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The Job Guarantee and the MMT Core Series: An Introduction

9:42 pm in Uncategorized by letsgetitdone

This is an introduction to a series of 16 posts I wrote in reply to a number of posts by John Carney at the CNBC blog and Cullen Roche at Pragmatic Capitalism, and comments replying to them. The posts by Carney and Roche criticized the MMT Job Guarantee (JG) proposal. They did so by calling into question whether the JG would be effective in achieving Full Employment (FE) and Price Stability (PS), and also by calling into question the MMT goals of “Public Purpose”, and “FE with a living wage” as appropriate. The critics proposed that “Full Productivity” (FP) and PS be goals of MMT, and that “prosperity” be the higher level goal. They also proposed that MMT concentrate on description and avoid policy prescriptions, and that it deal only with “facts” and not with “theory.”

The first 13 posts in this series refute these proposals, and also discuss the question of the appropriate hourly rate for the JG program. They also discuss various fallacies of composition inherent in many of the objections made to the MMT JG program, the issue of whether an FE or an unemployed “buffer stock” is more in line with public purpose, and also the issue of whether it’s possible to deal only with “facts” and not with “theories.” In the 14th post, I introduce the idea of the MMT Knowledge Claim Network (KCN) consisting of Social/Value Gaps, Knowledge Gaps (problems), Descriptive Knowledge Claims, Prescriptions, and Narratives. I also argue that the MMT KCN is a fused fact-value network with important value commitments, that it was developed holistically by its originators. that it is not focused on descriptive aspects of economics alone, that it offers explicit value claims, and that it’s normative aspect is clear.

I also argue that many of its practitioners, offer policy prescriptions rather than simply concentrating on the way the world is right now. I note further that the social/value gap, problems, and prescriptive aspects of the MMT KCN are progressive and Second New Deal oriented, and that is why many people who are persuaded by parts of the descriptive aspect of MMT want to do what they can to place these aspects into a secondary role and drive them out of the KCN altogether.

In the 15th post, I offer my view of the current components of MMT in its five categories of knowledge claims as preparation for the concluding 16th post in the series, which answers the questions I posed at the beginning of the series; namely:

– What is part of the MMT core right now? and

– how ought we to change it in the future?

Since I finished the series, its importance as a resource was underlined by new posts from Cullen Roche and Mike Sankowski (Trader’s Crucible), and by Cullen’s revision of his earlier paper on MMT which is now an introduction to a new approach called “Monetary Realism.” Here’s Cullen on MMT and MR.

”As many of you now know, the divide within some of the MMT thinkers has grown fairly substantial. The schism over the Job Guarantee revealed several points of disagreement that lead to vastly different conclusions than those espoused by the primary MMT thinkers. Several commenters and vocal proponents of MMT have made it clear that my positions are not those of the MMT economists and founders and are in fact something different. I won’t do the developers of MMT the disservice of pretending that my ideas are completely in-line with theirs. That would only serve to confuse those learning MMT and could undermine the efforts of the MMT developers.

I feel that the core operational aspects of MMT are among the most important ideas in the world and my goal here has always been to help promote those ideas. Because I believe in those ideas I will not stop promoting them. So I’ve been working with Michael Sankowski, Carlos Mucha (who most of you probably know as reader Beowulf) and several others to help formulate our thinking. I’ve also been in detailed talks with Warren Mosler over the last several weeks hashing out some differences. It’s safe to say that we have his blessing even though he’s not 100% in agreement with all we’ve concluded.”

I’m not sure I agree with the claim that Cullen, Mike, and Carlos have “Warren’s blessing” beyond his wishing them luck in pursuing their orientation, which I also have done. Certainly, Part Seven of my series doesn’t indicate to me that they have his blessing in the normal sense of this term, and I also think that no group that departs from the core value of “public purpose” as the goal of Government economic policy would ever have his full blessing.

