<blockquote>
<p>Then, she moves to the next tooic without providing any additional details. I am assuming that her reference is well understood by experts.</p>
</blockquote>
<p>The statement, taken at a face value, does not make sense.</p>
<p>MMT propounds to be theory on how economy operates. Its supposed to descriptive not prescriptive. Saying any descriptive theory is good in theory but bad in practice does not make sense. That is like saying theory of evolution is good in theory but bad in practice.</p>
<p>Now, most economists do consider MMT to be incorrect theory incompatible with many empirical observations (e.g. see discussions <a href="https://www.aeaweb.org/articles?id=10.1257/pandp.20201102" rel="nofollow noreferrer">Mankiw 2020</a>; <a href="https://ideas.repec.org/a/kap/atlecj/v49y2021i2d10.1007_s11293-021-09713-6.html" rel="nofollow noreferrer">Prinz &amp; Beck, 2021</a>; <a href="https://www.tandfonline.com/doi/full/10.1080/09538259.2014.957466?casa_token=01QJkCJvAzkAAAAA%3A90GWhDykSbGT3biQ5HhnWwiSiNPlcWlkHayEkDnIThb7soiwu_QrqrFVE2sVPBDRBx3QsTgW3xYnyw" rel="nofollow noreferrer">Palley 2014</a>). In fact many economists would even say it fails to be proper theory, in modern Popperian/Kuhnian/Positivist sense. However, descriptive theories are not 'put in practice'.</p>
<p>However, this being said if a policy makers have some given goal such as maximizing GDP then different scientific theories might yield different policies that lead to maximization of GDP. Then we can talk about such policies being put in practice or described in conceptual (i.e. theoretical way), but thats not the same as claiming that someone puts MMT or lets say New-Keynesian Cross, or IS-LM into practice.</p>
<blockquote>
<p>Would someone be able to provide examples where MMT has not worked in practice? I am really interested in looking at examples where MMT has not been supported by empirical economic data.</p>
</blockquote>
<p>The first sentence is not really answerable (see previous section). The second sentence can be only answered if we use one of the interpretations of MMT, since many MMT proponents do not really describe MMT in a standard way that would make it clearly testable (which is why some do not even consider it a theory).</p>
<p>If we take the Palley interpretation of MMT which has some testable predictions we can answer this question. Following Palley one of the MMTs implications is that government spending is non-inflationary below full employment. This implies that what matters for inflation is just the output gap not other factors such as quantity of money and so on.</p>
<p>However, various studies find evidence supporting the view that inflation is causally related to other factors, for example monetary aggregates (e.g. see <a href="https://www.esr.ie/ESR_papers/vol35_3/Vol%2035_3Frain.pdf" rel="nofollow noreferrer">Frain 2004</a>). Also, studies that estimate Philips curve that control for output gap generally show that output gap simply cannot explain inflation completely and you need also interest rates, expectations and so on (e.g. see discussion in Romer Advanced Macroeconomics).</p>
<p>These are examples of situation where MMT would not be supported by empirical data.</p>

CC BY-SA 4.0
2024-06-23T18:45:16.403Z
2024-06-23T18:45:16.403Z
1muflon1
<p>I was reading the book <em>In This Economy</em> by Kyla Scanlon.</p>
<p>When she talks about Modern Monetary Theory (MMT), she writes:</p>
<blockquote>
<p>This [MMT] is a good idea in theory, but in practice, it hasn't worked out.</p>
</blockquote>
<p>Then, she moves to the next topic without providing any additional details.  I am assuming that her reference is well understood by experts.</p>
<p>Would someone be able to provide examples where MMT has not worked in practice?  I am really interested in looking at examples where MMT has not been supported by empirical economic data.</p>

CC BY-SA 4.0
2024-06-23T07:07:47.640Z
Personally I think it's bad in theory and hasn't been tried out in practice for this reason.
AKdemy
CC BY-SA 4.0
2024-06-23T09:35:34.250Z
My understanding was that it had not been tried.  I was surprised when Kyla Scanlon suggested otherwise. I am wondering what she was referring to.
Larry Freeman
CC BY-SA 4.0
2024-06-23T14:44:06.360Z
Perhaps she is referring to certain elements / sub- policies of MMT that have been tried, rather than a whole regime.   Eg aggressive deficit spending by many countries following Covid.
dm63
CC BY-SA 4.0
2024-06-24T07:23:28.663Z
Some say it was used in Turkey in recent years and failed.
Richard Hardy
<money-supply><government-debt><government-spending>
What are examples where MMT hasn't worked in practice
Larry Freeman
# What are examples where MMT hasn't worked in practice

(Asked by: username_0 on 2024-06-23)

I was reading the book *In This Economy* by Kyla Scanlon.

