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Where does one even begin to critique @JohnHCochrane's critique of MMT? The lack of introspection about the actual state of macroeconomic research is astounding. 1/
He writes: "But monetary economics is a well established field, &nature of money, tax backing of money, interaction of monetary &fiscal policy, govt budget constrts &c. is well within range that current intellectual instns debate knowledgeably." Debate, yes. But knowledgeably? 2/
Even when I was a grad student, it was obvious to everyone studying macro &international that modern macroeconomics fails entirely to even begin to study monetary economics. Grad students discuss this every day. Only search models of money even *try* to take money seriously. 3/
& search aka "New Monetarism" remains a very specialized subfield of macro that AFAIK @johnhcochrane has never dipped his toes in. Even search in its effort to win acceptance with the mainstream fails to fully explore the implications of the models: 4/ syntheticassets.wordpress.com/2015/05/07/reb…
So I have news for John Cochrane. The models on which MMT-like theories can be built have been written. And they are available on SSRN: papers.ssrn.com/sol3/papers.cf… But the sociology of the economics profession is such that you don't know they exist. 5/
The problem is that the select class of general equilibrium models studied in modern macroeconomics is the wrong class of models for studying money. It's been obvious for nearly 40 years that you need to study Bewley (1980) economies if you want to study money using GE. 6/
As far as I can tell the only reason macroeconomists don't study Bewley economies is because they don't like the results -- which indicate that we know less than the big wigs in the profession want to pretend we know. 7/
This also means that the macroeconomics profession hasn't even begun to the set the research agenda -- much less begun the actual research -- that must be done to understand how a monetary economy operates. 8/
As I argued in JMCB in 2007, and Schumpeter argued in 1939 and Hawtrey argued in 1919 and Thornton argued in 1802, in order to study the macroeconomy, you must model the banking system and the institutional mechanisms by which it provides credit to finance trade. 9/
Any research agenda that claims to address "monetary economics" and yet fails to study the institutional structure of the banking system is doomed to failure. Modern macroeconomics assumes away the essence of monetary economics. That is why MMT exists. 10/10
