We don't know who is correct. We do know that one POV is massively favored by those who would like to use the national debt as a reason to impose austerity policies on the US economy.
What you're calling "heterodox" is obviously wrong, as there has been massive monetary expansion over the past several decades with relatively tame price inflation. The main thing MMT changes is allowing the legislative government to spend the newly-created money for deliberate goals, rather than it just being handed over to the financial industry. Given the massive price inflation we have experienced in housing, education, vehicles, etc - everywhere the new money has been able to go from the financial industry to consumers (to bring up average price inflation as per the overt policy) - I'd say that spreading the new money around more is a no-brainer.
Experimenting with a different approach might be understandable if the austerity wasn't aimed directly at killing the global goodwill that makes such monetary inflation possible - USD's status as the world reserve currency. As it stands, I don't know things would look any different if our country was being controlled by a hostile foreign power intent on destroying us.
You use the word heterodox as a thought preventing insult.
On the one hand we have a simple model that 1+1=2. On the other we have someone else proclaimed correct saying it’s not so. But it’s too complex for me to understand.
heterodox is a common term in the economics world. imagine it says "mainstream" if you prefer.
> You could start by stating your assumptions and basic axioms.
I'm not here to write a text book on economics. I'm here to point out that "debt is bad, we can never carry on like this" is a belief, not a statement of fact.
Everything in macroeconomics is a belief, because it is clearly far from a hard science.
Common sense always applies to some degree when it is based on logic. Also my belief is that a system where there is no limits on government spending and debt seems obviously unstable and likely to become infinitely corrupt.
Common sense is a very poor guide to many aspects of the world. It's not true of physics, or biology, or astrophysics, and even areas of math are very, very far from common sense. Human cognitive biases make "common sense" as both a predictor how people will behave and as a basis for understanding the world a remarkably poor choice.
And yes, economics is far from a hard science and most macro is driven by some combination of personal experience and political ideology. But that doesn't mean that "non-common-sense" ideas about macro are wrong, anymore than it means that extrapolating from the "common sense" of personal experience (i.e. no limits on your own spending and debt will lead to bankruptcy) is right.
I said common sense "based on logic" specifically to sidestep this popular argument about the evils of common sense. Such common sense includes statements like "if something can't go on forever it won't". I guess you disagree with this statement?
But no I don't agree with your claim. Common sense is an excellent guide and a major reason why evolution gave us large brains. And that includes the hard sciences, only failing in very specialized niches that often took centuries to find after almost everything else was well-explained by intuitive theories. Biology is not a hard science.
Common sense is only an excellent guide if you want to predict specific kinds of things about the world. It breaks down once you leave the realm at which our senses operate (which includes national economies).
Morever, equating logic and common sense is to deny the recency of "logic". Humans reasoning like this, even if you want to take it back to the Sumerians, is a very recent development in human experience (probably).
> Biology is not a hard science.
OK. I wonder what all that lab time and experimentation was for that I saw when I was doing my PhD in computational molecular biology (never finished). I guess it was all just ... soft.
> centuries to find after almost everything else was well-explained by intuitive theories
No by "common sense based on logic" I mean common ground between both. To exclude gut feelings or emotion or whatever. And I'm sure logical thinking ability is also hardwired by evolution.
Realms where our senses do not operate would be microscopic or relativistic and the like where which we have never been able to observe before. National economies are completely observable and accessible to our logic and common sense. They are akin to thermodynamics which is not counterintuitive at all.
You are arguing by example and I am countering with larger classes of examples. For someone who gives up so quick on picking winners in macroeconomics theories you sure are sure of your answer here despite any quantitative basis for your claims.
> They are akin to thermodynamics which is not counterintuitive at all.
You can only say this thanks to the work of generations of previous scientists (and teachers) who managed to render the very unintuitive as intuitive.
> Realms where our senses do not operate would be microscopic or relativistic and the like
There are (a) dozens of known cognitive biases, the majority of which we cannot avoid even when we know about them (b) visual and auditory illusions. Both of these are not in the microscopic or relativistic realms, but nevertheless show clear examples of our senses (and upstream sensory processing) failing to properly inform us about the state of the world.
> National economies are completely observable and accessible to our logic and common sense.
A national economy is only "completely observable" when reduced to statistics. No individual can possibly "observe" all of a national economy, partly because it is too big and partly because parts of it are too small. A statistical summary is not without value, but is not equivalent to it being "completely observable". As for the notion that we can bring our "logic and common sense" to bear on a national economy: well, that's precisely what the arguments between orthodox and heterodox economists is all about. They are bringing their logic and common sense to bear on it, and they do not arrive at the same conclusions.
> gives up so quick on picking winners in macroeconomics theories
On the contrary, I am very much for picking winners. While the answer may not be forever (subject to new theories), I pick MMT for a winner over orthodox/mainstream theories. This is not because I am certain that MMT is correct, but more because orthodox/mainstream theories have all the hallmarks of having been invented by the winners in an economy, for the winners.
Observability means it can in principle be measured, not whether it is practical. And we can observe all the way down to the individual level where effects happen (prices), individuals set interest rates, etc. Aggregation is also in the intuitive column. At worst you could argue this reguires a subsequent step of logic, which I accounted for since humans do by design.
Thermodynamics is easy. I did it as a sophomore. It can be derives using statistical mechanics from classical mechanics but this is not necessary. The ideas of heat itself and its flow are ancient.
Speaking of cognitive biases, pointing out examples of errors does not provide a proof that something is worse than some unnamed alternative. Unless your argument is that we are worse at something that an omniscient and perfect version of humans. And if you go all the way back to my very first statement, I said common sense always works to some degree. I didn't say the predictions would be perfect. You are making the much-harder-to-defend argument that it disappears from value via some magical statistics effect you haven't identified.
