Finding the Money, a video aimed at explaining Modern Monetary Theory (MMT) to a popular audience, debuted today on several streaming platforms and theaters throughout the U.S. Whether it succeeded or not in its aim I will leave it for others to judge. What I found most noteworthy and illuminating in the 95-minute video was a brief clip of an interview with George Selgin, an economist of some note in free-market monetary policy circles. When questioned about what the MMT proponents get wrong or factually incorrect, Selgin waffles a bit and replies, “it’s a matter of emphasis and rhetoric.” He then goes on to give a more definite answer: “The MM theorists do say there is ultimately a scarcity of resources. But too often they treat the world as if the norm is one of generally unemployed resources and plenty of ‘em.” Here, Selgin seems to be challenging MMT’s central claim that politicians and bureaucrats can costlessly conjure up real resources to expend on their favored programs simply by creating and spending fiat money. Selgin, reversing field yet again, then adds, “But I must say in the last twenty years, of course, since 2008, there’ve been more times when we haven’t been constrained [by real resource scarcity] than when we have.” Selgin is in effect saying that, during the past fifteen years, the Fed should have administered the U.S. economy a bigger dose of inflationary monetary policy than it actually did.
Selgin’s concession, qualified though it may be, indicates that there is strong affinity between MMT and the monetary-disequilibrium theory that he champions. Both theories incorrectly attribute economy-wide unemployment of resources—misstated as “a lack of real resource constraints”—to an insufficiency of aggregate money spending. In doing so, both ignore the simple truth of Austrian business cycle theory: unemployed resources and recession are caused by a monetary policy-induced mismatching between the relative scarcities of a multitude of heterogeneous resources and the structure of their relative prices.
