A modern monetary theory advocate’s response to ‘modern monetary theory on money, sovereignty, and policy: A marxist critique with reference to the Eurozone and Greece’ by Costas Lapavitsas and Nicolás Aguila (2020)

The purpose of this paper is to provide a robust defence of Modern Monetary Theory’s (MMT’s) approach to money. It is argued here that, when compared to the commodity variant of the Marxist theory of money, the insights of MMT provide a superior basis from which to develop economic knowledge. In contrast to Lapavitsas and Aguila, the paper provides arguments in support of MMT’s approach which is both theoretically sound and provides satisfying explanations which are in accord with the evidence. This article also highlights the significant mischaracterisation of MMT’s approach in Lapavitsas and Aguila and shows how the authors’ failure to present an accurate picture of the MMT argument results in their critique missing the mark. Effectively, their criticism applies only to an MMT of their own creation. When Lapavitsas and Aguila turn their attention to Greece, they fail to appreciate the value of the insights provided by MMT and their lack of a detailed understanding of monetary operations in the Eurosystem leads them to make several notable errors.