03 Mar 2020

Bernie Jackson on a Flaw with MMT Analogies

MMT 3 Comments

Or rather, why Warren Mosler’s analogies don’t do what Mosler thinks. (For context see my interview with Warren.) Bernie Jackson emailed me (and said I could reproduce) the following:

MMT’s referee & ticket analogies fail on their own terms and illustrate the MMT flaw!


When the referee puts points on the board, the points DO come from somewhere: actual events on the field. If referees arbitrarily put up points whenever they want, the fans will object and eventually stop watching the game. Referees are bound by rules as much as all other players in the game: when a touchdown is scored on the field, that FIRST creates an “asset,” a thing valued within the context of the game, against which the referee is THEN able to issue six points on the board. Not five, not seven. When the ensuing extra point (or go-for-two) is scored, another asset is created, and the referee again credits the board with exactly that number of points. There is indeed a FIXED SUPPLY of points at the referee’s disposal, and the referee is only a messenger, with ZERO power to create or destroy those points. Even if many fans are hoping for a touchdown, they will be disappointed in the referee’s putting six more points on the board UNLESS an actual touchdown is scored to back up the value of those points.

When a stadium sells tickets for an upcoming game (and note that they SELL them in exchange for other assets; they don’t “hand them out” or “give them away”), those tickets are not issued out of thin air, not at all! FIRST, an asset had to be created, called a football league, and a football team, and a stadium in which to play, and a marketing complex in which fans learn to care about any of that, and only THEN can tickets be printed up. The value of those tickets is backed by the real assets that make it possible for a fan to experience the game–and not just watch the game all by himself, but to watch it with a large, enthusiastic crowd and all the pageantry. The league and team executives created those assets, and only later can they print up tickets, just as paper money is issued to represent gold or other assets already acquired.

If we were to print tickets to a fictional game, some people might mistakenly buy them, because they were fooled into thinking there would be a game to attend, but as soon as enough people found out, the jig would be up. So no, you cannot just print up tickets and “hand them out” to create any sort of wealth, and if you were to hand them out, it would not “enable spending” in any productive, non-imaginary way (try “spending” your ticket to a game that isn’t really taking place).

If referees were to put fake scores on the board, to make a dull game more exciting, or to fulfill a complex mathematical model optimizing the number of fans still in their seats at the end of the game, the jig would likewise be up, as soon as fans discovered the ruse. This ruse would not be possible in football but would be in a game of technical measurements and hard statistical analysis. Imagine if football became so complex that every play were reviewed by instant replay, and fans never knew for sure the outcome until the referee emerged from the hood. When nay-saying sports analysts exposed that the statistics of points awarded had no correlation to happenings on the field, the jig would be up.

A regime of issuing tickets and marking points could last indefinitely if those tickets and points were backed by real assets (real games to attend and real athletic achievements on the field), but if the tickets and points were issued out of thin air, the regime would inevitably collapse.

So, those two classic MMT analogies are perfect. On their own terms, they illustrate that paper money has no value of its own and will ultimately collapse if not issued against a real asset.

This all struck me while listening to your episode 24, your commentary on an earlier interview with Warren Mosler. I had heard you discuss MMT a few other times, but I don’t think I heard these flaws exposed quite this explicitly. I hope that contributes a little something to the debate!

Thanks for all the episodes,
Bernie Jackson

03 Mar 2020

Bob Murphy Show ep. 105: Corey DeAngelis Makes the Case for School Choice

Bob Murphy Show, Education No Comments

As usual, I push back at the end, to keep him honest… Audio here, video below:

27 Feb 2020

Bob Murphy Show ep. 103: Harry Dent on the Coming Financial Crash

Bob Murphy Show No Comments

Here’s the audio, and video below:

26 Feb 2020

“Quick, what’s the conversion factor?”

All Posts, Climate Change 22 Comments

The obvious point of this clip was to ambush (in 2015) the then-head of the EPA, Gina McCarthy, for not knowing the % of atmospheric CO2, but what’s really embarrassing is that she (apparently) didn’t know that you could convert ppm into %. I sympathize with someone not having such a factoid at her fingertips, especially in a hostile testimony, but it really does seem as if she doesn’t realize what these concepts really mean.

24 Feb 2020

Bob Murphy Show ep. 102: A Deeper Analysis of the Grievance Studies Hoax

Bob Murphy Show 7 Comments

Something never quite sat right with me when this story broke in late 2018, and I finally spelled out my concerns. To be clear, I’m not saying the three people shouldn’t have done the hoax; I’m just trying to isolate exactly what it was supposed to demonstrate.

17 Feb 2020

BMS ep. 101: Tim Terrell on Why Big Business Favors Environmental Regulations

All Posts, Bob Murphy Show, Climate Change, Environment 1 Comment

Tim told me some stories that I had never heard before. Audio here, and video below.

17 Feb 2020

“Why Does God Allow Bad Things to Happen?”

Religious 14 Comments

When I was about 17, I was watching my 11-year-old brother talk smack in our front yard to a kid who was about 13. They were trash talking back and forth, and my brother ran up to the kid to attack him. The kid had clearly had some martial arts training, because he did a backwards kick into my oncoming brother’s chest, knocking my brother flat on his back on the grass.

At this point I came out of the house and said, “OK guys, let’s break it up” and dispersed the crowd of kids (all several years younger than me), who were all going “Ohhhhh” after seeing what happened.

I had done this out of love for my brother. He was clearly responsible for what happened (he was being a punk and braggart, trying to impress the older kids), and I wanted him to have some experience with physical combat to help him in the future know how to assess a situation. But, when I thought he might actually get hurt, I intervened.

For whatever reason, that event recently popped back into my head, and I thought it might be somewhat analogous to why God lets (some) bad things happen to us.

P.S. I understand that people in life sometimes die. So please don’t point that out to me.

13 Feb 2020

Bob Murphy Show Twin Spin

Big Brother, Bob Murphy Show No Comments

I was on the road so I’m backed up in posting here:

==> Ep. 98 on why progressives are “anti-vaxxers” when it comes to the Alt Right.

==> Ep. 100 on why even tyrannical regimes ultimately rest on public opinion.