Ep125[1/3,1/6] John Harvey: MMT, the UK, and pound sterling

Activist #MMT - podcast

Welcome to episode 125 of Activist #MMT. Today's the first in a six-part series with Texas Christian University (TCU) economics professor and Cowboy Economist, John Harvey. The first three parts are hosted by me, the final three by MMT researcher, Texas lawyer, and my previous guest, Johnathan Wilson. Jonathan and John talk about how MMT can apply to nations outside the US, using Russia as an example, and also some of the core theoretical and ideological differences between MMTers and mainstream economists, focusing on a recent critique of MMT by Drumetz and Pfeister. (You can hear my own interview with Jonathan in episodes 106 and 107.)

(A list of the audio chapters in this episode can be found at the bottom of this post. Here's a link to all six parts in this series: parts two and three with me, and parts four, five, and six with Jonathan. For a link to every Activist #MMT interview with John – plus the full audio of every Cowboy Economist video (!) – go here.)

Regarding parts one to three, John and I talk about his chapter in the upcoming book called Modern Monetary Theory: Key Insights, Leading Thinkers. The book will be published by the UK-based Gower Institute for Modern Money Studies, or GIMMS; it's edited by L. Randall Wray and GIMMS; and is scheduled for January 2023 release. John is one of 15 authors.

John's chapter is called "Modern Monetary Theory, the UK, and pound sterling". He was asked to write the chapter for two major reasons: First because there is not enough MMT-specific analysis on exchange rate determination, and second, to address the reality of the so-called sterling crisis in the United Kingdom. John and I don't specifically discuss the latter topic, but it is addressed in the paper.

It addresses the following criticism of MMT (this is a quote from the chapter): "MMT-inspired policies will cause high rates of price inflation which will, in turn, lower the international value of a domestic currency – perhaps catastrophically." Importantly, the critique is based on the following three assumptions:

1. The false idea that we are already, or soon will be, at full employment
2. A fantastical theory of exchange rate determination
3. A terrible and lazy mischaracterization of MMT

John and I spend most of our time discussing the reality of these three assumptions. Surprisingly, however, the main insight I take from this conversation is a much clearer understanding of inflation in general. I'm going to describe that insight in the introduction to part two.

The heart of our conversation is on the above three assumptions, but we start and end with mostly unrelated subjects. Part one begins with John describing his experience as chair of the economics department at TCU, he discusses the Russian-Ukrainian conflict only as it relates to exchange rate determination, and he also answers a question from an Activist #MMT patron, regarding his opinion of our possibility of experiencing a recession. At the end of part three, we talk about how, for most of those that most of us directly interact with, mainstream economic theory is not, in fact, a big conspiracy. We end by discussing the good and bad of math in economics.

Thanks to the recommendation of a patron, with every episode of Activist #MMT as of several months ago, you can pinpoint any part of this interview by referring to the full list of audio chapters, which can be found at the bottom of the show notes. So, for example, if you wanted to skip over this introduction and go right to the beginning of the interview proper, now you can know exactly what timestamp to go to.

And now, on to my conversation with John Harvey. Enjoy.

Resources

• Books:
  • Fred Lee's A History of Heterodox Economics (2006)
  • Karl Polanyi's The Great Transformation (2001 edition, 1944)
  • Naomi Klein's The Shock Doctrine (2007)
  • Nancy MacLean's Democracy in Chains

Audio chapters

• 6:02 - Attics, squeaky toys, dogs, and rats
• 8:51 - Economics chairmanship
• 16:21 - Being Post Keynesian chair in a mainstream department
• 21:04 - Patron question: Recession coming?
• 26:10 - Russia-Ukraine conflict
• 31:31 - My lawn mower runs out of gas
• 32:36 - Start of main questions
• 33:20 - Demand-pull inflation
• 44:39 - George Selgin
• 47:35 - Back to inflation
• 52:55 - Duplicate of introduction, but with no background music (for listeners sensitive to the opening music)