”Importantly, I want to be clear that I do not view Monetary Realism as a competing idea to MMT. Rather, it is merely the form of Mosler Monetary Theory that I wish to promote (without confusing readers into thinking that I am promoting the exact MMT ideas and prescriptions). After all, Warren is still the father of the theory and it’s incredibly important to note that he is, by far, the most influential thinker in this offshoot of MMT. If anything, I hope that by focusing on the operational realities of MMT via Monetary Realism that I will bring even greater credibility to MMT and its operational realities. The fact that we have differences regarding prescriptive uses, in my opinion, gives the idea even greater credibility. But in the end, it should be clear who gets the credit for these ideas – Warren and the other developers. Monetary Realism is merely standing on their shoulders.”

And Cullen also goes on to state that he has revised his introduction to MMT, so that it is now an introduction to MR. In that paper, he also has added “innovation” and “growth” to the goal structure of MR, and also stated that: “The core value of Monetary Reality is transparency of the global monetary system.” He also states that a new web site is being created to promote MR. Two posts have also appeared at the Trader’s Crucible web site here and here, announcing the new development.

My take on MR is that even though it tries to minimize the differences between MMT and its “offshoot,” these are at the core of the two systems and that if they were not there would be no MR. If MR proponents still accepted ‘public purpose” as the highest level goal in their KCN, and had not replaced it with “prosperity,” if they had not replaced FE with FP as a key second-level goal, then there would have been no split.

The replacement of FE as a goal indicates that MR doesn’t consider a job at a living wage as a right of every individual. That is a huge difference between the two approaches that cannot be minimized, as the MR adherents are trying to do.

Beyond these explicit differences there is the further implicit difference that the MMT commitments to public purpose and to FE are commitments to greater equality in American and global society. The abandonment of FE and the JG suggest that the MR proponents are much less concerned about social and economic justice than are the MMT founders and others who practice the MMT approach. In a time when democracy is threatened by plutocracy throughout the world, that difference between the two approaches is fundamental and will shape their future development.

In the future, I’ll try to clarify further the differences between MMT and MR and illuminate some of the foundational problems of MR that are already apparent.

The various posts in the series have been previously published on this blog. In addition, the series is available in blog book form with convenient sequential links among the various parts of the series.

The Job Guarantee and the MMT Core: Part Sixteen, Conclusion

7:00 pm in Uncategorized by letsgetitdone

This is the concluding post in this Job Guarantee and Modern Monetary Theory (MMT) series. After evaluating the specifics of the posts by John Carney and Cullen Roche criticizing the MMT Job Guarantee (JG) proposal in the first 13 posts in this series; in the 14th post I introduced the concept of the MMT Knowledge Claim Network (KCN) consisting of Social/Value Gaps, Knowledge Gaps (problems), Descriptive Knowledge Claims, Prescriptions, and Narratives. I also argued that the MMT KCN was a fused fact-value network with important value commitments, that it was developed holistically by its originators. that it is not focused on descriptive aspects of economics alone, that it offers explicit value claims, and that it’s normative aspect is clear. I also argued that many of its practitioners, offer policy prescriptions rather than simply concentrating on the way the world is right now. I also noted that the social/value gap, problems, and prescriptive aspects of the MMT KCN are progressive and Second New Deal oriented, and that is why many people who are persuaded by parts of the descriptive aspect of MMT want to do what they can to place these aspects into a secondary role and drive them out of the KCN altogether.

In the 15th post, I detailed my view of the current components of MMT in its five categories of knowledge claims as preparation for this post, which will answer the questions I posed at the beginning of the series; namely

– What is part of the MMT core right now? and

– how it ought we to change it in the future?

How Do we Tell What’s Part of the MMT Core Right Now?

I think the way we do this is to read the literature produced by the founders and their students, look at their videos, presentations, graphics, listen to audios, and then make an assessment about the components that capture most of their attention. In addition, one should look at writers who’ve entered the field after the founders and see where they are focused. But, of necessity, their concerns will initially have less weight simply because they haven’t defined the direction of the MMT movement, and will be viewed as proposals for changing it, to be evaluated by others.

So, what is the core of MMT right now? My assessment follows.

Social/Value Gaps:

– The goal of public purpose as a general organizing ideal;

– Closing the output gap;

– Closing the employment gap;

– Achieving price stability; and

– closing the gap between the minimum wage and a living wage.

