Tuesday, 19 February 2013

New Keynesian? More like New Procrustean

The problem with mainstream economists is that they have a model that they believe in. They believe in it absolutely. It has become part of their core identity. And because the model is pure and perfect in their eyes it is therefore obvious that everything in the world must be adjusted to fit the model.

So we end up with governments that have their hands tied, we end up with persistent unemployment and we end up with silly inflexible system designs like the Euro.

And when the real world throws up endless evidence that the model is utterly wrong, the mainstream economists scream that, no, the world must be forced back into the model.

And so we have Greece effectively stretched on the rack, we have unemployed living in pipes and the Spanish youth left to wander the streets scratching a living and their heads.

Under a New-Keynesian economic system there must be suffering so that the purity of the model is maintained. And since this religion fits with the views of those with the money and power it is funded and propagated.

This is a Procrustean attitude. There is one average size of bed and all must be made to fit it.

A different viewpoint though yields the obvious solution. What we need is a bed that is big enough for all. This is what the MMT approach shows us.

We can have jobs for all and sufficient income for all. There is no need for poverty. And very likely without having to 'tax the rich' either. So we all win.

Let's harness the output we're leaving on the table. Let's stop chopping people's feet off to fit the New Procrustean bed.

Let's make the bed big enough for all of us.