A “fallacy” is a flawed argument. When you read about MMT, you will find lots of different opinions, unfortunately some of them deliberate fallacies to try and make you believe otherwise. Who do you believe?
The answer is “no-one”, MMT is not based on “belief”, though it is tempting to trust those who sound most believable. However, there are several pointers that may help you decide who is more reliable.
- Critics who dismiss MMT as a whole, are clearly overgeneralising. MMT has many parts, many of which are existing economic theory. Look out for headlines such as “MMT debunked”.
- The use of ad hominems (personal insults) is not even a criticism, but an attempt to discredit someone. It says nothing about MMT itself.
- A “strawman argument” is where a critic may make claims for MMT that are not true, claim that they are, and then incorrectly dismiss MMT. For example, many critics are claiming that governments have been doing MMT for several years now (often citing quantitative easing, QE, as an example), and it is not working. There may be some policies that resemble MMT, but we have not been doing MMT, so it has not been shown to be failing.
- You’ll often read that “printing money causes inflation“. It can be. But it is when resources are in limited supply that inflation kicks in. Think of limited fuel and energy, and how their prices have increased.
- An appeal to authority is where a critic may resort to noting the proponent of MMT is not an economist. It helps to be qualified, but it does not necessarily undermine their argument.
- The fallacy of composition, an error in logic when people infer that something which is true for individuals, is also true for the wider country, such as comparing the country’s economy as being run like a household budget.
So how do you discover whether MMT is a credible alternative to existing money theory? If there was an easy answer, it would be adopted without hesitation. Unfortunately the only option is to seek a second and third opinion from people who understand modern money theory, so do your own homework!
- Seven Replies to the Critiques of Modern Money Theory, Eric Tymoigne, Levy Institute and Lewis & Clark College, December 2021
- Did Modern Monetary Theory Get a Tryout?, Matt Bruenig, People’s Policy Project, February 11th, 2022
- See “Pillar seven: modern monetary theory is bunk – what?”, in Central bankers have created excessive unemployment for decades because they use the wrong theory, William Mitchel, December 28, 2022
- ‘Tombstone for a Tombstone’: Dealing with the ‘bad science’ behind mainstream criticism of MMT @ GIMMS. 28th January 2023
- “A Fallacy of Composition“, J.D. Alt, New Economic Perspectives, May 2, 2014