About two years ago, I had a brief exchange with modern monetary theory (MMT) champion and Stony Brook University professor Stephanie Kelton on Twitter (now X). It resulted in Kelton publicly challenging me, an economist and tenured professor at another large public university, to formulate a critique of her (and MMT’s) “chartalist” view that government currency has value only because it must be used to pay taxes.
Kelton summarized her position on Twitter: “Taxes (fees/fines/etc.) allow government to spend its otherwise worthless currency into existence, thereby allowing gov to move the real resources it desires from private to public domain.” I certainly agree on the implicit point that the value of (demand for) government currency must be explained, but I do not agree that taxation is sufficient.
In fact, I posed the question to Kelton in the Twitter exchange, stating that “there is already plenty of currency—more than is needed to pay taxes. What’s MMT’s explanation for currency demand well beyond tax liabilities?” I clarified: “Your argument is that currency is valued because it must be used to pay taxes. And that’s also why it is valued way beyond tax liabilities. Is that right?”
Kelton, in return, quoted James Tobin and then pointed to a more elaborated (and supposedly more complete) argument by fellow MMT champion L. Randall Wray. She then challenged me to “find the hole in” it, adding: “I’ll wait. Please cite page numbers and quotes.”
I had not yet read the article, but I accepted the challenge. After all, the challenge was publicly stated and of academic character. I neither wanted to nor could turn it down.
After reading Wray’s article, I chose to respond to its argument in a way that not only complied with Kelton’s stated terms but offered extra validation as a peer-reviewed article, as was Wray’s. I submitted the manuscript for publication in the Quarterly Journal of Austrian Economics, where it underwent the review process and eventually (after revisions) was accepted under the title, “Is It Money Because It Is Redeemed in Tax Payments? A Response to Kelton and Wray.” I am told that the journal editors at that time reached out to Kelton for a response in the journal but that they heard nothing back. Later, after my article was published, I too reached out to Kelton via email and in social media to make sure she was aware of my response.
Over a year has now passed since I publicly notified Kelton that I have responded to her challenge. It would be fair to think that she has an academic responsibility to, at a minimum, acknowledge the response to her challenge or, more appropriately, provide a counter to it. After all, she posed the challenge and did so to a fellow university professor in a matter of academic import. She did so publicly for all to see. She said that she would wait for it as well: “I’ll wait.”
However, Kelton has produced nothing. Only two things have happened in regard to this challenge over the past year: she has blocked me on X (for reasons that seem unrelated to the challenge), and my article was awarded the Lawrence W. Fertig Prize at the Austrian Economics Research Conference. Both would add to rather than subtract from her implicit academic responsibility.
There is to date, as far as I know, only one real attempt to respond to my counter to Wray and Kelton. It was written by a Philip Armstrong, who describes himself as a “Christian, Socialist, Teacher, PhD Econ” on X. Published in the Real-World Economics Review, it fails to recognize that my article is what Kelton requested—a counterargument focused on “find[ing] the hole(s)” in Wray’s argument and nothing more. It is not, as the author seems to think, an Austrian alternative to chartalism (although there, of course, is one).
The world is still waiting for the MMT champion to defend Wray’s argument from her requested critique of it.
