As I predicted2nd March 2019
This morning I read a post by noted MMTer Stephanie Kelton, which responded to some questions by Paul Krugman. I predicted that he’d be pulling out his hair, as her responses were a complete mess—as if she didn’t understand the simple questions he was asking. Here’s an excerpt from my Econlog post:
I can’t even imagine Krugman’s reaction to all this. First of all, although she says “no” in answer to question #1, her explanation makes it quite clear that she is actually answering “yes”, especially when you combine the answers to questions #1 and #2. Krugman is asking whether, assuming a given macroeconomic situation (including a given level of private spending), there is only one budget deficit consistent with full employment. She clearly thinks the answer is yes. So why does she answer “no”. I suspect she doesn’t understand Krugman’s question (which is pretty straightforward.)
Now Krugman has responded and he’s every bit as frustrated as I expected. Here is his response to the first point I raised:
Her response to my first question totally misses the point; I was asking if *given private behavior* there’s a unique level of the deficit needed for full employment, and argued that there wasn’t. She just assumes that there is
And here’s how Krugman summarizes his twitter thread:
Sorry, but this is just a mess. Kelton’s response misrepresents standard macroeconomics, my own views, the effects of interest rates, and the process of money creation. Otherwise I guess it’s all fine. See what I mean about Calvinball? 6/
MMT desperately needs a spokesperson capable of conversing with economists like Paul Krugman, if they want to be taken seriously. When they give bizarre answers to serious questions from a highly respected economist on their side of the ideological spectrum, it’s a problem.
Not surprisingly, I think it’s perfectly fine to be heterodox, but first you need to understand orthodox.
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