Home > Main > I just don’t have time to crush Bob Murphy over MMT again

I just don’t have time to crush Bob Murphy over MMT again

May 9, 2011

A few months back, I crushed Bob Murphy and the Austrian take on MMT.  Here is a quick quote:

Discussion of Murphy’s mistakes: Murphy makes two fundamental mistakes.  The first mistake results from his confusion of assets and savings. Murphy doesn’t understand the meaning of the word savings in an national accounting sense, or deliberately confuses real and monetary accountings.

He is making the same mistake today in his new post on MMT.  He just makes it more explicitly, so it is easier to see.

Truth be told, I’ve corresponded briefly over email with Mr. Murphy.  He was a nice and kind person.  He makes a serious mistake in his thinking. And frankly, I think the Austrians would knock it out of the park with a minimalist construction of MMT.  Unfortunately, they are insane because they don’t recognize any government as being legitimate.  Even kind and nice people can be insane.

Update: The always excellent Cullen Roche takes on the same topic over at the Pragmatic Capitalist.   And I’ve got a few trolls!

  1. Peter D
    May 9, 2011 at 9:19 pm

    Looks like MMT is moving into the “violently opposed” stage for good, as you predicted! Really exciting, to see how this internet revolution is taking place!
    Credit to Murphy, he was very restrained. I think his anti-Krugman posts were more derisive and condescending. In this one he sounds kinda… scared, insecure. Or maybe it is just my projection .

    • TC
      May 9, 2011 at 9:58 pm

      🙂 It is incredible! The last few months have been really exciting. I don’t have any ideas on the self-evident phase, but I Bill Gross saying “Of course we cannot literally go broke” is a first step.

      Bob Murphy is a good guy. I bet he is a great person to have in your town or community. I should be nicer to him. Plus, he is sharp. He knows his projected audience well- he was writing this one so Paul K could read it and nod his head in agreement.

      I write totally over-the-top, provocative, condescending commentary, so I cannot say his methods are wrong when he decides to go that route. It probably helps to drive readers for him, which is not a bad thing at all.

      P.S. I lobbed a few bombs over at mises.org for fun. They will probably show up in force over the next few days.

      • Peter D
        May 9, 2011 at 10:46 pm

        Yes, his opposition does not qualify as violent. You don’t say something is “intriguing” or “seems to be dead wrong” when you oppose it violently. This is not even passive-aggressive.
        But I doubt Krugman will nod in agreement. K’s beef with MMT is very different (IGBC and related) while the points that Murphy attacks here are related to “spending=income” point that Krugman himself made (in one of the days when he decides to sound like Bill Mitchell 🙂 ) and that Murphy seems to attack here.

        • beowulf
          May 10, 2011 at 10:54 am

          I think where Austrians might reach a point of agreement (or perhaps acquiescence) is if its pointed out that many MMT supporter have zero interest in expanding govt spending programs or regulations. Indeed, they’d prefer if the politicians stopped wasting money on targeted spending programs or otherwise try to micromanage the economy.

          That goes for monetary policy as well, better to lock current 0.25% FFR permanently than the market constantly adjusting to Fed playing sorcerer’s apprentice with the risk-free interest rate in the future (banks would continue to set their own rates for borrowers).

          Fiscal policy adjustments never requires the govt spend more, it can simply tax less, and it can do so (as I’ve mentioned before) by a rule-based formula instead of Fed or Tsy discretion.

        • TC
          May 10, 2011 at 11:19 am

          I’d almost agree with this. Their hatred is so strong it blinds them to any good that might come from government. I am in favor of much lower spending in many places – military, ELR instead of welfare, expanding the people covered for medical care coverage while limiting the scope of that coverage.

          These guys are simply not able to reason. MMT maintains the government deficit is important, not the gross level of spending as a % of GDP. Some taxation is necessary to create demand for the currency. Beyond that, the basic MMT paradigm is silent on the gross level of spending.

          I don’t know why people cannot see this. But, they don’t, and that is part of the reason they are crazy.

  2. beowulf
    May 10, 2011 at 3:07 pm

    Yeah, the healthcare sector is such a trainwreck of market failure layered on market failure, the only way out of the woods in terms of coverage and affordability (to both families and employers) is reforming Medicare to cover everyone. Fund it out of general revenue but keep the 2.9% Medicare tax (or increase it if you wish) as a prepaid deductible; what you don’t spend would be refundable to a retirement account. The beauty of forced savings plans is they drain Ag Demand almost as efficiently as taxes but the taxpayer is left in a better mood. :o)

    My theory as to why they don’t see it– they’ve always rejected proposed govt programs, the good the bad and the ugly, with a simple “we can’t afford it”. By disarming their wide spectrum objection to every single govt program, they assume MMT supporters must favor of all those bygone plans (from midnight basketball to universal pre-school with a supercollider or two thrown in).

  3. Peter D
    May 11, 2011 at 10:45 pm

    There is an interesting guy over at the PragCap commenting on how we should not paint all Austrians with the same brush:
    Interesting stuff on Hayek’s support for certain welfare programs, friendship with Keynes etc. We might be wrong lumping them all in one pile based on the narrow exposure to mises.org and such. I know there are definitely many strains and disagreements, based on one paper by George Selgin I am reading. So, maybe we should tone down the rhetoric and be more precise…

    • TC
      May 12, 2011 at 10:36 am

      Of course I agree with this. I should tone down the rhetoric. but then…I wouldn’t be the Traders Crucible, 😉

      No but really. I know that many Austrians are “semi-reasonable”. I say semi-reasonable because I think they do not think through their theory to the logical conclusion, and they are willing to entertain ideas of all kinds.

      But I’ve been a trader for a long time, so I have and had lots of interaction with people who are hard-core hard money people. You can look into the comments section over at Mises.org. These people are crazy.

      But I will start toning it down. 🙂 Of course, you can still expect a bit of hilarity to peek out every now and then.


  1. May 10, 2011 at 9:54 pm
  2. May 11, 2011 at 6:46 am
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