(s) for posting!!  I check Yves Smith daily and her blog is filled with MMTers.  From my very limited understanding, the basic premise of MMT:  all is well because we have a printing press and can control inflation via interest rates.  After researching the web and reading numerous comment section debates, I've never come away the feeling that MMT makes sense in that it doesn't explain why wages have not inflated and the impact (in other words the loss of purchasing power).  In addition, many make the point that if we can just print our problems away, why not print a cool million to each tax payer, private debt is paid, problem solved?  Of course, the rebuttal by the MMTer to this statement always ends in "straw-man."  I for one, feel that MMT is a load of rubbish and dangerous.

Thu, 07/21/2011 - 18:49 | 1478960 halfacanuck
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No, MMT says high inflation should be reduced through increased taxation or decreased government spending, not through interest-rate adjustments. In other words, if inflation is caused by too much money chasing too few goods then the way to fix that is by removing money from the private sector.

It follows that by handing out "a cool million to each tax payer" there would be much more money in the private sector while the quantity of goods available for purchase remained the same, and thus the likely consequence would be very high inflation. A million wouldn't be cool for long.

Tue, 07/19/2011 - 14:37 | 1471265 brian oblivion
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MMT does not say you can print money endlessly. That's a strawman.

Tue, 07/19/2011 - 16:11 | 1471656 lins216
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I apologize, I missed the section of my comment in which I stated "MMT says you can print money endlessly."  Regardless, where am I incorrect in finding that the foundation of MMT is that we have a printing press we are a "Monetary Sovereignty?

Tue, 07/19/2011 - 21:13 | 1472555 Carp Flounderson
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keep reading if you're really interested, but you haven't captured even the basics of MMT in your understanding so the flaws of your criticisms are very transparent to those who do understand MMT.  MMT generally arrives at the same principles as mainstream economics in terms of inflation.  The most releveant difference these days is related to the meaning of large outstanding debt and possibilities of default.

Tue, 07/19/2011 - 13:32 | 1470919 sgt_doom
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"..all is well because we have a printing press and can control inflation via interest rates."

Yup, that and ignoring any and all reality impacts, such as the effect of Prohibition, and real estate securitization (in share form, instead of bond form as was the case this time) on the Great Crash, and doing the same (as far as securitization/credit derivatives/naked CDSes, etc.) this time around.

Bogus punks.....

Tue, 07/19/2011 - 12:54 | 1470747 SlightlyCompetent
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I hear hear TPC grinding his teeth.

Submitted article on - social news for finance.

Tue, 07/19/2011 - 12:45 | 1470696 Yancey Ward
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For me, the blind spot of the MMTers is when they write that the government doesn't borrow or tax in order to spend, but borrow to adjust the interest rate structure and tax to regulate aggregate demand.  However, this is the exact same thing as saying that the government borrows and taxes in order to spend.  If I could get just one MMTer to actually see this, I would consider my purpose in life to have been accomplished.

Tue, 07/19/2011 - 13:33 | 1470923 EB
EB's picture

Ignoring the meaningless aggregates for a minute, "regulate aggregate demand" of course includes all demand, private and public.  So, they claim whatever public spending is called for is simply to regulate the economy.  It's for your benefit.  The bureaucratic wizards have thus spoken.

The claim is also supported by the conflation of the Treasury and the Fed into an entity they call the "government".  However, this is impermissible for a few different reasons, which I will outline in my next post.

Tue, 07/19/2011 - 12:50 | 1470664 TruthInSunshine
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Albert Einstein advised people to keep things as simple as possible.

Economics = Supply & Demand.


Unfortunately, we now have a warped-beyond-human-comprehension Supply & Demand curve, as entities having collective taxing power have arisen and grown into goliaths, which have gone on to take a massive portion of peoples' savings, and allocate that portion of dry powder towards procuring A LOT of worthless shit that no one in their right, sane mind, on an individual basis, would have ever desired (I haven't even bothered to delve into the matter of intractable corruption and graft that has infected Central Banks and Legislators, causing the Supply & Demand curve to become even more hopelessly absurd).

Good luck fixing the Supply & Demand or price discovery 'issues' that now are suffocating the life out of any real economy, now that Central Banksters have so screwed up every single input.

Tue, 07/19/2011 - 14:26 | 1471178 ebworthen
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The only reason these academic shills have jobs and get listened to is the largesse of the populace and the greed of Politicians and Financiers.

Tue, 07/19/2011 - 13:14 | 1470826 earnulf
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I agree, KISS, Keep it Simple Stupid.

It's when we try to detail every possible frickin outcome that things get boloxed beyound belief.

