Who can forget the time that Sumner chided MMT for being too literal minded in 'Too Literal Minded? A Theory of the Strange World of the MMTers'
"My theory is that they focus too much on the visible, the concrete, the accounting, the institutions, and not enough on the core of monetary economics, which I see as the “hot potato phenomenon.”
This post at the time generated 321 comments at Sumner's Money Illusion and led many MMTers to heap scorn. Cullen Roche:
"One of the greatest strengths of the MMT approach is that it is not based on theory or mythology. This is why I often say that the name can be misleading. The core of MM “Theory” is just a description of our fiat monetary system’s “Reality”. When MMTers discuss the actual operations of the monetary system we are not theorizing. We are discussing the actual operations. This is why we reject so much of the economics that is taught in textbooks predicated on defunct gold standard beliefs and the thoughts of men and women who have never actually been involved in monetary operations or the mechanics of what makes an economy and/business work in the real world."
"That is why I am astounded by recent comments such as Scott Sumner’s, who today writes:
“I wasn’t able to fully grasp how MMTers (“modern monetary theorists”) think about monetary economics (despite a good-faith attempt), but a few things I read shed a bit of light on the subject. My theory is that they focus too much on the visible, the concrete, the accounting, the institutions, and not enough on the core of monetary economics, which I see as the ‘hot potato phenomenon.’”"That’s exactly right. We don’t create Crusoe Islands (as Robert Murphy does) or monetary systems without banking systems (as Sumner does). We are working within our reality and applying analysis and solutions based on that which is visible, concrete, provable through accounting and obvious through the institutions who implement these operations. If you want to know why we’re in this current mess look no further than the thought process above which claims that we need to focus less on reality and more on mythology. They got us into this mess and now we’re all sitting around waiting for them to get us out. Meanwhile, those of us working in the trenches in reality just get ignored….."
Not to further muddy the waters but Roche now has started kind of a sect that has left MMT called MMR. Again not to further muddy the waters... LOL
In any case it's interesting to read this comment left by commentator Gregor Bush over at Money Illusion today:
"Williamson is the ultimate “Person of the Concrete Steppes” as Nick Rowe would say. I find his focus on the mechanics of monetary policy and his complete lack of focus on expectations to be baffling."
"Whenever I encounter a POTCS, I always respond as you did but I take it even further: “if QE “dosen’t work” why don’t we just monetize the entire national debt? Come to think of it why do we pay taxes at all? Come to think of it, why do we work at all, why don’t we just have the Fed print money and we’ll import everything that we consume?”
"The usual response is to concede that the Fed could create a hyperinflation if it wanted to but getting inflation just a little bit higher is very difficult – but they can never explain why that is."
The post was in response to Williamson's skepticism about NGDP targeting. When SW isn't hating on Krugman he can ask some good questions. It's interesting how the question of how monetary policy works becomes a kind of vice-some people they would have you believe have some perverse desire for "Concrete Steppes."
What could the mechanics possibly matter-it's just about expectations. As Nick Rowe, et al, has in the past used car analogies lets go with this analogy and think of it this way. If your car is broken down what's more likely to get it started again-some understanding by you about the car's mechanics and how to fix them-in my case this would be the job of the mechanic!-or simple "confidence" and an expectation that what the mechanic do really will work?
I know some might argue with the analogy but as the MMers have used some car analogies I figure what's good for the goose...
The Market Monetarist Expectations analogy is sort of like this-does being an expert about physics enable you to hit a baseball further? The answer to this is clearly no. The question is which analogy is better? Is trying to jump start the macro system more like starting a car or hitting a baseball? I say my car analogy has a lot going for it.
SW of course has nothing to do with MMT and probably wouldn't even speak to them so this might that whether they're right or wrong they aren't the only ones asking about monetary mechanics.