[Part I A (Very) Oblique History of MMT (Wray, Institutional Econ, & other ramblings)
[Part III A (very) oblique history of MMT, Part III: (Blogs, Mitchell etc.)]
My first “oblique history/ramblings” happened to deal loosely with some institutional economics and revolved a bit around L. Randall Wray.
Here I am interested in some very early influences on Mosler, on the role of early co-authors in MMT, and of the importance of “secondary” waves of scholars to its spread. BTW – this series is meant to just be a bit of fun and my personal interests, not serious scholarship.
[Note that I use hyperlinks here to some less well-known scholarship as I think that is a useful service; I don’t use links here when mentioning well-known scholars as their work is easy to find.]
After the earliest MMT publication—Mosler’s Soft Currency Economics (developed through the early 90s), and the origins of MMT along with Mitchell and Wray from the mid 1990s, there is perhaps no clear cut set of “generations” of MMT. It is sort of a continuum of collaborators and early supporters e.g. – such as Mathew Forstater (both an early organizer and contributor), Pavlina Tcherneva, Stephanie Kelton etc. I also will mention two extremely early connections with Mosler at the end of this post.
Early students who became central to MMT include of course Kelton, Scott Fullwiler, Pavlina Tcherneva, Eric Tymoigne, and subsequent students contributed either a few papers or whole new avenues of research: Alla Semenova, Zdravka Todorova, Fadhel Kaboub, Ndongo Samba Sylla, Dirk Ehnts, Philip Armstrong, Yeva Nersisyan (the latter who has co-authored with Wray on numerous papers. (If you want a really obscure, and controversial, researcher see Reynold F. Nesiba; see also Robert Kravchuk).
(Not to forget, of course – with Bill Mitchell: Martin Watts, James Juniper, Phil Lawn, and the tireless work of Steven Hail (he explains things so well); the 3rd post will have more on Mitchell’s central role in MMT).
And all of that and I still haven’t mentioned Linwood Tauheed, James Galbraith, Michael Hudson, William Black, Fred Lee, Tae-Hee Jo. I am sure I am missing some important names here, I apologize in advance.
One could of course add to this a still later and ever-widening-in-their-interests generation (Rohan Grey, Nathan Tankus, Sam Levey). And add to that the wide range of MMT adjacent/friendly/PK scholars (John Harvey, Steve Keen, Peter Cooper…this takes me into blogging and podcasts which will be part III and associated with Bill Mitchell).
I simply wanted to point out the cumulatively crucial role these early collaborators played. If the earliest MMT band was Skywalker, Yoda and Obi-Wan, (and/or Princess Leia; Mosler & Co. can decide who is who 🙂 in that analogy) then the early collaborators I mention are Biggs Darklighter, Hans Solo, Chewbacca, and the Rebel Alliance in general (i.e., Post-Keynesian econ in general).
For example, besides having a foundational organizational role, Mat Forstater co-authored one of my favorite (and early-ish) MMT articles (and one of Mosler’s few “formal” papers, not being a “formal” academic like Wray and Mitchell): “A General Analytical Framework for the Analysis of Currencies and Other Commodities” (Mosler and Forstater 1998). (On being a “formal” academic: Note L. Randall Wray says in 2016—and this is not even about mainstream but heterodox economists—”I’m embarrassed by the way…my fellow heterodox economists sometimes treated Warren. I wish we could make it up to him.”
Three guys overturn a profession (with a little help from their friends)
Thinking about it – it is nothing short of astounding that three scholars almost single-handedly (triple-handedly?) eventually upended the massive “Great Vampire Squid” (to steal Taibbi’s line) that is neoclassical economics in our universities, central banks, and government.
When people sometimes criticize MMT for not “addressing x” (see the note* by Wray below) they forget what a tiny group of people it was. Thus the co-authoring and widening of range of experience provided by Forstater, Kelton, Tcherneva, Watts, Fullwiler, Tymoigne etc. was hugely important. As was the simple addition of more articles and material and editing and research by Liudmila Malyshava, Nersisyan, Semenova and so on. Even a few collaborators essentially doubled the size of the original MMT core scholarly group and helped expand the range and volume of writing. That was surely a critical factor in the growth of MMT (as were blogs, as we will see in Part III).
Anyway, the above is short but is the basic idea of how I think about the co-authors and students, how they have played an incredible role in helping the tiniest of movements grow in its early days.
Two more things
Before any of the early co-authors or students mentioned above (I am not even attempting to go into Chick, Godley, Vickrey, Minsky, Goodhart, Moore, Kregel, Lavoie, Papadimitriou and the other famous early paths to MMT) there is one co-author who gets very little attention despite being the very first of them all, and another early incident with Mosler worth mentioning as well.
As most interested in MMT know, there is the (to me anyway) fascinating fact that Donald Rumsfeld played a role in the very earliest seeds of MMT (I am no conspiracy theorist, but it does make me wonder to what extent Republicans have known since then that they could run huge deficits for military expenditures and tax cuts for the wealthy). And of course that leads directly to the equally surprising role of Arthur Laffer (and Laffer, Canto & Associates as we will see). People who do not even know of the direct Laffer connection often somehow confuse MMT as being somehow related to the Laffer Curve: e.g., “’MMT is sort of the Laffer Curve for the left,’ Bartlett said.” Modern Monetary Theory: One Way To Pay For The Green New Deal : NPR )
So as Mosler recounts in 7DIF, Rumsfeld points him to Laffer in a scene that could be straight out of a spy movie. Laffer, in turn, appoints a young employee, Mark McNary (BA in economics, ’81 to ’85, at Miami University in Ohio), to help “to co-author, research and edit the manuscript” That is, of Soft Currency Economics, the Ur text of MMT. (Mosler writes “The author would like to thank Arthur B. Laffer and Mark McNary for valuable literary assistance and research with this work.”)
