How Modern Monetary Theory (MMT) Actually Works (w/ Warren Mosler)

Deficit Owls put the link to the video How Modern Monetary Theory (MMT) Actually Works (w/ Warren Mosler) on their Facebook page. The video is on YouTube.

Modern Monetary Theory has become a hot topic of discussion. But is it well understood? In this interview with Real Vision’s Ed Harrison, Warren Mosler, the founder of MMT, describes exactly what Modern Monetary Theory is, and how the framework can be utilized. Particularly interesting is Mosler’s ambivalence about the political furor enveloping MMT. He sees the economic framework as more descriptive of monetary operations than prescriptive of policy. Mosler also outlines why MMT’s operational bent made it attractive to finance professionals long before it became a politically-charged debate among academic economists and politicians. Filmed on May 29, 2019 in New York.

Here is a fabulous interview from the godfather of MMT. In the beginning you have to listen fast to some of what he says. He says things faster than you may be able to absorb them. Later he starts to talk about how he came to understand what he had earlier described. For me this is a tremendous payoff. I have been learning MMT for a few years now, and there is always a bit or a piece here and there that I am not sure I get. He clarified so much for me in this one hour. Whatever you can get from this interview will add to your understanding of how money works and why you need to understand it. Whatever you don’t get should just encourage you to listen to more explanations that build your knowledge. Slowly, but surely, your brain will start to light up as you come to understand more. At least that is the way it works for me in any field I decide to study.

In trying to understand how a piece of software works, we often do what is called reverse engineering. We look at the code to figure out what it is doing to accomplish the task it is designed for. If the designer provides you with a description of the design he created before he or she started writing the code, then you will be miles ahead in understanding how the code does its job. In this sense, the interview with Warren Mosler is the design document that tells you how we came up with the concepts in MMT. I have seen documents from others that he worked with to develop MMT, but this is the best piece I have ever seen from Warren Mosler himself.

I took some courses in software engineering that used a book by a revered teacher Donald Knuth called The Art of Computer Programming. He seemed to like to explain computer algorithms by giving you the code in an assembly language he invented for the purpose. When I took the course, I already had a couple of years working as a software engineer. The book drove me batty. I knew already knew some of the algorithms I studied from the book. I kept thinking that if he would just explain the idea behind the algorithm, I could figure out the code for myself. Giving me the code so that I could figure out the ideas only made it more difficult. I decided to stop taking this course before he confused me about all the topics that I had already come to understand and use.

I consider reverse engineering as something I will do if I have to understand the code and nobody has provided me with any other tools with which to learn it. I don’t take pride in doing tricky reverse engineering because it is such a waste of time compared to reading a well written design description.

Mosler’s design for a ferry as discussed in the video is pure genius. Previously I have learned sailing, and read some on naval architecture. I have never read about a design like Mosler’s that puts that knowledge into practice.You never know where you are going to find a brilliant idea on an unexpected topic.

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