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Modern Monetary Theory: Some Additional Dimensions

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  • Gordon L. Brady

    (Florida Southern College
    High Point University)

Abstract

The objective of this paper is to examine the foundations of Modern Monetary Theory (MMT) by building upon the individual papers in this issue of the Atlantic Economic Journal by Mark Skousen and Patrick Newman. The foundations of MMT include five cornerstones. First, sovereign governments that are the sole supplier of a national currency (e.g., United States) can issue as much currency as they want, have unlimited ability to fulfill promised future payments, and cannot go bankrupt. Second, legislation enables spending while taxes neither place a limit nor specify government spending (earmarked taxes would be an exception). Third, a sovereign government can borrow as much as it likes in pursuit of laudable public sector projects or fiscal policy programs to manage the economic cycle. Fourth, a huge and growing national debt is beneficial to the economy as long as inflation remains contained. A fifth feature, the blogosphere, shaped the emergence of MMT largely in the absence of technical vetting and critical empirical examination. The popularization derived for MMT through the blogosphere will have a profound effect on U.S. politics and economic policy in the 2020s and 2030s. The foundations of MMT are refuted by the work of public finance theorists David Ricardo, James Buchanan, Robert Barro, and Alberto Alesina.

Suggested Citation

  • Gordon L. Brady, 2020. "Modern Monetary Theory: Some Additional Dimensions," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(1), pages 1-9, March.
  • Handle: RePEc:kap:atlecj:v:48:y:2020:i:1:d:10.1007_s11293-020-09654-6
    DOI: 10.1007/s11293-020-09654-6
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    References listed on IDEAS

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    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122, National Bureau of Economic Research, Inc.
    3. Afonso, António & Furceri, Davide, 2010. "Government size, composition, volatility and economic growth," European Journal of Political Economy, Elsevier, vol. 26(4), pages 517-532, December.
    4. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 645-661.
    5. Engen, Eric M. & Skinner, Jonathan, 1996. "Taxation and Economic Growth," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(4), pages 617-642, December.
    6. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries," European Economic Review, Elsevier, vol. 44(7), pages 1259-1289, June.
    7. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
    8. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    9. Buchanan, James M, 1976. "Barro on the Ricardian Equivalence Theorem," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 337-342, April.
    10. Patrick Newman, 2020. "Modern Monetary Theory: An Austrian Interpretation of Recrudescent Keynesianism," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(1), pages 23-31, March.
    11. Landau, Daniel, 1986. "Government and Economic Growth in the Less Developed Countries: An Empirical Study for 1960-1980," Economic Development and Cultural Change, University of Chicago Press, vol. 35(1), pages 35-75, October.
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    Cited by:

    1. Aloys L. Prinz & Hanno Beck, 2021. "Modern Monetary Theory: A Solid Theoretical Foundation of Economic Policy?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 49(2), pages 173-186, June.

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