MMT, Models, Multidisciplinarity


New Economic Perspectives has the article MMT, Models, Multidisciplinarity.

The upshot is that, there is an inverse relationship between the price the government pays for goods and services and the quantity of real goods and services it receives, for a given level of taxation and net saving desires. Constraining the budget creates unemployment and under-provisions the government. If instead, the government allowed its budget to float, if could design a countercyclical policy (such as the Job Guarantee) that would be a superior price anchor and automatic stabilizer, which I modeled in a subsequent paper. So unlike basic neoclassical PPF models that pass objectionable tradeoffs as efficient, the Job Guarantee explicitly rejects the use of unemployment for economic stabilization purposes.

There is a lot in this article that is worth learning. It will take further reading and thought to digest it all. The references in the article will be interesting to follow.

There is one comment in the article, that I have said myself.

Now, all models make simplifications and all models are flawed. But they can be used to clarify an idea.

On this blog, I found one post I wrote that expresses the same sentiment. The post is Financial Modelers’ Manifesto posted on December 2, 2010.

I believe in this oath even for my former line of work modeling the behavior of integrated circuits. In my line of work, I was actually modeling laws of physics, but all models simplify.

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