I think these goals are part of the core because of their intrinsic value. And also because, if we reach them the MMT founders think the other social/value gaps will be greatly alleviated.

Knowledge Gaps/Problems: All the problems listed have solutions relating to the core social/value gaps, so all of them are part of the core.

Descriptive Components: All of these either are, or contribute to, solutions of the problems listed earlier, which, in turn, are related to the core social/value gaps.

Policy Prescriptions: Most of the policy prescriptions offered by MMT founders are core to MMT because they are closely related to the goals of Full Employment (FE) at a living wage, at least, along with Price Stability (PS). According to MMT, moving the Fed under the Treasury isn’t essential to FE/PS, or to getting around monetary constraints imposed by Congress. Proof Platinum Coin Seigniorage (PPCS) can be used to get around constraints on debt limits. It can also be argued that ending debt issuance isn’t essential even if PPCS isn’t used, as long as Congress gets rid of statutory debt limit constraints.

We can also say that: fixing the health care system, the energy crisis, and the housing crisis, are not, in themselves part of the MMT core because FE with a living wage and PS don’t require these proposals. However, a counter-argument to this is that all three categories of proposals are essential elements of Public Purpose, that they are part of the MMT core for that reason. This line of argument also suggests that such items could easily be added to the core if MMT writers start paying more attention than they have so far to these three issues.

Narratives: All of the narratives named in Part Fifteen are part of the MMT core, because they set the context for MMT’s descriptive components about how the financial system relates to Government fiscal and monetary policy.

How Should the MMT Core Change Over Time?

The posts by John Carney and Cullen Roche calling out the MMT Job Guarantee proposal raised the issue of what’s in the core of MMT, and also the issue of change in MMT’s knowledge claim network. How should MMT change over time?

Carney and Roche both delivered criticisms suggesting that the JG wouldn’t create FE and PS, but suggested that various unanticipated side effects would make the program unsuccessful. I replied to those criticisms in earlier posts in this series. But the significant point here, is that the first line of attack was to question whether the JG would be effective in meeting the MMT objectives. So, their objective was to move the JG out of the MMT core by refuting it through argument.

This is a THE BEST way of attempting to change the MMT knowledge claim network, but one has to present evidence that really calls the JG or any other conjecture one is trying to refute into question.

Carney and Roche, also tried to question Full Employment and Price Stability as appropriate goals for MMT. In doing this, they never mentioned Public Purpose but instead asserted that “prosperity” should be a primary social value that should be realized through attaining “full productivity” (in Cullen’s words). Cullen also claimed that the continued existence of the possibility of unemployment was needed as an incentive to reach “full productivity.”

Without arguing against this view here, it’s pretty clear that this goes after the JG program, by going after the higher level goals that make it desirable. It’s not a criticism of the truth of the proposition that the JG will facilitate FE and PS, but a criticism of whether FE is a desirable goal. Judging from the absence of any mention of public purpose, along with the assertion that “prosperity” should be the higher level goal justifying possibilities that would support the continued existence of an unemployment buffer stock, it also seems to be a proposal to replace “Public Purpose” with “prosperity” as the highest level goal in the MMT fact-value knowledge claim network.

Again, there’s nothing wrong with an attempt to change MMT this way from my point of view, since I think that MMT goals and objectives should be just as subject to criticism as its causal or prescriptive statements or designations of problems. However, in raising such questions, critics should be very direct in what they’re doing and should explain why they think that “public purpose” should be subordinate to some other high level goal such as “prosperity” and why prosperity is better served by an unemployed buffer stock rather than a fully employed one. Also, if they still consider “public purpose” the highest level goal in the system, and also think that “prosperity” is a better way to achieve it than FE with PS, then I think that they have to explain why that is and subject their views to critical attempts at refutation.