When she talks about Modern Monetary Theory (MMT), she writes:

> This [MMT] is a good idea in theory, but in practice, it hasn't worked out.

Then, she moves to the next topic without providing any additional details. I am assuming that her reference is well understood by experts.

Would someone be able to provide examples where MMT has not worked in practice? I am really interested in looking at examples where MMT has not been supported by empirical economic data.

**Tags:** money-supply, government-debt, government-spending

> **Comments:**
> **username_1**: Personally I think it's bad in theory and hasn't been tried out in practice for this reason.  
> **username_0**: My understanding was that it had not been tried.  I was surprised when Kyla Scanlon suggested otherwise. I am wondering what she was referring to.  
> **username_2**: Perhaps she is referring to certain elements / sub- policies of MMT that have been tried, rather than a whole regime.   Eg aggressive deficit spending by many countries following Covid.  
> **username_3**: Some say it was used in Turkey in recent years and failed.  

---

## 1 answers

### Answer by username_4 on 2024-06-23. Score: 1 | Accepted answer

> Then, she moves to the next tooic without providing any additional details. I am assuming that her reference is well understood by experts.

The statement, taken at a face value, does not make sense.

MMT propounds to be theory on how economy operates. Its supposed to descriptive not prescriptive. Saying any descriptive theory is good in theory but bad in practice does not make sense. That is like saying theory of evolution is good in theory but bad in practice.

Now, most economists do consider MMT to be incorrect theory incompatible with many empirical observations (e.g. see discussions [Mankiw 2020](https://www.aeaweb.org/articles?id=10.1257/pandp.20201102); [Prinz & Beck, 2021](https://ideas.repec.org/a/kap/atlecj/v49y2021i2d10.1007_s11293-021-09713-6.html); [Palley 2014](https://www.tandfonline.com/doi/full/10.1080/09538259.2014.957466?casa_token=01QJkCJvAzkAAAAA%3A90GWhDykSbGT3biQ5HhnWwiSiNPlcWlkHayEkDnIThb7soiwu_QrqrFVE2sVPBDRBx3QsTgW3xYnyw)). In fact many economists would even say it fails to be proper theory, in modern Popperian/Kuhnian/Positivist sense. However, descriptive theories are not 'put in practice'.

However, this being said if a policy makers have some given goal such as maximizing GDP then different scientific theories might yield different policies that lead to maximization of GDP. Then we can talk about such policies being put in practice or described in conceptual (i.e. theoretical way), but thats not the same as claiming that someone puts MMT or lets say New-Keynesian Cross, or IS-LM into practice.

> Would someone be able to provide examples where MMT has not worked in practice? I am really interested in looking at examples where MMT has not been supported by empirical economic data.

The first sentence is not really answerable (see previous section). The second sentence can be only answered if we use one of the interpretations of MMT, since many MMT proponents do not really describe MMT in a standard way that would make it clearly testable (which is why some do not even consider it a theory).

If we take the Palley interpretation of MMT which has some testable predictions we can answer this question. Following Palley one of the MMTs implications is that government spending is non-inflationary below full employment. This implies that what matters for inflation is just the output gap not other factors such as quantity of money and so on.

However, various studies find evidence supporting the view that inflation is causally related to other factors, for example monetary aggregates (e.g. see [Frain 2004](https://www.esr.ie/ESR_papers/vol35_3/Vol%2035_3Frain.pdf)). Also, studies that estimate Philips curve that control for output gap generally show that output gap simply cannot explain inflation completely and you need also interest rates, expectations and so on (e.g. see discussion in Romer Advanced Macroeconomics).

These are examples of situation where MMT would not be supported by empirical data.


---

