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Posts Tagged ‘Stephanie Kelton’

The New Antieconomics | Mises Wire

Posted by M. C. on February 17, 2022

Economics is about human action and choice within the context of scarcity. The problem facing economists is how to understand and explain human betterment, which is another way of saying production. The critical question, posed correctly by economist Per Bylund, starts with scarcity as the default point for understanding purposive human behavior.

Jeff Deist

What causes poverty? Nothing. It is the original state, the default and starting point. The real question is what causes prosperity.

Antieconomics, by contrast, starts with abundance and works backward. It emphasizes redistribution, not production, as its central focus. At the heart of any antieconomics is a positivist worldview, the assumption that individuals and economies can be commanded by legislative fiat. Markets, which happen without centralized organization, give way to planning in the same way common law gives way to statutory law. This view is especially prevalent among left intellectuals, who view economics not as a science at all, but rather a pseudointellectual exercise to justify capital and wealthy business interests.

Antieconomics is not new; even alchemy might be considered a medieval version of the endless quest to achieve something for nothing. It holds enduring appeal in modern politics and academia, where communism, chartalism, Keynesianism, and monetarism all represent twentieth-century variations on the central theme of commanding economic activity.

But today’s most visible version of antieconomics takes the form of modern monetary theory. MMT featured heavily in a recent flatteringprofile of Professor Stephanie Kelton in the New York Times titled “Is This What Winning Looks Like?” “Winning” in this context refers to MMT’s growing popular appeal, with Kelton as the public face following her 2020 book The Deficit Myth.

Kelton’s MMT is a political and fiscal program, not a macroeconomic theory. It argues deficits don’t matter because money issued by a sovereign government is never constrained (unlike resources, as Kelton admits). Thus governments don’t “pay” for things the way individuals or businesses do, and furthermore, public debt is actually a private benefit to someone. The problem is not paying for government programs, but rather identifying them—robust public works, job guarantees, universal basic income, food and housing, Green New Deal programs, Medicare for All, etc.—and, more importantly, creating the public will to support them politically.

In Kelton’s words, MMT “teaches us to ask not ‘How will you pay for it?’ but ‘How will you resource it?’ It shows us that if we have the technological know-how and the available resources—to put a man on the moon or embark on a Green New Deal to tackle climate change, then funding to carry out those missions can always be made available. Coming up with the money is the easy part.” The Deficit Myth, in sum, is what one commenter called “a plea to use permanent wartime mobilization for civilian ends.” Endless stimulation, not better and cheaper production, is the goal of fiscal (or monetary) policy.

This is antieconomics in its fullest expression. Resources exist (from whence?); are commanded by or at least available to the state, if not outright owned by the state (taxes? seizure? forfeiture?); and then are put in service of an undefined political mandate (what “we” want). Funding is an afterthought, as the fiscal authority creates money as needed. But in fairness to Kelton, the US federal government in 2020 spent roughly $6.5 trillion, twice what it raised in taxes ($3.4 trillion). In a very narrow sense, MMT “works” in the short term for the benefit of politically favored groups.1 This is the seen. But proper economics, as Henry Hazlitt and Frédéric Bastiat explained, requires looking at the long-term effects of a policy on everyone. This is the unseen. For MMTers, the vast opportunity costs of government spending, even when the economy is nowhere near “full employment,” go unseen.

Perversely, media critics defended criticisms of Kelton’s Times feature on the grounds of sexism. She is lauded, not surprisingly, as a rare standout in the male-dominated field of academic economics. The attacks on her work, we are told, come from older jealous white men (e.g., former Treasury secretary Larry Summers) who don’t appreciate the “new” economics she proposes and who envy the attention she has brought not only to herself and MMT, but to the broader push for egalitarian economic justice. Kelton, after all, served as an economic advisor to democratic socialist presidential candidate Bernie Sanders and supported Elizabeth Warren. Old neoliberals like Summers, by contrast, still support the outdated idea of fiscal constraints.

But beyond the absurd allegations of sexism—surely Kelton knows how merciless Twitter and other platforms are to everyone—is the more alarming suggestion that the practice of economics is too male and needs a female version. Economics is too adversarial, too concerned with being right, and in need of a more collaborative (read: female) approach. The implications of this for all social sciences, not just economics, are staggering: we would upend the search for knowledge to reflect a different logic between men and women—what Mises called “polylogism.” Would this not require an entirely new epistemology across all scientific disciplines?

None of these diversions will allow us to escape reality. Economics starts and ends with scarcity, an inescapable feature of human reality. Any conception of freedom from material and human constraints requires a posteconomics world, either an earthly utopia or a heavenly abundance. In our world, however rich relative to the past, scarcity is the starting point of economic analysis. In our world, individual human actors make “rational” choices only within the context of constraints: time, capital, intelligence, ability, health, and location. And every choice has an opportunity cost. 

Professional economics is in big trouble, and only an aggressive new generation of Austrian-trained praxeologists can undo the damage done by the prescriptive and political antieconomists. 

