What *is* MMT? (And what’s its key insight?)

This post answers the following questions, in order:

  1. What is MMT’s key insight?
  2. What is a brief summary of MMT? (What is MMT?)

Briefly: What is MMT? MMT is an accurate description of how our economy actually and already functions at the federal level. It replaces false financial constraints (debt!, deficit!!, China!!, inflation!!!* and HoWrEyOuGoNnAPaYFoRiT???), with real constraints: our ability to utilize human labor in order to obtain, produce, and do what we need to survive and thrive.

(*Inflation the Boogeyman, not inflation in reality.)

So MMT says we can do a lot more than we’re told, but what specifically? Well, you can’t know until you do a thorough resource and inflationary impact for the specific program you want to do. You can’t know until you thoroughly study whatever it is you want to do. We can clearly do Medicare For All, a bold Green New Deal, we can clearly cancel all student debt, and implement the MMT-designed job guarantee. (FYI, the Medicare for All study is thorough a mainstream lens and so is highly conservative. The rest are through an MMT lens.)

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This post was last updated November 3, 2020.

Disclaimer: I am a layperson who has 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.

MMT’s key insight

  • MMT founder Warren Mosler, in his 2020 MMT White Paper: “The MMT understandings put policy options on the table that were not previously considered viable.”
  • Eric Tymoigne and original developer L. Randall Wray, in the 2013 paper, 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.”
  • Original MMT developer Stephane Kelton, 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.”

What is MMT? By MMT original developer 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.”

What is MMT? By original developer 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.

What is MMT? By original developer 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.

MMT developer 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.”

What is MMT? My layperson take.

You can’t escape your prison until you can see the walls surrounding you. You can’t defeat the monster until you understand its nature. The truth is like a precious jewel. There are many directions from which to look at it, each providing a different facet of the truth. The facet I choose to focus on is economics.

The economy as most of us normally see it, is dark, dank, and overly complicated. MMT is a large glass lens that when you look through it, you see the economy as it actually and already is: clear and obvious. The only thing complicated about it is what many incorrectly believe it to be.

MMT is not “the truth” about economics, but it is, to me and many others, by far the most convincing theory there is regarding how our economic systems actually function.

The point of MMT is not that

“We can afford anything we want and therefore should give everyone luxury.”

The point is this:

Even the poorest (and least financially sovereign) nations can provide all its people with what is necessary to prevent suffering (if perhaps with less of the bells, whistles, and luxuries than in the wealthiest nations).

The federal government of every nation can afford literally anything that is priced in its own currency. So, a federal representative, prominent media figure, or economist says that they must withhold what is desperately needed by millions, because of “the deficit!”, “debt!!”, ”China!!!”, “inflation!!!!*”, and especially the how’re-you gonna-pay-for-it question – they are very likely, to be very charitable, incorrect.

(*Inflation the Boogeyman, not inflation in reality.)