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CofFEE Working Papers

Author(s): Louisa Connors and William Mitchell
Title: Framing Modern Monetary Theory
No: 13-06
Year: 2013

Abstract:

Macroeconomics concepts, such as real GDP, inflation and unemployment rate, the budget deficit, and the interest rate make headlines on a daily basis. Finance segments on national news broadcasts increasingly discuss macroeconomic issues with frequent recourse to complex terms that are that are not well understood by the majority of media commentators or the public. Consequently, the public discourse reflects significant errors that render it almost impossible for participants to make informed assessments of macroeconomic developments independent of the politics involved.

Economic concepts such as the government budget deficit contain nuances that make unambiguous assessment of their meaning difficult. Social media exacerbates this problem and our propensity to generalise from personal experience, as if the experience constitutes general knowledge, continually leads these タワFacebook macroeconomic debates into combative dead-ends of false reasoning.

Problems in communicating the complexities of economic concepts and evidence are amplified by the ideological assumptions that dominate the public debate. Conservative think-tanks and media outlets offer a relentless array of タワresearch or policyタン reports such that the public understanding has become straitjacketed by orthodox concepts and conclusions that, in themselves, are erroneous, but also lead to policy outcomes that undermine prosperity and subvert public purpose.

The fact that mainstream macroeconomics has retained its hegemonic status in the face of its failure to resonate with reality is, in no small way, due to the way economic debates are framed in the public discourse. Framing refers to the way an argument is conceptualized and communicated by speakers and listeners. Processes of conceptualisation proceed by way of adaptive reasoning on the basis of models and representations.

Proponents of neo-classical macroeconomics have been extremely successful in their use of common metaphors to advance their ideological interests. What is, in fact, a myth that is designed to advance a narrow ideological interest, is constructed and accepted by the public as a verity. We end up believing things and supporting policies that actually undermine our own best interests because of the way the arguments are presented to us. In other words, we accept falsehoods as truth and ideology triumphs over evidence.

The progressive tolerance of diversity is reflected in the extremely fragmented rhetoric that characterises progressive politics. Often the language that is used to advocate a progressive alternative actually serves to reinforce conservative myths.

We argue that Modern Monetary Theory (MMT) has a coherent story to tell about the operations of the macroeconomy and provides new insights into the opportunities available to a government and its citizens concerning full employment, and accessible high quality health, education and other infrastructure.

This paper argues that MMT has struggled to gain traction in wider economic and political debates because:

1. An incomplete understanding of key macroeconomic terms amongst economic commentators, especially journalists, and the wider community (lack of education); and

2. The deployment of key macroeconomic terms (incorrectly) in the context of pervasive cultural metaphors to support policy interventions that effectively benefit a privileged few at the expense of the majority.

We provide a conceptual basis for understanding how the language we use constrains our thinking and examine some of the key metaphors used to reinforce the flawed message of orthodox economics. We examine key ideas of modern monetary theory and propose effective ways of expressing those key ideas in a progressive social and economic framework.

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