{"title":"Alternative uses of functional finance: Lerner, MMT, and the Sraffian supermultiplier","authors":"Ricardo Summa","doi":"10.4337/roke.2024.01.02","DOIUrl":null,"url":null,"abstract":"The purpose of this paper is to show that the Sraffian supermultiplier is compatible with functional finance and can be used to discuss macroeconomic policy in a simplified way, providing an alternative to Lerner and Modern Monetary Theory (MMT). We argue that the general functional finance framework (FFF) can be separated from Lerner’s specific views on how the economy works and its policy recommendations. Then, we propose that FFF can be combined with different views on how the economy works as well as policy objectives and instruments. For this, we construct three comparable ‘toy models’ to evaluate the alternative uses of functional finance from Lerner, MMT, and the Sraffian supermultiplier. We use these toy models to provide an alternative comparison between Lerner and the MMT to that proposed by Wray (2018), and we argue that Lerner never abandoned his FFF or his theoretical principles towards Monetarism. We use this same scheme to evaluate the FFF from the standpoint of the Sraffian supermultiplier. The presentation of these three comparable ‘toy models’ helps to stress the shared principles and specific disagreements among Lerner, MMT, and the Sraffian supermultiplier and to discuss their implications for active economic policies and their constraints in open economies.","PeriodicalId":45671,"journal":{"name":"Review of Keynesian Economics","volume":null,"pages":null},"PeriodicalIF":1.8000,"publicationDate":"2024-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Keynesian Economics","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.4337/roke.2024.01.02","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
The purpose of this paper is to show that the Sraffian supermultiplier is compatible with functional finance and can be used to discuss macroeconomic policy in a simplified way, providing an alternative to Lerner and Modern Monetary Theory (MMT). We argue that the general functional finance framework (FFF) can be separated from Lerner’s specific views on how the economy works and its policy recommendations. Then, we propose that FFF can be combined with different views on how the economy works as well as policy objectives and instruments. For this, we construct three comparable ‘toy models’ to evaluate the alternative uses of functional finance from Lerner, MMT, and the Sraffian supermultiplier. We use these toy models to provide an alternative comparison between Lerner and the MMT to that proposed by Wray (2018), and we argue that Lerner never abandoned his FFF or his theoretical principles towards Monetarism. We use this same scheme to evaluate the FFF from the standpoint of the Sraffian supermultiplier. The presentation of these three comparable ‘toy models’ helps to stress the shared principles and specific disagreements among Lerner, MMT, and the Sraffian supermultiplier and to discuss their implications for active economic policies and their constraints in open economies.
期刊介绍:
The Review of Keynesian Economics (ROKE) is dedicated to the promotion of research in Keynesian economics. Not only does that include Keynesian ideas about macroeconomic theory and policy, it also extends to microeconomic and meso-economic analysis and relevant empirical and historical research. The journal provides a forum for developing and disseminating Keynesian ideas, and intends to encourage critical exchange with other macroeconomic paradigms. The journal is dedicated to the development of Keynesian theory and policy. In our view, Keynesian theory should hold a similar place in economics to that held by the theory of evolution in biology. Many individual economists still work within the Keynesian paradigm, but intellectual success demands institutional support that can leverage those individual efforts. The journal offers such support by providing a forum for developing and sharing Keynesian ideas. Not only does that include ideas about macroeconomic theory and policy, it also extends to microeconomic and meso-economic analysis and relevant empirical and historical research. We see a bright future for the Keynesian approach to macroeconomics and invite the economics profession to join us by subscribing to the journal and submitting manuscripts.