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The "Noble Lie" on Public Spending and Inflation

Published by Matthew Davidson on Sat, 19/09/2020 - 11:00am in

[I suck at organising information. I've tried all sorts of fixes for this, both off-the-shelf and DIY. So now I'm going to just use tagged blog posts to organise things, so I can suck at this in public. No need to thank me.]

Introduction

Paul Samuelson, 1995

I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say “uh, oh what you have done” and James Buchanan argues in those terms. I have to say that I see merit in that view.

Paul Samuelson on Deficit Myths — L. Randall Wray

Martin Wolf, 2020

In my view, [MMT] is right and wrong. It is right, because there is no simple budget constraint. It is wrong, because it will prove impossible to manage an economy sensibly once politicians believe there is no budget constraint.

Summer books of 2020: Economics — Martin Wolf [mirror]

Ross Gittins, 2020

But once demand was growing faster than the supply of real resources, any further money you created would simply cause inflation. This is what’s really worrying the opponents of MMT (and me). If you let the politicians off the leash to spend as much as they liked up to a point, how would you ever get them to stop once that point was reached?

We're edging towards a big change in how the economy is managed — Ross Gittins