Tue, 07/19/2011 - 12:37 | 1470659 Steroid
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Dis malscience by name of MMT!

Tue, 07/19/2011 - 12:18 | 1470604 Don Levit
Don Levit's picture

This is a very timely and thought-provoking article.

MMTers seem to place the government on the level of God, for both can create something out of nothing.

Here is a quote from a fellow, who seems to be an MMTer:

"The only entity that can provide the non-government sector with net financial assets (net savings) and thus eliminate unemployment is the government."

Wow, I thought savings were produced by selling goods and services for a profit.

i thought that savings was a result of innovation and creativity.

I thought savings was a result of doing something more efficiently.

I thought savings reside in the minds of man, not in the mint of the federal government.

Don Levit

Tue, 07/19/2011 - 14:13 | 1471140 Dirtt
Dirtt's picture

Thank you Levit.

"Wow, I thought savings were produced by selling goods and services for a profit." I know I'm just a Dumbass.  But this is my thought too.

GDP = Government Designed Propaganda. As if distrust in my government could get any higher...

Tue, 07/19/2011 - 13:17 | 1470829 halfacanuck
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The key concept you're overlooking from that quote is the *net* creation of financial assets, i.e. without corresponding liabilities. In a financial system based on a nonconvertible fiat currency, only the government can do this. Bank loans create both an asset and a liability that cancels it out, thus do not create *net* assets, thus the private sector cannot increase its *net* savings without the government first creating more assets and transferring them to the private sector.

To get a firmer handle on this, imagine we're starting from scratch and all bank accounts are reset to zero. From where does the money come to begin populating the empty accounts? From "selling goods and services for a profit"? From "innovation and creativity"? No, from the government *creating* the money and either spending it in or loaning it to the private sector (these are called "vertical transactions"). Only then can profit through innovation take place within the private sector ("horizontal transactions").

The MMT view of the economy makes perfect sense if you actually follow through the logic and focus on the consequences of the government being the sole issuer of a nonconvertible fiat currency. This is true regardless of your (or the OP's) opinion of the validity of the GDP statistic. The Wikipedia entry is a reasonable place to start if you want to learn more about it beyond the rather dubious and superficial treatment above:

Tue, 07/19/2011 - 14:37 | 1471267 EB
EB's picture


This is true regardless of your (or the OP's) opinion of the validity of the GDP statistic.

Actually, my attack was on the validity of national accounting identities (including GDP), which you implicitly rely upon when you write about "net creation of financial assets".  These are fine for keeping nominal books of account, but do not correspond to real savings or real wealth.  Of course the dollars needed for taxes need to come from the government somehow.  My point is a system in which "the government [is] the sole issuer of a nonconvertible fiat currency" is a bad system.  It confiscates real wealth and destroys real savings.  MMT is simply a justification for the status quo.


Wed, 07/20/2011 - 19:15 | 1475554 halfacanuck
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Also, I don't "rely upon" GDP or any other statistic when I say the government must create new financial assets (i.e., run a deficit) in order for net private-sector savings to increase. That has nothing to do with measuring anything; it's a simple fact when you're talking about the kind of monetary system MMT attempts to explain.

Wed, 07/20/2011 - 19:01 | 1475521 halfacanuck
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Fair enough. But MMT is merely an attempt to explain how such a monetary system works. You may not like that system, but MMT isn't responsible for its existence, nor its continuation. It's simply a theoretical framework for understanding our current monetary system, and has nothing to say about how capital should be employed or how much government should be involved in the economy, etc.

Tue, 07/19/2011 - 14:36 | 1471260 hooligan2009
hooligan2009's picture

this is not a good riposte to the argument. savings representing the deferral of consumption are wealth, money is a unit of currency, the saver creates the wealth and money is one possible medium of exchange. so is gold, so is barter. your analogy only works in a closed economy and suffers from two shortcomings, one is that you can't print savings and the other is that money may be a medium of exchange (oil sold for dollars used to buy food) but it is not a store of value. the government can control the amount of money printed, but not the degree to which it is used. 

Wed, 07/20/2011 - 18:47 | 1475487 halfacanuck
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Yes, MMT is by definition only applicable to a monetary system based on a nonconvertible fiat currency issued solely by the government (or its central bank, as the case may be). It does not claim to apply to any other setup, such as a commodity- or barter-based monetary system.

Nor does it have anything to say about how money is used; it is simply a framework for understanding how fiat monetary systems function. The point I was trying to make is that no-one can save (or make a profit) without someone else dissaving (or making a loss) except through net new financial assets being created by the currency issuer.

Tue, 07/19/2011 - 14:34 | 1471249 brian oblivion
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Great post. The misunderstanding of Keynes and MMT on ZH is epic in proportion.

