Season 1 · Episode 334
Opportunity Cost and MMT
Modern monetary theory lessens the constraints on public spending, but does it also mean there’s less discipline on how resources are used? Phil Dobbie puts the question to Steve Keen on this week’s podcast.
Debunking Economics - the podcast · Steve Keen & Phil Dobbie
January 18, 202340m 54s
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Show Notes
Conventional economics is built around the idea of opportunity cost. If there is a limited resource a decision has to be made about how best to use it. How is that principle applied when you look at Modern Monetary Theory, when governments can create money without limits until you have reached a point of full employment. There is no need to look at one choice over another. Perhaps you can do both? So, what determines how money is spent? Are those spending decisions left in the hands of politicians? Steve Keen says, to start with, the theory of opportunity cost should be ditched because it only applies at a personal level. He explains why that is, but agrees with Phil that politics is the big stumbling block when it comes to the practical application of MMT.
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