Monday, June 20, 2011

Randy Wray On How Data Bears Out MMT

The post, The Austrian School responds to Dr. Galbraith, generated a lively debate and 174 comments. Some of those critical comments requested mathematical and empirical proof of MMT views.

UMKC Prof. Randy Wray just posted an overview of his earlier (2002) prediction about what developed into the GFC based on the sectoral balance approach and US data. In it, Randy gives the math — sectoral balances summing to zero — and the empirics — the data for the periods — to show how the MMT view bears out.

Randy also points out that the WSJ got it completely backwards at the time, and the mainstream still hasn't figured it out. Now, mainstream economists in the US, UK, and EZ are calling for "expansionary fiscal austerity" based on the same failed ideas, while MMT shows why this will lead to contraction instead.

2 comments:

Chaos said...

Were 'austrians' the ones asking for empirical and mathematical proof? The world upside down...

TomatoBasil said...

MMT is the Rodney Dangerfield of Economics. But the brilliant professor breaks it down to Econ 101 and draws the counter intuitive conclusion. Nice.