No one who has actually read Keynes can blame him for the the looting and corruption in Washington. What we have now is Lemon Socialism. Anything that can be attributed to Keynes is a twisted version of which Keynes would never have approved.


The issue at stake for Keynes is the notion that an economy can find itself in a place of sub-optimal equilibrium at which labor and capital are left on the sidelines senselessly. Right now we sit with corporate coffers stuffed with cash and massive unemployment, we are in such a sub-optimal equilibrium. Keynes argues to remedy such a situation you need the government to spend to push the market towards a better equilibrium.  He would never argue that the spending be done propping up financial markets.

Tue, 07/19/2011 - 21:06 | 1472532 Carp Flounderson
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"The misunderstanding of Keynes and MMT on ZH is epic in proportion."  Amen

But the misunderstanding of Keynes and MMT and anything even remotely related to economics is epic in proportion everywhere, including in the link  where the guy seems to get some strange satisfaction of victory through the revelation that: When MMTers speak of "net saving," they don't mean that people collectively save more than people collectively borrow. No, they mean people collectively save more than people collectively invest.

Brilliant breakthrough there buddy.  Then he manages to agree with it and still make fun of the concept.  douche-bag... can't be bothered reading the rest.  TLDR

Tue, 07/19/2011 - 14:52 | 1471333 Dr. Acula
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Keynes's General Theory was torn a new orifice by Henry Hazlitt in "Failure of the New Economics".

Why does anyone even bring up the discredited pseudoscientist Keynes any more...

Tue, 07/19/2011 - 14:45 | 1471316 TaxSlave
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The money is counterfeit.  It is not wealth.  Public spending of it not only muscles out productive spending, it devalues savings and constitutes an unpayable debt burden on the hapless producer.

Dig those ditches and fill them in!

Keynes was a fascist.

Tue, 07/19/2011 - 12:51 | 1470689 THE DORK OF CORK
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Its saving chips rather then more BTUs - or at least thats what I think they mean, when the economy is strong goverment extracts credit deposits to pay tax and when its weak they can produce new Goverment money at will - they do not think that is devaluing as they believe they can generate more money from the future using a efficient MMT formula.

Private debt contracts do break down without the production of new Goverment money during periods of economic weakness - I am witnessing this phenomena first hand in my country.

This does lead to to economic inefficiency as otherwise the medium of exchange dries up - killing commerce.

Also they seem to differentiate between QE 2 like excess reserves and the printing of raw currency into the economic medium.

Tue, 07/19/2011 - 17:51 | 1472053 JeffB
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"Private debt contracts do break down without the production of new Goverment money during periods of economic weakness..."


I don't see why that should be so. Private debt contracts weren't doomed to break down under private money systems or countries on a gold standard.

Perhaps more importantly, I think the artificial manipulations of the money supply by the central banks is what *causes* the boom & bust cycles or the "periods of economic weakness" you allude to.


Tue, 07/19/2011 - 20:14 | 1472408 THE DORK OF CORK
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I am not a fan of MMT - I just think it is the system

When banks stop producing credit the money supply dries up - people cannot pay their debts.

The only mechanism to free this consequence of malinvestment is the production of broad base money in a MMT world

Even most Gold standard people agree you have to dramatically increase the price of Gold and thus cash M0 and/or M1 in the system to replace M3 when such a dramatic contraction happens.

The malinvestment we have witnessed cannot be stopped by deflation now - it must inflate , if not you get a breakdown of transactions with even more inefficiency.

Tue, 07/19/2011 - 12:17 | 1470598 THE DORK OF CORK
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This entire thing is such a mess - I think MMTers have the best understanding of how the monetory system actually works which perhaps explains why its not working to increase wealth.

I am however sceptical of extreme Austrians as not all human constructs are created by rugged individualism.

Maybe Freegold is the arena where both these practitioners will test their formulas as I feel it has many MMT & Austrian aspects.

As for Keynesians well fiscal spending is such a small little thing in comparsion to the shadow banking cancer now - it has not been tested in 30 years.

World trade has been in constant chaos since Americas default of 71 - how can you be sure of anything now.......except that Monetarists are scum

Tue, 07/19/2011 - 14:41 | 1471234 Dr. Acula
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"I am however sceptical of extreme Austrians as not all human constructs are created by rugged individualism."

Your statement doesn't make a lot of sense to me. At heart, AE is wertfrei, meaning value-free or non-judgemental. It's a science, like astronomy - not a political movement.

I might be an "extreme Austrian" but I also enjoy being a member of a homeowners' association, which is more-or-less a kind of commune. "rugged individiualism" is great, but I'm still not going to mow my own lawn.


