Aula 5 | Functional Finance | Prof L. Randall Wray

LECTURE 5 - MINSKY’s MODERN MONEY THEORY (MMT) AND FUNCTIONAL FINANCE (Institute of Economics, Campinas, Unicamp, August 14th, 2018)

In the fifth section of the Modern Money Theory Course, Professor L. Randall Wray goes back and tracks the Minskyan routes of MMT and his connections with Abba Lerner’s principles of Functional Finance. Coming from this perspective, the main argument of MMT is that fiscal policy primary target might be full employment without high inflation. And also argues why a typical general aggregate demand stimulus does not generate full employment and leads to effects ranging from increasing financial fragility, inflation and inequality.

Bibliografia:

Lerner, A. 1943. Functional Finance and the Federal Debt. Social Research, v. 10. 1943.
Wray, L. Functional Finance: A Comparison of the Evolution of the Positions of Hyman Minsky
and Abba Lerner, Working Paper, n. 900. Levy Economics Institute. Jan, 2018.

Imagens: Alexandre Motta

[rararabblerouser]

The Take: Occupy, Resist, Produce by Naomi Klein and Avi Lewis is the fantastic documentary Randy was trying to remember the name of. Still worth a watch. I actually incorporated it into my then 5th graders schooling when we were on Covid lockdown. We also worked our way through Yanis Varoufakis's Talking to My Daughter About the Economy and we watched a documentary on ancient Mesopotamia from the channel The Fall of Civilizations (name?) to dig into economic history. But I digress. Thank you for this lecture series Professor.

[Achrononmaster]

There has to be something wrong in those 1960 models that have the optimum being private debt growing just below government debt, no? Unless the private debt grows in sub-proportion to population number. Because otherwise longer term private debt will overwhelm real economic productivity, as Michael Hudson has often spoken about. Real production cannot grow exponentially, but private debt does (due to compounded interest). My guess is Minsky might not run his models out long enough, or did not put in the right time evolution dynamics?