Post-Keynesian is not Necessarily Modern Monetary Theory (MMT)

I am going to wade into the dark waters of MMT once again here, but only because this is a very important point.  I was discussing some things about the post-keynesian school online with Noah Smith and others and he pointed out that he conflated MMT for being the same thing as the post-keynesian school.

Anyhow, I’ll keep this short and sweet, but MMT (Modern Monetary Theory) is not necessarily the same thing as Post-Keynesian.  For those who don’t know, the post-keynesians base their thinking from the foundation of stylized fact and recognize the importance of the actual institutional structures that exist within a monetary system (that involves understanding the government institutions within the monetary system, the endogeneity of money within the banking system, etc).  PKers also understand that firms exist in this system primarily to generate a profit and that the pricing decision of goods and services is what determines the distribution of national income between wages and profits.  This system is highly unstable and does not necessarily veer towards equilibrium.  This is at odds with important facets of the neoclassical thinkers, but that’s not the subject of this post.

MMT is a strand of the PK school that adds a fairly substantial amount of unique thinking and theoretical work to the foundation of PK thinking.  Unlike Monetary Realism (MR), which is almost entirely descriptive, MMT is largely built around prescriptions.   Specifically, MMT adds on things like Knapp’s State Theory of Money, the MMT Job Guarantee (which is really just Minksy’s Employer of Last Resort), Abba Lerner’s Functional Finance and very specific policy proposals, etc.  Many of these views are not PK and some of them are actually closer to Marxist views than PK views.  Abba Lerner was a market socialist and Minksy always resisted being called a PKer.   If the three main legs of MMT are Functional Finance, the ELR and Godley’s Sectoral Balances (as many of them claim) then MMT actually has a lot of influence from well outside of the PKE school.  In fact, one could easily argue that MMT is more market socialist than PKE.

Clearly, MMT is highly influenced by the giant PK thinkers like Joan Robinson, Nicholas Kaldor, Michal Kalecki, Marc Lavoie, Wynne Godley and Hyman Minksy, but don’t fall into the trap of believing that Post-Keynesian is necessarily the same thing as MMT.  It’s not.  MMT is a strand of Post-Keynesian that, in my opinion, adds on a whole lot of unnecessary and even misleading parts to what is an incredibly valuable set of operational understandings from the PK giants.

If you really want to understand the post-keynesian school I recommend you read Monetary Economics by Lavoie and Godley.