Modern Monetary Theory is one of the most popular theories about the functioning of money and monetary systems at the moment. Despite many controversies, both theoretical and practical, it is often indicated as an element of the new agenda in the field of economic policy. Is this popularity the result of the simplicity of this theory, the scarcity of economic knowledge, or perhaps - nevertthelles - the correct reading of the mechanism of creation and the features of modern money?
Dear Pawel,
It is an old theory that is proposed for some big problems in the modern economic problems. It proposes to finance most of our big problems by deficit spending through money supply. The fear is that such spending might cause inflation, but with current high deficit and low inflation, it is very appealing. Besides one can use tax policies if there is too much money out there. I think that it is its simplicity that makes it attractive, that is, one need not follow all the modern technical analyses to get a feel of the policy mechanism.
I think important are two elements. The first is ... 'at the moment'. It meant that somehow the MMT had seemingly fit the data. The second is that we need to change the Tense; it used to be seen as the most 'popular'. The circumstances are changing and fortunately, its simplicity is no longer seductive.
I wonder if relative lack of affirmative empirical evidence reflects the time-lapse in knowledge dissemination. It may be worth considering that economical theories are performative in a sense that they create reality as more people belive in them and adjust their behavior accordingly (vide experiments showing economic student to be more selfish than others after being taught that humans are selfish). From pragmatic (rather than essentialist) view maybe it just takes time for the theory to become "real"? I'm not positing, it's just food for thought.
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