What *is* MMT? – as answered by academics

This post describes what Modern Money Theory (or MMT) is, according to its developers and academics. Secondarily, it also answers the question, What is MMT’s key insight?

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This post was last updated September 21, 2021.

Disclaimer: I have studied MMT since February of 2018. I’m not an economist or academic and I don’t speak for the MMT project. The information in this post is my best understanding but I don’t assert it to be perfectly accurate. In order to ensure accuracy, you should rely on the expert sources linked throughout. If you have feedback to improve this post, please get in touch.

By Malcom Reavell, adapted from a talk by Bill Mitchell.

Stephanie Kelton

Stephanie Kelton was chief economist on the U.S. Senate Budget Committee (Democratic staff) in 2015 and as a senior economic adviser to Bernie Sanders’ 2016 and 2020 presidential campaigns (source). She is also the author 2020 book, The Deficit Myth:

“If I had to describe the Modern Monetary Theory (MMT) project in a single sentence, I would say it is about replacing an artificial revenue constraint with a real inflation constraint.”

From the abstract of her 1998 paper, Can Taxes and Bond Sales Finance Government Spending?: “This analysis carries significant implications for fiscal as well as monetary policy.”

L. Randall Wray

Wray is a professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute of Bard College. From the 2019 post, “MMT: REPORT FROM THE FRONT“:

Once an undergraduate is inoculated with MMT, there is no danger that she or he will become mainstream. As one of my students demonstrated in class, it is like taking off distorting glasses and seeing the world afresh for the first time. You will never see the world the same again. This is a legacy that will replicate itself and will last and will spread. It is like a cancer. But a good one.

From the 2013 paper by Wray and Eric Tymoigne, Modern Money Theory 101: A Reply to Critics: “One of the main contributions of Modern Money Theory (MMT) has been to explain why monetarily sovereign governments have a very flexible policy space that is unencumbered by hard financial constraints.”

Here’s a similar take by original MMT developer Warren Mosler, in his 2020 MMT White Paper: “The MMT understandings put policy options on the table that were not previously considered viable.”

Bill Mitchell

Bill Mitchell is currently Chair in Economics and is the Director of the Centre of Full Employment and Equity (CofFEE), Visiting Professor at Maastricht University, a prolific blogger, and the author of many books (source).

From the 2018 post called “MMT is just plain good economics – Part 1“:

MMT is not a regime that you ‘apply’ or ‘switch to’ or ‘introduce’.

Rather, MMT is a lens which allows us to see the true (intrinsic) workings of the fiat monetary system.

It helps us better understand the choices available to a currency-issuing government.

It is not a regime but an accurate perspective on reality.

It lifts the veil imposed by neo-liberal ideology and forces the real questions and choices out in the open.

In that sense, MMT is neither right-wing nor left-wing – liberal or non-liberal – or whatever other description of value-systems that you care to deploy.

I mean by that, that while MMT provides a clear lens for viewing the system, to advance specific policy platforms, one has impose a value system (an ideology) onto that understanding.

Scott Fullwiler

From his 2020 paper, When the Interest Rate on the National Debt Is a Policy Variable (and “Printing Money” Does Not Apply):

“Ultimately, MMT is not about ‘money,’ but rather about a government freed from standard conceptions of its financial limits to serving its people.”