Now I am sure Mosler had his ideas sorted, as we will see below with the other influence I will mention.
But it is interesting to wonder, of course, if Laffer said anything of use? Also, why did Laffer appoint McNary? Just handy at the time, or did Laffer think he had some interests that would add to the project?
Did anything from Miami University get in there? McNary was truly in at an early stage, the very beginnings of the very first MMT written work. When the history of (real) macroeconomics is written he will have had a pivotal role yet does not work in theoretical or academic economics at all.
Had McNary (like Professor Spaventa below) been a brainwashed neoclassical, he likely wouldn’t have been able to have a useful role in Soft Currency Economics.
Education at all levels and places matters.
Anyway, I found it so interesting that McNary is seldom mentioned that I requested an interview with him, and he kindly obliged. It was fascinating and he had some great stories to tell. Unfortunately this happened just as Covid was breaking out and I had several things interrupt my writing for the last 6 months and I never managed to make a post or podcast about it. I will try to come back with what I can remember from the conversation. I also think that any of the MMT podcasters out there would find it worth their while to have him as a guest – I believe he would oblige and as I said, he has some great stories on the very very earliest stages of MMT.
The last early influence is told by Mosler himself in 7DIF. I thought it worth re-mentioning, however.
It involves Mosler’s early (1992?) trip to Italy to meet with Italian finance minister Luigi Spaventa , where Mosler asks:
“Professor Spaventa, this is a rhetorical question, but why is Italy issuing Treasury securities? Is it to get lira to spend, or is it to prevent the lira interbank rate falling to zero from your target rate of 12%?”
(Mosler’s insights I believe actually changed the Italian government’s response. This could have been even more momentous for Italy/Europe had it not already had its monetary trajectory disastrously tied to the emerging Euro.)
A few seconds later he jumped up out of his seat
“Professor Spaventa took a minute to collect his thoughts. When he answered my question, he revealed an understanding of monetary operations we had rarely seen from Treasury officials in any country. ‘No,’ he replied. ‘The interbank rate would only fall to 1⁄2%, NOT 0%, as we pay 1⁄2% interest on reserves.’ His insightful response was everything we had hoped for. Here was a Finance Minister who actually understood monetary operations and reserve accounting!”
proclaiming “Yes! And the International Monetary Fund
is making us act pro cyclical!” My question had led to the
realization that the IMF was making the Italian Government
tighten policy due to a default risk that did not exist.
This moment was key. Not because Mosler didn’t already have the crucial understanding of the inherent non-importance of bonds for spending, but because it allowed Mosler to move forward with everything – the deals that were remunerative, writing it all down and so on.
One wonders what intellectual background led to the crucial moment of Professor Spaventa understanding Mosler’s visit. Spaventa studied at Cambridge (seems like there is always a Cambridge connection!) and then law at the Sapienza di Roma (and was a visiting fellow at All Souls College, Oxford). Anyway, had he (or Mark McNary) had the erroneous neoclassical beliefs of Central Bank/Treasury functions of that time (and now), things might have gone very differently, and perhaps even Soft Currency Economics and MMT would never have come to be in the way they did.
Notes
* L. Randall Wray: “Our critics only want to take the opportunity to find a way to criticize us, not to actually do something that would be useful. They know that the number of core MMT researchers who have developed MMT is exceedingly small—undoubtedly smaller than the core group of social scientists who have ever worked to develop a new paradigm. But rather than joining to try to rectify the lacunae, they are only interested in bashing MMT.” L. Randall Wray (writing positively about Richard Murphy being an exception with his discussion of MMT and taxes)
~~~
For some obscure bibliographic sources and more than you probably ever wanted to know about Art Laffer and his curve, this is actually an interesting dissertation: “A Grounded Theory Analysis of the Laffer Curve and Its Implications for Supply Side and Demand Side Economics” Link to PDF
I was interested in the intellectual milieu Mark McNary (and Art Laffer) were “in” around the time they were dealing with Mosler and Soft Currency Economics. These now obscure works were written by McNary and Laffer around that time:
Marcal, Pedro, Mark McNary, and Arthur Laffer, “Rosa Californica” January 28, 1993. A.B. Laffer, V. A. Canto & Associates. January 28, 1993.
Laffer, Arthur B., Mark McNary, and Vitanza, Lance. “California D.P. (During Pete).” Laffer Associates. June 8, 1994.
This American Legislative Exchange Council Report, ALEC (“Limited Government, Free Markets”) “Rich States, Poor States” 2018, especially Ch. 3, cites some of those early 90s Laffer, Canto & Associates papers and suggests the sort of ideas that were in the air then. It is interesting/hard to imagine Mosler creating the origins of MMT within that mindset.
But he did 🙂
~~~
See also L. Randall Wray on Forstater and Tcherneva:
“Second, there is Mat Forstater, who had the good sense to recommend Pavlina Tcherneva to Warren when he posted a request for a good research assistant to do a literature search—to find the giants whose shoulders he didn’t need for understanding, but who might prove useful in selling the ideas.
Without Pavlina there never would have been the 1996 meeting at Bretton Woods that served as the first conference for what would become MMT. It was titled “A Framework for Macroeconomic Analysis”.”
Clint Ballinger 
🙂
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