Modern Monetary Theory: a Critical Introduction
With the conspicuous failure of austerity measures in the wake of the 2008 financial crisis, and with the discourse surrounding the U.S. national debt shifting from alarmism to benign acceptance, Modern Monetary Theory, a relatively new (or perhaps not so new) conceptualization of money and government finance, has gained traction and attention in both heterodox economics and mainstream policy circles. For Modern Monetary Theorists, governments do not need to tax in order spend. If a country is monetarily sovereign, if it exercises exclusive legal control over its currency, it can print money—and fund social programs and investment—without risk of insolvency. Greeted by some as a panacea, Modern Monetary Theory also has its critics. Some doubt the government’s ability to print money ceaselessly without triggering catastrophic inflation. Others note the theory’s “rich-country perspective”—not all countries are entirely monetarily sovereign; and many are at the mercy of foreign lenders of U.S. dollars and Euros. Finally, Modern Monetary Theory has seemingly nothing to say about social relations and the real workings of the capitalist economy. What’s the importance of inequality, labor disputation, class conflict, and perhaps even politics itself, when more money can always be made at the stroke of a computer key?
This course is a critical introduction to Modern Monetary Theory—an investigation of its theoretical foundations, its understanding of money and government fiscal policy, and the major critiques, both economic and political, made against it by mainstream and heterodox thinkers alike. We’ll begin by exploring the origins of money and the “alternative story of money” on which Modern Monetary Theory is based. Next, we’ll take a look at the theoretical work on which the theory draws, specifically Keynes’s Principle of Effective Demand. We’ll unpack the theory’s approach to fiscal policy, the idea of the state as “Employer of the Last Resort,” and the ways it demystifies mainstream thinking regarding monetary and fiscal policy. Finally, we’ll examine critiques of Modern Monetary Theory, specifically with regard to questions of inflation, semi- or non-sovereign monetary states (and their dependency on the U.S. dollar), and the workings of the real economy, as well as responses to those critiques. Throughout, we will ask: what are the attractions of Modern Monetary Theory? What are its limits? Is it a viable framework for left-wing policy making? Or, does it in some ways reinforce the very problems that a redistributive politics might attempt to solve, ensconcing inequality and U.S. dollar imperialism amidst a surfeit of federal spending? Readings will be drawn from works by John Maynard Keynes, Michal Kalecki, Paul Davidson, Alfred Mitchell Innes, Randall Wray, and Stephanie Kelton, among others.
Course ScheduleTuesday, 6:30-9:30pm ET
June 08 — June 29, 2021