Imagine you are an experienced mechanic. One day your neighbour comes home with a newly purchased used car. It is running terribly – sputtering and running slowly with little power.
You look under the hood. It is a four cylinder car in good condition, and you notice that one of the spark plug cables is simply unconnected. The only thing that needs to be done to make the car run smoothly and with 100% power is to connect that spark plug so that all four cylinders fire.
This is the case with economics and the economy. There are a minority of economists, MMT and Post-Keynesian economists especially, who actually observe the real properties and understand the fundamentals of how the economy functions (as opposed to the scholastic mainstream economics founded on make-believe assumptions).
These economists are sometimes accused of being “normative” and reply that they are merely describing how economies actually function. Unproductive debate follows.
The misunderstanding is that sometimes describing is inevitably prescriptive, as with the car.
Once the actual mechanics of the economy are understood it is impossible to look at the way the economy is currently managed and not suggest increasing spending for public projects such as infrastructure, healthcare, and employment. There are idle resources alongside desired projects; there is no downside to employing them, and almost innumerable upsides.
Just as with the mechanic, there is no way to look at an otherwise well-running four cylinder car that is running needlessly on 3 cylinders and not mention “Errr,,,you know…it would run perfect if you simply connect that cable back, which I can do for free in 10 seconds.” (Which actually improves the functioning by far more than 25% since a non-functioning cylinder messes up the entire timing/function of the engine, it doesn’t just reduce the power proportionately).
Another way to say this: In this case there is in effect a “free lunch.” There is almost no effort involved in plugging the fourth cylinder in, but a massive gain that is currently being foregone for no reason. A similar way to say the same and actually talking about lunch: If someone left a very nice picnic spread on a hot summer day, and you salvage it before it rots, you do indeed have a free lunch, a lunch that would not have existed except for your (minimal) actions. It would have been permanently lost and you would have had to eat something else, but by simply not letting it go to waste you have a free lunch. We are letting a good bit of our economy “rot” for no reason. This is a permanent reduction of wellbeing for us and future generations.
MMT is hardly being “prescriptive” or “normative” when they point out the loose spark plug cables of our economy. There are gains to wellbeing that are relatively easily achievable now that have virtually no downsides.
MMT economists aren’t saying “you should convert that street car, put some big knobby tires on it, and start doing off road derbies!” That would be a normative change in lifestyle and design with many trade offs for wellbeing. But simply plugging the fourth spark plug cable is a pure gain.
This analogy can be extended to think about some recent criticisms of MMT and developing countries. MMT insights help any economy run optimally. What they cannot do is make the fundamentals of a country better. In other words, there can be old Ford Pintos, 4×4 Jeeps, and Ferraris all with loose spark plug cables. All of them have a pure benefit from having those cables noticed and reconnected. However, the cars themselves have fundamental differences in capabilities. It is silly to expect the advice to make the Ford Pinto run like the Ferrari. But both will run much better than they did previously.