In his post on the difference between “theory” and “fact.” Cullen Roche says:

“. . . . we should focus on giving the world a better understanding of modern money by focusing on the proven factual pieces of MMT (monetary operations, monopoly supplier function, etc). If we offer policy proposals then that’s fine, but that’s secondary. I would expect the MMT economists to do that and it should be encouraged that they use their expertise in doing so! . . . ”

I think Cullen is here on the point of suggesting that MMT should restrict its core to those components in its descriptive category that he considers to be “fact.” John Carney also seemed to be suggesting something similar in his posts on MMT. He likes MMT’s description of fiat monetary operations, but he doesn’t like its policy proposals. So, he’d like to broker closer relations between Austrians and MMTers. But to do that he’d like to change MMT by restricting its core to its description of monetary operations, and ignore its social/value gap, knowledge gap, descriptive theoretical, and policy components. So, he wants to change MMT by cutting most of its core components out, so that Austrians and MMTers can agree on something.

This, however, isn’t a legitimate way to evolve MMT, while still retaining its identity. You can’t take a KCN, eliminate its social/value gap, problem, much of its descriptive theoretical, and also its policy context, and still claim that it is the same system, simply evolved over time.

For better or worse, MMT has a core that cross-cuts all of its categories of components. It can be changed, while maintaining its identity, by refuting claims in any of its five categories of components. But if one changes it by eliminating whole categories of components, or by changing the core aspects of its social/value gap or problem components, or the core aspects of its descriptive and policy components, then it is simply not the same KCN, framework, or approach, anymore

When Cullen Roche and John Carney critically evaluate the JG on grounds that it will not work, the kind of change implied by that kind of criticism is the right way of “evolving” MMT. Even their criticisms of Full Employment and “Public Purpose,” though more far-reaching in their implications for MMT’s KCN and its identity, may, perhaps, still not be so significant as to change its essential character. But at some point, a pile of sand grains becomes a heap, and likewise, a proposal about how to evolve MMT becomes not a proposal for its evolution, but a proposal for its replacement by something entirely different.

This is the case with the proposal that MMT be restricted to a core of descriptive propositions that Roche and Carney think are “facts.” Such a proposal simply rips MMT out of its entire developmental context, as well as the heart out of MMT, and the resulting network is no longer Modern Monetary Theory at all, but something offering an entirely different understanding of the world and how we ought to act in it.

The Job Guarantee and the MMT Core: Part Fifteen, Components of the Knowledge Claim Network

5:09 pm in Uncategorized by letsgetitdone

In this post I’ll list the primary components of the MMT Knowledge Claim Network (KCN) classified under the major categories: the Social/Value Gaps; the Knowledge Gaps (Problems); the Descriptive Components (including Solutions); the Policy Prescriptions; and the Narratives.

The Social/Value Gaps mentioned by MMT developers

– Failure of Economics to contribute to the Public Purpose as defined by the failure to close the other social value gaps listed below;

– the gap between actual output and projected “full” output;

– High involuntary unemployment vs. full employment;

– Price stability vs. inflation or hyperinflation;

– No right to a living wage;

– No operative right to health care for everyone;

– social exclusion and the loss of freedom;

– skill deterioration due to unemployment;

– psychological harm such as sense of identity, self-respect, and sense of empowerment;

– much greater ill health and reduced life expectancy than necessary;

– loss of motivation to live a full empowered life;

– deterioration of social relations, communities, social networks, and family life;

– increasing racial and gender inequality;

– increasing educational inequality;

– decreasing equality of opportunity;

– loss of social values and sense of individual responsibility;

– increasing economic inequality over time;

– increasing poverty;

– increasing crime rates including increasing use of control frauds by important economic institutions;

– Failure to prosecute and punish people who commit control frauds;

– The collapse of real estate values and the destruction of the wealth of working people after the crash of 2008;

– increasing anger against economic and political elites that get more and more and more wealthy, and more and more immune to the rule of law;
– increasing political inequality undermining political, social, and economic democracy;

– increasing political unrest and threats of political violence both from the privileged and those seeking change.

The Knowledge Gaps/Problems Formulated and/or closed by MMT Developers

– How do we, using Fiscal and Monetary policy, create Full employment (FE) with a living wage and Price Stability (PS) and maintain it the face of periodic business cycles?

– How does a Government with a Sovereign Currency create and destroy high-powered vertical money?

– How does a fractional reserve banking system create and destroy horizontal money?

