Modern Monetary Disagreement

In an economic climate of persistently low real long-term interest rates and rising public demand for social and environmental programs, Modern Monetary Theory has been gaining momentum on the left. But it remains to be seen if MMT’s approach to government spending, central banking, and debt can win over a wider range of economic policymakers.

In this Big Picture, Harvard’s Kenneth Rogoff expresses doubts that MMT’s prescriptions would prove either safe or effective, and worries about the long-term fiscal and monetary implications. But James K. Galbraith of the University of Texas at Austin counters that MMT has a sound footing in Keynesian economics, and may be the only way to achieve both full employment and price stability.

Sebastián Edwards of UCLA, however, warns that in countries where some version of MMT has been tried, it has never ended well. But Robert H. Dugger of Hanover Provident Capital disputes that, and argues that the debate will be rendered moot by the next major debt crisis, which will make some form of MMT inevitable.