Feb 26, 2024
Welcome to episode 148 of Activist #MMT. Today I talk with post-Keynesian economist Steve Keen about his decades-long fight against mainstream economics, what MMT convinced him of, and the couple parts of MMT he still disagrees with. This first part is a half-hour long audio interview, which will be followed next month by an hour-and-a-half-long video interview, where Steve walks me through the basics of his Minsky modeling software, and why he believes it's an important tool for MMTers.
(Here's a link to PART TWO. A list of the audio chapters in this episode can be found right below.)
MMT and Steve are in complete agreement with how banks spend (lend money into existence). After reading Stephanie Kelton's book in 2020, Steve realized that government spending also creates money. National governments don't tax in order to spend, they spend in order to tax. Steve quickly created a Minsky model convincing himself that MMT is indeed correct regarding this. This insight is also completely compatible with his understanding of bank spending.
As far as Steve's disagreements with MMT, they are important, and Steve lays them out in detail in the last ten-or-so minutes of this episode. But let it be known that they are far from core issues. In other words, the amount of agreement is far greater. It's good to understand what these disagreements are, but as Steve says, we have much bigger fish to fry.
This is the first main episode of Activist #MMT since August. Although I've released three chapters from John Harvey's readings of his book Contending Perspectives (with lots more to come!), the past six months have been all consuming, starting with my third Torrens course – which was coincidentally taught by John on that very book. It was both incredibly enlightening and unbelievably exhausting.
I've also become a full-time musician. I now sing several times each week at retirement communities and related facilities (independent living, assisted-living, nursing homes, etc.). Coincidentally, back in July, I met Steve in person for dinner in Princeton, New Jersey, which is about an hour north of my home. After dinner and conversation, Steve gave me an initial walk-through of Minsky. We ended the night with me singing a few songs on the sidewalk – just me, my phone, and a little Bluetooth speaker. At the very end of today's episode, after the closing theme music, you'll hear a small highlight from that experience. You can check out my singing website at seejeffsing.com.
And now, onto my conversation with Steve Keen. Enjoy.
Audio chapters
- 4:24 - Hellos, and the plan
- 5:53 - His journey fighting mainstream, and, in 2020, to MMT
- 8:19 - Marx's view of money, Steve's PhD, Minsky's financial instability hypothesis, double entry bookkeeping, thinking of government spending differently
- 9:43 - Modeling money properly with double entry bookkeeping
- 10:49 - Discovering MMT in 2020, which changed his view on government spending
- 12:56 - Mild criticism of MMT's consolidated view
- 14:29 - Money creation is the expansion of balance sheets. The same thing happens on both the asset and liability side. If it ONLY happens on the liability side, it's a liability swap it. If it ONLY happens on the asset side, it's an asset swap.
- 16:42 - Regarding government money creation, how does your model distinguish between money creation and the supposed recycling of collected money?
- 19:12 - The only insight MMT gave Steve was that government spending creates money. All his work on banking is exactly compatible.
- 20:09 - Steve's two disagreements with MMT
- 21:31 - Disagreement 1: MMT says that in general, imports are a benefit and experts are a cost.
- 25:48 - Disagreement 2: The JG and UBI are actually complementary
- 27:59 - A dangerous follow up question: danger of UBI is that it could undermine the job guarantees Price anchor. Steve's response: the UBI would need to be below the job guarantee wage
- 30:25 - Have you modeled these disagreements in Minsky to confirm your view? Answer: no. There are simply much bigger fish to fry.
- 31:16 - Goodbyes for audio portion, transitioning to video
- 34:38 - Singing for Steve on a sidewalk in Princeton
- 36:01 - Duplicate of introduction, with no background music (for those with sensitive ears)