– Why is fiat money valuable?

– What Are the Basics of Macro Accounting?

– What Is the Sector Financial Balances Model, and what are its implications?

– How do we design and create public sector jobs that will add value to the economy?

– How do we train people for those jobs, if necessary?

– How do we tax to avoid demand-pull inflation?

– How do we combat and control cost-push inflation?

– What are the causes of inflation?

– How do we reform the money creation/destruction system to remove unnecessary Government Budget Constraints (GBCs)?

– How can we build stock-flow consistent models of the economy?

– How can we build valid impact models of changes in Government fiscal policy relative to the social/value gaps?

– How can we prevent control frauds leading to extreme economic boom-bust cycles and political domination by wealthy elites and the financial sector?

– What is the origin of money, and how has it developed over time?

– What are the different types of money?

– What is Government debt and how is it different from the debt of currency users?

– What are the different kinds of Government debt?

– What is the impact of “printing money” on inflation?

– What would be the impact of very high profit coin seigniorage on inflation?

– What are the key programs that can produce and maintain FE and PS?

– How can we reform the banking system to remove its speculative aspects and orient it to public purpose rather than private gain?

– How can we reform Wall Street to minimize the creation of real estate bubbles, commodity bubbles, and bubbles in other economic areas?

– What are the effects of current account balances on other sectors of the economy?

– Are Government deficits endogenously or exogenously determined?

– What is Fiscal Sustainability and how can the Government maximize it?

– What is Fiscal Responsibility and how can the Government achieve it?

MMT Solutions: Descriptive Components (Generalizations, Theories, Models, “Facts,” etc.) offered by the Developers Aimed at Understanding and Solving Problems

– An account of the origin of money

– The nature of credit money

– The State theory of tax-driven money

– The endogenous money approach

– Relations between horizontal and vertical money

– The functional finance approach

– The theory of the Government Budget Constraint (GBC)

– The role of the central bank in providing horizontal money and draining reserves

– Modern money = Endogenous money + state money + credit money + functional finance

– Heterodox approaches to money

– The sector financial balances model of aggregate demand applied to closed and open economies

– The State as the currency monopolist

– Stock-flow consistent modeling

– The Theory of a Sovereign Currency

– The Theory of the causes of inflation

– Theory about regulating the Financial System

– Theory about Minimizing Control Frauds

Policy Prescriptions Offered by MMT Developers

– Zero Interest Rate Policy (ZIRP)

– The Job Guarantee (JG)

– Payroll tax holidays

– State revenue sharing

– Banking reform proposals

– Proposals placing the Federal Reserve Under the Treasury Department

– Proposals for Federal deficit spending without debt issuance

– Proposals for guaranteeing annual entitlement spending without regard to “trust fund” balances

– Proposals about law enforcement for removing control frauds from the economy

– Proposals for containing demand pull-inflation

– Proposals for containing cost-push inflation

– Proposals for regulating the Financial System

– Proposals for Minimizing Control Frauds

– Proposals for Reclaiming Currency Sovereignty and Exiting the Eurozone

– Proposals for Fixing the Health Care System

– Proposals for Ending the Energy Crisis

– Proposals for Ending the Housing Crisis

The Narratives

– The story of the origin and history of money

– The story of the development of fiat money

– The story of the development of MMT from Marx, Keynes, Veblen, the Institutionalists, the Post Keynesians, Chartalists, and Functional Finance

That’s It!

I’m not certain that this list of MMT KCN components is complete. It’s not intended to be authoritative, and even though I’ve read a lot of MMT by now, I don’t have the background in its KCN that the developers or their current graduate students have. So, there’s plenty of room for error in my specification of the components of MMT.

Since I’m sure that many of my readers this can improve on my list; I’d really like to “crowdsource” it. Please feel free to offer revisions/corrections, or complete reconstructions if I’ve made errors.

This list isn’t gospel. It’s a tool to try to get a broad view of the subject matter of MMT, provide some understanding of its range and scope, and prepare us to consider questions about “the core” of MMT. So, I want to sharpen it, and I hope you’ll help me do that. My next and final post in this series will deal with the MMT core right now, and how it ought to change in the future.

