In spite of a wealth of published, peer-reviewed studies on the subject, it seems there must always be at least one in every crowd who insists on trying to undermine Modern Monetary Theory by fixating on the third word in its title. While it has been conclusively presented that MMT is an observation of the outcomes of repeatable events, and therefore not constrained to the realms of ‘theory’, there are many who focus on the fact that many aspects of MMT can be taken as ‘theoretical’. That must change because it is based on a fallacy.
First and foremost, what exactly is a theory? A theory is loosely defined as a set of beliefs about a subject, but the MW definition is much more varied in scope:
- the wave theory of light
- her method is based on the theory that all children want to learn
- in theory, we have always advocated freedom for all
- theory of equations
- music theory
As you can plainly see, there is a lot more to the word ‘theory’ than just ‘stuff that’s made up’. But let’s take a closer look at each facet of that definition, and try and determine which one most closely relates to MMT.
When you consider that MMT is a set of scientific observations of repeatable scenarios, the one which makes the most sense is the fourth definition. MMT is not limited by the extent of our ability to study it, or meant as a stopgap to supplement our ability to study anything else, so the first definition is out. It’s not used simply for the sake of argument, so it’s not definition number three, and its arguments are not formed simply for utilitarian purposes, so it’s not definition number 2, either.
But then there’s also number 6, “the analysis of a set of facts in their relation to one another “. That also closely relates to the word ‘theory’ in MMT and goes well with definition #4. You need to study the relation of the parts before you can form principles relating to them as a whole. This directly relates to a central tenet of MMT: macroeconomics, or the study of how money operates in any system, without regard to any specific currency or geopolitical identity.
The key word in both definitions is “facts”.
So there we go, the dictionary definition of ‘theory’ is ample in its scope, and encompasses ideas which are not related to conjecture, speculation, or guesswork.
And yet, people still can’t seem to see past the word ‘theory’ in MMT. They want ‘proof’ for this ‘theory’, and they hold out all respect for the concept until they get it. By this same logic, they won’t believe music exists, unless you can prove music theory. …It’s asinine.
Belief is sometimes the rarest thing in the universe. …But disbelief is heaviest, judging by people’s reluctance to suspend theirs.
At Kitty Hawk, NC in 1903, Orville and Wilbur Wright flew their small aircraft for the first time. The only problem was that only a tiny handful of people even witnessed the event, including a local child, and afterward many refused to believe it had actually happened. Newspaper reporters had covered various levels of failure on the part of the Wright bros. for a while, but stopped attending their various attempts to fly. When local papers were inundated with callers asking about the flights, many were confounded as to why the events were not being reported on.
Dan Kumler, who was city editor of James M. Cox’s Daily News in Dayton during those early years of flying, said that “People who had been on interurban cars and seen the Wrights flying used to come to the office,” Kumler recalled, “to inquire why there was nothing in the paper about the flights. Such callers got to be a nuisance.”
When asked why there was nothing in the paper;
“We just didn’t believe it,” he said. “Of course you remember that the Wrights at that time were terribly secretive.”
When asked if it was even possible to be ‘secretive’ about the fact that they were flying, over an open field;
“I guess,” said Kumler, grinning, after a moment’s reflection, “the truth is that we were just plain dumb.”
That didn’t stop them from ridiculing the Wrights, and from being as derisive and condescending as they wanted to be about their “flight theory”, that man could somehow pilot heavy machinery through thin air. In fact, their stupidity probably helped to that end, tremendously. Not all news agencies lambasted them, some exaggerated their accomplishments beyond the point of credulity, just for sensational headlines. The result was a loss of credibility for the Wright brothers, in both cases.
There are those who will say that MMT isn’t quite the same because there has never been a concerted effort to put it to use. It is ‘theoretical’ simply because no one with the power to do so has actually said “since federal spending does not require federal taxation, we are going to spend according to our needs, not according to a budget based on an arbitrary amount of tax funds”, and then see what would happen.
We already know what will happen. Or rather, what won’t happen: Inflation. But that doesn’t stop the people who want the real-life, inescapable proof which is impossible until someone virtually ignores their own national debt. One doesn’t even have to look to other countries. The US just passed a 700 billion dollar military budget, with no added taxation.
When it came time for funding or recognition, all the Wrights’ had were the blueprints for their plane and their word. Today a scientist could look at those designs, study the weight ratios, and know that the craft was flightworthy …aerodynamically sound. We know today that it was because it flew. We can believe that it flew because we see aircraft all day long. But until they saw it fly for themselves, they weren’t going to invest any time, effort, thought, or most importantly money, toward its ends.
