What is Modern Monetary Theory?

[Lexicus]

True, but I still believe if you understand all the underlying theory it would make you a better manager of money. And if not, then maybe you don't understand as much as you think you do.

Look up Warren Mosler or Hyman Minsky. Minsky came from academia but understood finance quite well and had many friends on Wall Street. Mosler came from banking and his inside-out knowledge of finance informed his understanding of economic theory.

But in general, understanding macroeconomics and understanding how to do well in business are two different things.

 

[rah]

Doing well in business and managing money are two different things. Understanding cycles and trends are big for the latter.

 

[Lexicus]

Doing well in business and managing money are two different things. Understanding cycles and trends are big for the latter.

Understanding macroeconomics is a third thing, it doesn't change the argument. Certainly, sometimes having an accurate understanding of macro can help you make money by betting against people who don't understand macro. Warren Mosler has done that before and I doubt he's the only one.

 

[rah]

help you make money by betting against people who don't understand macro.

Like going to the race track. You're not betting on the horses, but on all the others betting.

 

[Lexicus]

Bets are bets though, you keep betting and sooner or later you're gonna lose. No economic theory can make you into a flawless predictor of the future. Human society is just too complex to predict consistently.

What MMT does not do is offer an economic "theory of everything." It offers some tools to discipline economic analysis. and other tools to understand institutions in a way that neoclassical economics does not. It isn't fair to hold MMT to some standard that it does not claim to meet.

 

[El_Machinae]

True, but I still believe if you understand all the underlying theory it would make you a better manager of money. And if not, then maybe you don't understand as much as you think you do.

Yes, maybe 'better' than the average person. But not better than the average specialist. They're different fields. And the average is driven by the average of the specialists.

A psychologist might be a better neurosurgeon than you, but you'd expect a trained doctor to be better.

Additionally, you're presuming that an intellectual has a desire for wealth greater than is required to become comfortable.

 

[rah]

Bets are bets though, you keep betting and sooner or later you're gonna lose. No economic theory can make you into a flawless predictor of the future. Human society is just too complex to predict consistently.

True when you're betting against probability and the house is taking a percentage but when you're betting against other people it is possible to win over the long run.
A real good poker player will lose occasionally but will win in the long haul.

I still haven't been convinced that MMT is anything more than the flavor of the month. We'll see.

Additionally, you're presuming that an intellectual has a desire for wealth greater than is required to become comfortable.

No, just saying I think her would be better than the average, which is all it usually takes to be a successful money manager.

 

[El_Machinae]

Better than the average what, though? The average is driven by the average of the experts.

 

[rah]

I think it's been proven many times that in terms of investing decisions, the average of the experts isn't really that different from those that aren't.

 

[El_Machinae]

Ah, then you're realizing that the key to success is to have deep pockets, be approximately average, and be lucky.

Knowledge of macro only means you'll be successful if you have the above three things as well. Remember, in finance, you can be a multimillionaire and still not even know how money is created. The benefit of being specialized is pretty large. Neuroscience and psychology ...

Also, because it's mostly zero sum, you will see that experts becoming better drive the average rather than create a better average.

 

[rah]

That just leads me to the conclusion that it has no value.

 

[Lexicus]

That just leads me to the conclusion that it has no value.

"If I can't use it to make money, it has no value" is...a really poor attitude imo

 

[El_Machinae]

That just leads me to the conclusion that it has no value.

Psychology and neuroscience ...

 

[rah]

"If I can't use it to make money, it has no value" is...a really poor attitude imo

That what happens when you get old, a POOR F****** attitude.
But I'll modify that to.... of lesser value. I care a lot less about the why now and more about the results.
And my patience for listening 'to know it all' younger punks reminding me about all the things I don't understand has worn thin.

 

[Lexicus]

That what happens when you get old, a POOR F****** attitude.
But I'll modify that to.... of lesser value. I care a lot less about the why now and more about the results.
And my patience for listening 'to know it all' younger punks reminding me about all the things I don't understand has worn thin.

Well I hope I die before my intellectual curiosity is exhausted

 

[rah]

It still exists, just not for the latest economic theory.

 

[El_Machinae]

That what happens when you get old, a POOR F****** attitude.
But I'll modify that to.... of lesser value. I care a lot less about the why now and more about the results.
And my patience for listening 'to know it all' younger punks reminding me about all the things I don't understand has worn thin.

Do you realize that some theories can create a superior aggregate, even if they don't give an individual a competitive advantage?

Society learning that smoking causes lung cancer decreased lung cancer, but didn't make any of the researchers rich. And nowhere are rich as cigarette execs. Some things make a society better, and other things make people better off relative to their society.

 

[rah]

But there were actual results, decreased lung cancer.
Get back to me when MMT shows similar earth shattering results.
I'd rather put effort into climate change since it have a greater impact. My major economic concern is not to end up having to survive on dog food.

 

[Lexicus]

I'd rather put effort into climate change since it have a greater impact.

The more people who understand MMT, the better the chance we have of addressing climate change.

MMT does not address esoteric concerns. Macroeconomics deals with issues that can literally define the course of millions of lives. 1 in 4 Americans ended up unemployed in the 1930s because the policymakers at the time did not understand macro.

Now, before I'm strawmanned on this, of course I'm not suggesting that MMT is a utopian cure-all of any kind! No. But it provides us with a framework where we can figure out ways to deal with those issues. That is of no small importance considering that neoclassical macro has had the effect of constraining the kinds of policies and approaches people think are possible.

My major economic concern is not to end up having to survive on dog food.

What is the point of saying this kind of thing?? Do you think "I don't care about anything except where my meals are coming from" is a noble stand or something? If you don't care about economic theory why are you posting in this thread?

 

[El_Machinae]

I'd rather put effort into climate change since it have a greater impact. My major economic concern is not to end up having to survive on dog food.

Sure, then investigate and build (and propagate) economic theory that allows us to reduce the risks of climate change, but in the win/win way necessary to make it politically viable! Knowing how money works, at a macro level, is essential to that.

MMT is not a series of proposals. It's a model of the system. If you look at all the gold-bugs, they also have a model of the system. Austrian economics, Keynesian economics, etc. are all models of how the system works. You use the models to create a proposal that can help prevent climate change from destroying our future. Other people then critique them. We then vote based on those ideas, and then Trickle-Down continues to pop up to trick people. You need the tools to beat Trickle-Down theory in your friends, because our current system is cooking the planet.

If you'd rather put more effort into climate change, I'd really support that. We need more people of means both changing their consumption, convincing their friends to do so, and also start forwarding ideas that can help change the course of this cruiseliner.

Get back to me when MMT shows similar earth shattering results.

We're still running the trickle down theory. Want to make sure it really doesn't work. My suspicion is that Boomers are going to learn about money-printing, and its value, as the next recession destroys the non-cash parts of their portfolio.