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Synthetic MMT: Old Line Keynesianism with an Expansionary Twist

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  • Lance Taylor

    (New School for Social Research)

Abstract

Expansionary macroeconomic policy with a strong redistributive component is an attractive proposition, most recently launched on the basis of Modern Monetary Theory or MMT. The Theory is a synthesis of familiar ideas, newly relevant but scarcely path-breaking. Its basics \'96 Chartalist or fiat money, functional finance, and models based on consistent national accounting \'96 come straight from Maynard Keynes, Abba Lerner, and Wynne Godley. Functional finance is the heart of fiscalist Keynesianism built upon automatic stabilizers for the business cycle. MMT'92s job guarantee proposal is one more stabilizer which could be a modest helpful supplement to the system which exists. National accounting comparisons of a possible MMT package with the 2008 crash and the Trump tax cut are presented with emphasis on autonomous shifts in demand. The package could have problems with debt sustainability and external balance. Inflation is unlikely if wage repression in the USA is not reversed. But strong wage increases are presumably a goal of MMT.

Suggested Citation

  • Lance Taylor, 2019. "Synthetic MMT: Old Line Keynesianism with an Expansionary Twist," Working Papers Series 103, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:103
    DOI: 10.36687/inetwp103
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    File URL: https://doi.org/10.36687/inetwp103
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    References listed on IDEAS

    as
    1. Norman F. Keiser, 1956. "The Development Of The Concept Of “Automatic Stabilizers”," Journal of Finance, American Finance Association, vol. 11(4), pages 422-441, December.
    2. Rezai, Armon & Taylor, Lance & Foley, Duncan, 2018. "Economic Growth, Income Distribution, and Climate Change," Ecological Economics, Elsevier, vol. 146(C), pages 164-172.
    3. Taylor,Lance, 2020. "Macroeconomic Inequality from Reagan to Trump," Cambridge Books, Cambridge University Press, number 9781108494632, January.
    4. Lance Taylor, 2017. "The “Natural” Interest Rate and Secular Stagnation: Loanable Funds Macro Models Don't Fit Today’s Institutions or Data," Challenge, Taylor & Francis Journals, vol. 60(1), pages 27-39, January.
    5. Lance Taylor, 2008. "A foxy hedgehog: Wynne Godley and macroeconomic modelling," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(4), pages 639-663, July.
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    Cited by:

    1. Servaas Storm, 2023. "Lance Taylor (1940–2022): Reconstructing Macroeconomics," Development and Change, International Institute of Social Studies, vol. 54(5), pages 1331-1353, September.

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    More about this item

    Keywords

    MMT; Modern Monetary Theory; functional finance; structuralist inflation theory;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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