The Job Guarantee and the MMT Core: Part Fourteen, MMT Is A Holistic Knowledge Claim Network

7:44 pm in Uncategorized by letsgetitdone

The recent extensive blogosphere discussion on the JG and the MMT core began with a post by John Carney that stated his opposition to the Modern Monetary Theory (MMT) Job Guarantee proposal and claimed it either wasn’t an essential component of MMT, or that if it was, then MMT was wrong. Cullen Roche, a well-known popularizer of MMT at his Pragmatic Capitalism blog then asserted:

”It’s not that I think the JG “cannot” be a component of MMT (Bill drew a very clear line in the sand saying that the JG is “central” to MMT and not “peripheral”), but that our knowledge, understanding and implementation of modern money need not involve the JG. The JG might be central to the idea the founders had when creating MMT, but that just means it’s central to the original concept of MMT as they saw it. . . .

This is true as far as it goes. But, it’s also true that the JG is still part of the MMT core, because MMT is committed to Public Purpose, the MMT developers have tied Public Purpose to Full Employment (FE) and Price Stability (PS), and the best knowledge we have at this point, after years of study of the JG, is that in the context of a program also specifying full payroll tax cuts and State revenue sharing, it is the policy that is most likely to produce FE and PS.

But Cullen is proposing that the JG should no longer be considered part of the MMT core because:

. . . they have by no means proven the JG to be the optimal usage of the government’s monopoly currency supplier powers (despite substantial evidence and persuasive arguments) . . . . and in fact could come at substantial long-term cost. Instead, I think there are better options which can also lead to price stability and full employment.”

In earlier posts in this series I’ve criticized the specifics of Cullen’s and also John Carney’s arguments against the JG, and, I hope and expect, that I’ve shown that there is little merit to them, and that they mainly consist of pointing to low likelihood side effects of the JG, disagreements with the objectives of FE and PS, and apparent lack of concern for the overall goal of Public Purpose.

Here I’ll add that MMT writers can’t possibly “prove” that the JG program is “the optimal usage of the government’s monopoly currency supplier powers”, because they’d have to prove that a better policy than the JG can’t be formulated, and proving this would be proving a negative, an impossibility.

Of course, it’s possible to “prove” that the JG program is not optimal for its purpose, since this can be done by proposing a single policy that works better than the JG. However, my previous posts have shown that rather than come up with such a policy, Carney and Roche have offered reasons why they think the JG won’t work, and then have moved on to attack the objective of Full Employment with Price Stability as less desirable than other goals, in Cullen’s case the goal of “prosperity” through “full productivity,” which Carney later concurs with.

My purpose now, however, is not to rehearse my earlier critiques of the views of Carney and Roche. It is to address the more general and important issues of how the core of any approach to economics, including MMT, emerges; what is part of the MMT core right now; and how such a core ought to be evolved over time. I’ll begin in this post by introducing the idea of holistic knowledge claim networks in economics and its general implications for what should be included in such networks and MMT’s knowledge claim network. My next post, will present my assessment of the components of the MMT network right now, and the concluding post in the series will state my view of what’s in the MMT core right now, and how MMT ought to be changed in the future.

The Knowledge Claim Networks of Economics Emerge Through Iterative, Incremental Value-impregnated Decision making

It’s worthwhile to reflect a bit on how economic Knowledge Claim Networks (KCNs) — networks of statements about the way the world is, works, ought to be, will be in the future, and how knowledge of it can be developed — for research and policy emerge.

First, the people who form them come to the task with ideas about the differences between the world as it is and the world as they want it to be. Let’s call these the social/value gaps motivating activity.

Gaps like these always exist. People meet them with action when they know how to close them. Where they think they need more knowledge to close them, they consider which social/value gaps accompanying these knowledge gaps (“problems”) they see are important enough to devote their attention to, and which aren’t worth their effort to try to close.

A choice like this, the selection of a knowledge gap to be addressed and closed, requires a decision, relying on the values people hold and the importance they attach to those values. There is nothing value-free or value-neutral about a decision. If an existing social/value gap seems particularly important to people, and if they have the resources to address the knowledge gaps associated with it, then they will select those as “problems” to be solved by the KCN, they will be creating.