Tue, 07/19/2011 - 14:59 | 1471369 THE DORK OF CORK
THE DORK OF CORK's picture

Blog inflation..............

Tue, 07/19/2011 - 14:51 | 1471356 THE DORK OF CORK
THE DORK OF CORK's picture

Dr Acula

I imagine most Austrians would be against what they consider Fascistic endeavours such as the Apollo programme.

Personally I don't think enough money is spent on inspirational goverment programmes especially in applied science.

Once these programmes are kept below lets say 1 % of GDP I see no problem.

What Austrians fail to recognize is that most of the applied and some of the pure science advancements  came from Keynesian war spending during the 20th century.

While I am not advocating war  - war like simulations such as Apollo give massive returns once they follow the 3 successful rules of war - have a viable goal , a schedule and a respectable budget.

Tue, 07/19/2011 - 17:32 | 1471987 BigJim
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Well, I take issue with Dr. Acula's idea that AE is a 'science' to begin with. It's more akin to the study of logic. My reading of AE is that they feel an economy is too multi-variant to study as a science - ie, to isolate variables and run controlled experiments.

And much as I enjoy the spectacle of people bunny-hopping around our arid moon, what gave the government the right to appropriate zillions of dollars to pay for it? You say that many of our science advances are because of government programs, but this overlooks the fact that government programs by definition took the money from other endeavours to pay for such politically-prioritised science research. Yes, we've got teflon... but maybe we would have had a vaccine for breast cancer by now instead.

You want people to visit the moon? That's great, but please set up a charity that solicits donations from like-minded people, and do the research privately, instead of expecting the government to extort money from everyone else to pay for your interests.

Tue, 07/19/2011 - 20:01 | 1472379 THE DORK OF CORK
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@Big Jim - I only use Apollo because its such a dramatic wonderful example -but if you want to bring the primary mechanism for technological change & knowledge in the 20th century to a sudden stop or very slow crawl you will have to expect a very cruel short life for your children as Malthusian depletion dynamics begin to kick in.

You cannot save in a depleting world no matter how efficient - efficiency will only slow the process down - technological productivity is the only mechanism to beat entropy.

Tue, 07/19/2011 - 15:15 | 1471437 StarvingLion
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I don't know why you have an obsession with nuclear power and manned space flight to Mars.  The neoliberals love applied science, its just that its biology and information/communications technology.  Bioscience R&D became too expensive and now they're outsourcing that too and I think thats why they moved manufacturing to China, so they could tap the vast expendable labour force to do bioscience.  I think for our own good, we should focus on bioscience but the Phd programme currently sucks rocks.

Tue, 07/19/2011 - 15:24 | 1471477 THE DORK OF CORK
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Sorry Lion - Apollo has always been a fascination for me - I just use it as a example as I know its architecture pretty well.

But other applied science endeavours could be pursued - but I do think big applied engineering science has been neglected since the late 60s early 70s.

Tue, 07/19/2011 - 13:08 | 1470793 EB
EB's picture

Freegold is indeed interesting and the Euro seems to be the prototype, though it could still unravel with the periphery states onboard.  

As for the MMTers, they consistently make the mistake of conflating the nominal with the real.  A good example is what Don Levit quotes below:

"The only entity that can provide the non-government sector with net financial assets (net savings) and thus eliminate unemployment is the government."

Taylor Contant writes in Part III to a Refutation of Mosler Economics:

True: this is a financial accounting identity.

False: the belief (whether Mosler holds it or not) that increased financial savings necessarily represent increased real savings.

So far, Mosler has not stated whether he equates financial savings with real savings. Regardless, I will clarify that anyone who would state such a thing as "an increase in financial savings necessarily means an increase in real savings" would be wrong.

If the US government expands its budget deficit and thereby expands the total amount of financial savings as a result (because all debt is held by somebody outside of the government sector as savings, as per Mosler's statement of the accounting identity), it does not follow that the pool of real savings (anything which may serve as a capital good in the production of higher order goods, for example, machinery, food stocks, clothing stocks, commodity stockpiles, fuel supplies, etc.) is increased proportionally, as an identity.

In other words, it would be wrong to assume that, because larger government deficits represent larger financial savings, larger financial savings represent larger real savings and therefore larger government deficits mean larger real savings which means we are all wealthier and economically better off if the government expands its deficit.

Given the use of Keynesian aggregates and faith in central planning, I fail to see the functional difference in MMT from Keynesianism.  It destroys real wealth.  However, if you want everything to look good on paper (i.e., nominally), then sure, it all balances out.  And one thing the Freegolders correctly point out is that to save a paper-asset-laden system in nominal terms requires massive inflation.

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