First published: December 2019
MMT has recently attracted a lot of attention in the media and to a lesser extent in mainstream academic economics (see for example Krugman’s intervention and debate with Kelton on twitter and online newspapers). At the AEA Meeting in San Diego, in two days from now, N.G. Mankiw will present his “guide” on MMT, which he has published on his blog. In this blog post, I hope to clarify the set of assumptions that underlie the disagreement between MMT and mainstream economics and thereby convince the reader that the debate should focus less on debt sustainability issues and the quantity theory of money and more on the role of effective demand. The two views indeed diverge in two key dimensions: i) they make a different diagnostic regarding the degree of slack on the labor market and distance to full-employment ii) they hold different beliefs about government spending multipliers.
Click here to access the blog post: The Debate about MMT Should Focus on the Role of Effective Demand, Not Debt Sustainability.