Once problems are selected, the people formulating a new KCN create and select the categories, conceptual frameworks, hypotheses, models, facts, data, and “theories” that they will use in creating the solutions for those problems. Some of this activity will occur in conjunction with their attempts to formulate and choose the problems they will address, or activity in this area may motivate them to return to problem formulation and selection activity.

In other words, there’s no hard and fast temporal distinction between defining problems, conceptualizing and formulating categories and arriving at hypotheses, facts, models, etc that people use to solve, or try to solve, problems. The conceptual distinction between these different types of activities is important for understanding and analysis, but it doesn’t indicate that distinct stages, unmarked by overlaps and feedback relations exist in the actual process of creating a KCN in economics.

It’s important to notice, as well, that this process of conceptualizing categories, frameworks, theories, etc. is in no way a value-free process. Of course, it’s constrained by one’s ideas about what the important knowledge gaps are. So, the values affecting the problem phase of development certainly pass through to this one. But, additionally, when one considers that formulating categories, frameworks, theories, etc. always involves consideration of multiple alternatives of each of these things, then it’s also clear that there are decisions in other parts of the process of inquiry that values must effect. The formulations that intrigue people, that use categories resonating with them, that seem to speak to their moral and ethical concerns, or reflect on them, will certainly effect decisions people make about what theories, models, etc will be selected for attention in later investigations and testing.

Objectivity here is about fairness — the willingness to consider major conceptual frameworks (including value propositions), theories, and hypotheses bearing on a particular problem or problems that compete with and contradict each other, regardless of which alternatives one wants to consider. There’s also a balance between the need to cut down on all the competing notions that might be considered to a set of manageable alternatives, while still emerging with a set of competing theories that is reasonably complete and doesn’t exclude serious formulations that might prove to be true (from the descriptive standpoint), or legitimate (from the value standpoint).

The objective of this phase of the process is ending up with a fair comparison set of KCNs and their accompanying theories, hypotheses, data, etc. But there is never any guarantee that one has done so. It’s like the idea of maximizing profits in a business. One may try do that, but one can’t possibly tell whether one has failed after the fact, until others or yourself come up with counter-examples showing missed opportunities for making greater profits. On the other hand, if there are no counter-examples, that still doesn’t mean one has succeeded. That, you’ll never know, because nobody can exclude the possibility that the necessary counter-example won’t suddenly appear.

After conceptual categories, hypotheses, models, facts, data, and “theories” get formulated then the issues of testing competing formulations arise. In an open KCN situation everything is subject to criticism and refutation including even reconsideration of the important social/value and knowledge gaps. The issue here is arriving at a KCN that has been most successful in meeting critical attempts at refutation. It’s not ideological defense of it against all comers as a lawyer would defend a client that counts. Instead, what’s important is subjecting it and the alternatives to it in the fair critical comparison set, to the strongest attacks possible to see if the KCN is strong enough to withstand “the slings and arrows of outrageous fortune.”

When people do that they are generating their new KCN using a fair critical comparison process. To the extent they fail to meet that standard, the resulting KCN is likely to be of lesser quality and to have less adaptability to the challenges it will inevitably face. Of course, in reality, most approaches don’t emerge through a process of fair critical comparison. They deviate from this ideal in varying degrees.

But whatever the deviation, the main point is that even if the ideal of fair critical comparison is approached very closely, the process of critical evaluation still involves value judgments because decisions choosing one approach over its alternatives always involve value judgments about whether the critical grounds for preferring one alternative over all the others are strong enough, and whether the risks of selecting that alternative are low enough that one is making the best decision one can in choosing to rely on the KCN one ends up selecting.

So, there’s no escaping value judgments in arriving at KCNs in economics whether or not one is trying to be objective. Not that objectivity in a meaningful sense is impossible. I’m NOT claiming that. But, I am saying that value neutrality is impossible. It is a sham that denies the reality of the need to make decisions in developing knowledge including new KCNs in economics.

