There's Much Ruin in a Nation: An Analysis of Modern Monetary Theory

Document Type

Article

Publication Date

4-23-2020

Abstract

This paper analyzes the first macroeconomic textbook based on modern monetary theory (MMT) written by Mitchell, Watts and Wray. MMT is a heterodox theory that a government need not worry about budget and monetary constraints and excessive inflation until a country achieves its goals of full employment, first-class healthcare for all citizens, and other desirable policies. Their textbook, Macroeconomics, leaves out major sections that are standard in macroeconomic textbooks, such as AS-AD analysis and economic growth theory. I argue that MMT is a dangerous theory that can lead to a bloated government, runaway inflation, and slow growth. Furthermore, MMT is unnecessary given that many advanced economies have moved in the opposite direction and achieved full-employment growth without adopting MMT, such as Sweden, Canada, Singapore, and Chile.

Comments

This article was originally published in Atlantic Economic Journal, volume 48, in 2020. https://doi.org/10.1007/s11293-020-09651-9

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Peer Reviewed

1

Copyright

Springer

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