But here’s the thing, even when the Wright Bros. had proven that their efforts were sound, there were people who said: “So what?” “What good is it?” Even after they had proven the possibility of manned flight, they then had to prove its worth.
Blind faithlessness is just as bad as blind faith, but lack of insight, foresight, and just plain ‘sight’, outslay them all.
It’s a long-standing tradition which continues through the ages. On the 21st of November, 1783, the Montgolfier brothers’ ‘fire balloon’ was ready for the first manned flight, attended by Benjamin Franklin, a host of celebrity attendees, and most of the residents of Paris, and the surrounding area. When one of the said residents posed the question “what good is it?”, Franklin famously retorted “Sir, what good is a newborn baby?”
One man’s garbage is another man’s reason for living. You just have to gain a proper appreciation of it. A large part of that appreciation comes from an understanding of how the thing in question works, and how to use it.
In 1971, when Nixon took the US currency off of the gold standard, our economy can be said to have received a hardware upgrade, as it suddenly was not constrained by either the value or availability of gold (remember, ‘convertibility’ of gold means distribution and local storage of gold, which is always problematic). However, in order to utilize this functionality, we also needed a software upgrade, which we never got. We literally never learned how to use it, and it came with no owner’s manual. MMT is that owner’s manual. It explains how to use an economy which no longer had those old constraints. Without it our economy is grounded; its wings clipped. Without it we are doomed to never know our true potential, and explore the power to soar over the limitations which have hampered us for so long.
Or to put it in visual terms:
When it comes to the issue of flight, history has clearly drawn the line in the sand. You were either on the innovative, insightful side that resulted in the creation of entire sciences and industries, or you were a cynic with no imagination, stuck fast in the muck of centuries of accumulated myth, ritual, and established dogma.
But like many other everyday miracles that happen in spite of every effort to squash them, like the field of aeronautics hopefully, MMT will find its place where it belongs; in this case in our senate budgeting, eventually. You can only postpone the inevitable for so long. We must do more than sit around and wait for it though, we must make it happen. We must will it to manifest itself through our actions and deeds.
When the smoke clears, and history has spoken, and ‘MMT’ is simply called ‘Economics’, which side will you be shown to have been on?
The point is not to try and instill blind faith in anything, but to instead instill an open mind to the possibilities. You have the power to research MMT, understand it for yourself, and arrive at your own conclusions, but first you must respect the subject enough to try.
The source of most of its opposition is semantic in nature anyway. It may be intended to seriously undermine MMT’s inherent concepts or tenets, but it doesn’t even touch them.
MMT is larger and more complex than some who prepare it for consumption may portray at times (myself included), but it is nowhere near as complex as people who wish to demean it would have you believe. They offer a convoluted bramble of names and philosophies from throughout the centuries, all offering their own views about money, and how it should be used. …A veritable twisted thicket of economic postulations. They tell you to not feel limited by any one economic idea, that there is an almost unlimited universe of economic theories to explore!
The idea is to overwhelm you and make you believe Economics in general, and MMT specifically, are things you will never understand, simply because they will never understand them. It’s also meant to gaslight MMT proponents as charlatans, …as willfully oblivious adherents to an arbitrary set of ideas. But while they fixate pedantically on the third word in MMT, they completely ignore the first word, ‘modern’. They could simplify their own tangled mess, with just a little research.
They also highlight their own ignorance about MMT, not just before a current audience, but written on the pages of history.
Perhaps most importantly for us today, as well as our grandchildren, they help to cover up artificially-imposed limitations on our economy which serve NO purpose other than to legitimize austerity measures, including the sale of our own government. Those in government are mostly just as clueless as anyone else. There are those who benefit from their ignorance. Every politician who comes to them ‘looking for the money’ is another politician who can be bought. They have a clear incentive to perpetuate the lies.
But what about when members of the 99% do the same thing? What is their incentive to keep people in the dark? The answer is, they are so far in the dark themselves that they can’t help but act out exactly as they were programmed to.
Do not be one of these people. Don’t provide any more excuses for austerity! You have the power to rise above!
Every person who learns MMT is one more person who will not fall for the tired excuses. More importantly, they will see through the excuser. There IS no excuse for austerity, in a monetarily sovereign nation with a fiat currency. If austerity is there, it means someone wants it to be there.