Alberto Bisin Re Modern Monetary Theory

On Saturday, 12/19/ 2020, John Cochrane‘s blog “Bisin on MMT Rhetoric” cited Alberto Bisin’s review of Stephanie Kelton’s Book “The Deficit Myth. “  Alberto Bisin contends, as do we, that So-Called Modern Monetary Theory, as espoused by Kelton and others,  does not qualify as a theory.  Cochrane quotes Bisin:

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.

We have commented elsewhere on Modern Monetary Theory: See herein So-Called Modern Monetary Theory Does Not Qualify As Scientific Macroeconomics, FMD’s take on Greg Mankiw’s Take on Modern Monetary Theory, and Modern Monetary Theory is Backward.

We add further comments:

Modern Monetary Theory is a disaster waiting to happen. In its unchecked extreme of printing money unconstrained by relation to the real flow of goods, and services, it would bring about rampant inflation, menace the financial system, and, ultimately, bring about a) the destruction of the financial system, and b) social chaos. The longer unconstrained printing and irresponsible borrowing last, the greater the intractability of ultimate problems.

A mere congeries of laws will not suffice. For if one is to operate upon the concrete, one must be able to employ at once several laws.  To employ several laws at once, one must know the relations of each law to all the others.  But to know many laws, not as a mere congeries of distinct empirical generalizations, but in the network of interrelations of each to all the others, is to reach a system. [CWL 3, 76/99] [31]

With G at zero, positive or negative transfers to basic demand (D’ – s’I’) and consequent similar transfers to surplus demand (D” – s”I”) belong to the theory of booms and slumps.  They involve changes in (aggregate basic or aggregate surplus) demand, with entrepreneurs receiving back more (or less) than they paid out in outlay (which includes profits of all kinds).  The immediate effect is on price levels at the final markets, and to these changes (in price), enterprise as a whole responds to release an upward (or downward) movement of the whole economy.  [CWL 15, 64]

We have also commented on both the fact of inflation and the possibilities of stagflation.  As a theoretical ideal, the dummy money, invented by humans to enable divided exchange in the vast and complicated economic process, would be constant in exchange value.  Both inflation ad deflation are swindles.

… the dummy (money) must be constant in exchange value, so that equal quantities continue to exchange, in the general case, for equal quantities of goods and services.  The alternative to constant value in the dummy is the alternative of inflation and deflation.  Of these famous twins, inflation swindles those with cash to enrich those with property or debts, while deflation swindles those with property or debts to enrich those with cash; in addition to the swindle each of these twins has his own way of torturing the dynamic flows; deflation gives producers a steady stream of losses; inflation yields a steady stream of gains to give production a drug-like stimulus. [CWL 21, 37-38]


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