  • 1. The US government is one such favored group, given the dollar’s status as the world’s reserve currency coming out of the Bretton Woods agreement, a powerful military, plentiful land and natural resources, and other economic advantages. Is MMT only a viable system for wealthy, powerful countries? 


Contact Jeff Deist

Jeff Deist is president of the Mises Institute. He previously worked as chief of staff to Congressman Ron Paul, and as an attorney for private equity clients. Contact: email; Twitter.

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If Deficits Don’t Matter, Why Bother with Taxes? | Mises Wire

Posted by M. C. on March 26, 2021

Kelton’s answer? Taxes would still be needed, because they make us poor. And because they can punish people she doesn’t like.

Specifically, Kelton likes that taxes “remove dollars from our hands, so we can’t spend them,” leaving more purchasing power for the government. So taxes make the people poor, and that’s a selling point to her, presumably because she thinks governments are really good at lifting people out of poverty. Anybody who’s spent time in America’s inner cities, where government money is pretty much the only money, might disagree.

Peter St. Onge

On March 18, Joe Wiesenthal of Bloomberg Markets had MMT economist Stephanie Kelton on the show. If you’re not familiar with modern monetary theory, they think governments should print more money because deficits aren’t a big deal. At one point in the show, Wiesenthal asked, “If we don’t need to worry about deficits, why do we have taxes?” Kelton’s response was illuminating.

Now, the traditional excuse for taxes is, paraphrasing Oliver Wendell Holmes, that they are the “price of civilization.” Skeptics point out that, historically, societies with very low taxes were often far more civilized—think the Dutch Golden Age, Islamic Golden Age, Victorian England, the pejoratively named “Gilded Age” in American history—that thirty-year golden age when almost everything useful was invented. And, yet, throughout that period, federal receipts were one-fifth what they are today.

Why so much civilization? Because much of what governments do today was done by charities or businesses competing for customer dollars instead of seizing their budget in taxes. When doctors, firefighters, and schools have to satisfy customers, things get quite civilized.

Still, even if we accept a “night-watchman state” argument for, say, national defense or salaries for Supreme Court justices, it gets tricky if government can simply print up the fresh money to pay for all that civilization.

Kelton’s answer? Taxes would still be needed, because they make us poor. And because they can punish people she doesn’t like.

Specifically, Kelton likes that taxes “remove dollars from our hands, so we can’t spend them,” leaving more purchasing power for the government. So taxes make the people poor, and that’s a selling point to her, presumably because she thinks governments are really good at lifting people out of poverty. Anybody who’s spent time in America’s inner cities, where government money is pretty much the only money, might disagree.

Ah, but it’s not just about spending our money more wisely than we ever could, Kelton adds two secondary reasons she loves taxes: to punish particular people by redistributing their money, and to punish people for doing things she doesn’t like. Such as failing to buy energy-efficient appliances (no, really). In other words, social engineering with carrots for your friends, sticks for your not-so-friends.

Aside from the morality of preying on our neighbors, demanding they pay an ever-growing “fair share” that invariably exceeds what, say, a journalist or professor pays, using taxes for redistribution and punishing—“nudging,” in the fashionable parlance—carries enormous collateral damage. Because redistribution arranges society into hostile factions either trying to violently dispossess one another or defending against that dispossession. Moreover, redistribution isn’t simply innocently shuffling the chips; it is wholesale destruction. A paper coauthored by Christina Romer, former chair of Obama’s Council of Economic Advisors, found that each dollar in government spending leads to between $2 and $3 in lost economic activity. A separate study by Harvard economist Martin Feldstein came to similar deadweight estimates that “may exceed $2 per $1 of revenue.” In other words, in order to move a dollar, you have to destroy at least two to three dollars.

There is a similar mix of moral and practical costs to using predatory taxes for social engineering. It also breaks the social compact to live and let live, rendering our every decision subject to public vote, from what we eat, to where we vacation, to what kind of bag we use to carry our groceries. There is nothing outside the realm of the nudgers, no detail too small.

Moreover, by mass imposition of what are effectively judicial fines for noncrimes, such taxes can achieve a level of control that would never be constitutional if written as law. For example, today in the United States, 90 percent of students attend public schools, despite the terrible quality of education. Why do they stay? Because each voter must pay for public schools whether or not they use them, but would have to shoulder $11,200 per child per year for opting out of the public system, while continuing to pay that $12,600 per year in taxes for the “free” public system. Especially for the working class, this penalty becomes prohibitive for all but the most committed.

Pair these facts—no detail too small for the social engineers and their ability to achieve near-universal obedience via fines and subsidies—and we risk a totalitarian “permissioned” society where we are free on paper, but using that freedom comes with ruinous fines.

If, indeed, the only remaining justification for taxes in an inflationary regime is to redistribute and punish—to erode social harmony in a fiscal war of all against all while impoverishing society and enabling a creeping totalitarianism—then it is much closer to the mark that modern taxes have become not the price of civilization, but the predator of civilization. Author:

Peter St. Onge

Peter St. Onge blogs on economics at Profits of Chaos.

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