Our real choice in describing a particular KCN is whether we want to view and evaluate it only in terms of its descriptive aspects or whether we want to view and evaluate it as a holistic knowledge claim network, a fusion of fact and value claims, including social/value gap, problems, conceptual frameworks approaches, theories, models, measurement models, data, narratives, policy prescriptions, data, and also the whole track record of criticism, evaluation, and testing of various aspects of the network. I think the growth of knowledge is better served by a holistic approach that subjects everything to continuous criticism and evaluation, rather than an approach that restricts evaluation to the descriptive aspects of a KCN, considers a portion of that aspect of the network its core, and “pins down” the rest of the network as beyond criticism, evaluation, and test because it is assumed as a given.

So, the KCNs that emerge from the interrelated sequential and sometimes iterative decision making processes that produce them, assume not only singular and universal knowledge claims about the world, but also knowledge claims about intrinsic and extrinsic value. Such KCNs also contain prescriptive knowledge claims that combine claims about value with claims about the way the way world is and works. To understand those networks we have to understand all three. The value claims, the claims about the world, and also the prescriptive claims combining the two.

So What?

I’m sorry about all the meta-theory in this post, but I think I need it to make some very important points:

First, even though one can state a purely descriptive KCN in economics, that network will be taken out of context and so will be incomplete. Specifically, it will be missing

1) the context of value assumptions accompanying selection decisions relating to social/value gaps, knowledge gaps, hypotheses, models, theories, measurement models, and data;

2) the prescriptive propositions combining the descriptive and value portions of the KCN; and

3) any narrative or historical context that isn’t purely descriptive but contributes to the understanding of the KCN.

Second, one can’t easily decide what parts of the descriptive aspect of the KCN are at its core, if the value, prescriptive, and sometimes even the narrative portion of the network are missing. The reason for this is that some descriptive knowledge claims may not seem central to the KCN unless one can see their relationship to the value, prescriptive and narrative components of the network. That is, the full context of the descriptive portion of the network may be necessary to assess what is important to the full network and what is not.

– So, people having access to the descriptive portion of the network may decide to deemphasize development of parts of it that are not as interesting to them as other parts of greater theoretical interest.

– Or they may import their own private values into decisions about the way in which the network ought to be developed.

– Or, most importantly, they may fail to include attributes, properties, or variables in the network that are critical from the viewpoint of anticipating/measuring/evaluating side effects of private actions or public policies based on the purely descriptive “knowledge” offered by the network.

– Or finally, people developing the descriptive part of the network by testing and selecting among theories and hypotheses, may not be able to assess the relative risk of error in accepting a hypothesis or theory in preference to its competitors.

Third, decisions about what parts of a KCN are part of the core will be heavily affected by one’s value perspective on the network. In the history of science, the effort to banish values from inquiry and to isolate the descriptive aspects of science from the value and prescriptive aspects has resulted in people importing their own values into scientific processes and outcomes without being explicit about what their value knowledge claims are. These claims influence inquiry and its outcomes without having to face criticism, evaluation, and refutation.

In particular, they often result in decisions to write certain elements out of the descriptive aspect of the KCN because their implications may conflict with or expose implicit value commitments that people don’t want to fight about. The result of all this is greater subjectivity in inquiry than would be the case if value knowledge claims were explicit and their relationship to prescriptive knowledge claims was easily traced. The further result of it is the growth of unbalanced KCNs whose descriptive aspects are developed in distorted ways, whose value and narrative aspects are very under-developed, and whose prescriptive aspects are very partial, ignore consideration of side effects, and are all about continued vulnerability to “black swans.”

The MMT KCN has been developed holistically by its originators. It is not focused on descriptive aspects of economics alone. It offers explicit value claims, it’s normative aspect is pretty clear. Many of its practitioners, offer policy prescriptions rather than simply concentrating on the way the world is right now. In my next post we’ll take a look at its components. But for now, I’ll note that the social/value gap, problems, and prescriptive aspects of the MMT KCN are progressive and second New Deal oriented, and that is why many people who are persuaded by parts of the descriptive aspect of MMT want to do what they can to place these aspects into a secondary role and drive them out of the KCN altogether.