In this episode of Mentally Unscripted, Paul and Scott critique Stephanie Kelton's The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy.
When it's over, you'll understand better MMT's basic concepts. And you'll hear arguments about why it's not the cure-all its proponents claim.
Does it seem that the last several elections were a contest to see which candidate can promise more free stuff? If so, you're not alone.
Free healthcare, education, and money dominated recent elections.
In the past, one central question concerned us when it came to such promises. That is, "how is the government going to pay for all this free stuff?"
Then, Modern Monetary Theory, known as MMT, exploded onto the scene. And when it did, it pushed that fundamental question to the back burner. The reason is the central principle of MMT: the U.S. federal government can print as much money as it needs. You see, under MMT, the government can support massive spending programs. All with no concern for pesky things like deficits and debt.
No doubt you have friends and family who like the idea of the government paying for healthcare and education. And they may not know anything about MMT. But they likely heard politicians like Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio-Cortez claiming that the U.S. can afford these massive programs. And it sounds good. After all, everyone has the right to healthcare, education, and a living wage.
But your argument that the U.S. government needs to operate its finances the same as a household doesn't convince them. "Deficits don't matter," is all your friends and family say.
Armed with the knowledge from this episode, you'll have better conversations with friends and family about MMT. You'll understand its shortcomings and where we need more explanation. And you'll know why we can't use economics to solve moral problems.
Resources mentioned in this episode:
The Deficit Myth, by Stephanie Kelton
Mental models, biases, and fallacies mentioned in this episode:
Root Cause Analysis / Don’t Only Treat the Symptoms