The historical beginning of the MMT team – from the archives

It is Wednesday, so only some snippets, although as it turns out the blog post is quite long. I am also travelling a lot today. I have recently come across the complete archive of the PKT Discussion List, which was an E-mail listserv in the early 1990s that brought Warren Mosler, Randy Wray and myself together. In this blog post, I provide some of the interchanges that formed the basis of our subsequent partnership in developing MMT to where it is today. The discussion below is incomplete because I have not yet pieced all the archive together in a coherent way (it is quite fragmented in the form I currently have it in). But I think it might be interesting for you to see what was being said back in the 1990s. There will be more on this another day. No music today (ran out of time) but, tonight, my band is playing in Melbourne (see below) and live music is always better than YouTube videos anyway.

ABC Radio Program on MMT – Future Tense program

This Sunday (December 1, 2019), the national broadcaster ABC Future Tense program is featuring Modern Monetary Theory (MMT) – Modern Monetary Theory and its challenge to Neoliberalism – at 10:30 (EAST)

You will be able to listen via the Internet if you cannot get to a radio.

Times are changing and MMT is becoming more visible.

Some historical artifacts

As part of my examination of the PKT archive, I found these – I laughed.

1994 Style E-mail signature in ASCII

1996 Style E-mail signature in ASCII

Early beginnings of the Modern Monetary Theory (MMT) development team

Last week, I caught up with Warren Mosler on his annual visit to Newcastle to catch up, spend some time together (with families), and, generally, have a nice time.

We also recorded a 40 minute video together which I will post in due course where we talk about the beginnings of our MMT partnership, our concerns for the future, where MMT is going or not going, Warren’s Italian debate, and more.

As part of the beginnings of what is now called MMT, we talked about the early days on the PKT discussion list, which was an E-mail listserv in the very early days of the Internet where Warren, Randy and I met up and where, arguably, our respective positions brought us together to begin what our journey together.

By the way, my next book (alone) is provisionally entitled ‘An MMT Journey’. I am also working on the next book with Thomas Fazi (out next year hopefully).

Anyway, this week (thanks to Billy Saas), I was lucky enough to get hold of the complete archives for the PKT discussion list and have been examining them from inception (May 1993) to its ultimate demise in 2004.

I wrote a review of the PKT List for the Electronic Journal of Radical Organisation Theory – which is published by the Waikato Management School in New Zealand.

The review – Post Keynesian Thought Archive (Volume 2 No. 1, June 1996) – provides some insights into how the PKT list functioned.

As part of the regular operations of the list, the convenor Ric Holt, used to run seminars, where participants would discuss a paper lodged by one of the list members and comments would fly back and forth.

My seminar was in January 1997.

It was followed by a seminar by Warren in February 1997.

I have extracted some of the interactions that followed, although this is not an exhaustive documentation at all.

It gives some idea of how we were thinking and starting to forge the MMT partnership.

The … signals I have edited stuff out – usually irrelevancies.

As I have noted previously, the reference to the Buffer Stock Employment (BSE) model, came out of my Honours work (4th year) at the University of Melbourne in 1978.

When Warren came onto the PKT list with his Employer of Last Resort (ELR) model, I knew I had finally found a confrere!

In our video we recorded last week, Warren noted he came to the same conclusion in 1997.

A unity of science as they say.

So here is a rough unfolding of some dialogue on the PKT list.

January 26, 1997

Referring to my Seminar Paper on PKT in January 1997, Warren wrote:

From Sun Jan 26 09:41:57 1997
Date: Sun, 26 Jan 1997 11:35:38 -0500
From: Warren Mosler
Subject: Mitchell Semnar

I would like to thank the good Professor for preparing this paper. It is in my library and will surely be used repeatedly as reference material for many years to come.

Thanks again, Bill,

Warren Mosler

February 4, 1997

From Mon Feb 3 16:35:52 1997
04 Feb 1997 10:35:25 +1100
Date: Tue, 04 Feb 1997 10:35:25 +1100
From: bill mitchell
Subject: Bill’s Seminar Closing
To: PKT: ;

Dear pkt

Thanks very much for the interaction and the comments that were received …

I also think that Warren’s seminar is a very natural flow on from mine. I hold many of the same views about the economy that he does. We have come to those conclusions from quite (like completely) different professional backgrounds. That is quite an interesting sociology in itself.

But we both agree very firmly that we should not be defensive when we say that the reason there is unemployment is b/c the government is not doing its job. it should be the default employer. the debt and deficit implications are irrelevant.The major thrust of PKTt macro, I believe, should be to pursue this question.

Too many of us even seem to fall prey to this fear of debt or deficits. We worry about financing the job creation. Why worry about it? It is not an issue. Warren
will reinforce my seminar on that aspect.

If there are young pkters out there who are looking for a good research topic for a thesis or want to get started on some research agenda then this is a great area to pursue. We should stop being defensive about financing the public sector.

The real issue is building analysis and theory which will underpin the model that the public sector should act as a buffer stock employer. Then you eliminate unemployment from history.

We haven’t been as focused on that as we should be. Forget all the bullshit that debt is a worry. It isn’t.

kind regards

February 20, 1997

From Wed Feb 19 17:46:50 1997
20 Feb 1997 11:46:04 +1100
Date: Thu, 20 Feb 1997 11:46:04 +1100
From: bill mitchell
Subject: Warren’s Seminar
To: PKT: ;

Dear Seminar goers

i liked warren’s paper and his earlier one (SCE). it is challenging i think. it is partly so b/c it is written in a language that is somewhat odd to a trained academic economist. the way i talk about money is a bit different. so that culture shock is challenging. but i also think it is challenging b/c it says, in part, that we have been far too defensive.

when i have ranted here and there about the govt as a buffer stock employer and that the deficit doesn’t matter etc etc, even people in my own camp (on the list, but before out in the world of economics) have said things like:

“oh, but be careful, what about inflation?”
“oh, but be careful, what about the forex market?”
“oh, but be careful, who is going to pay for it?”
“oh, but be careful, the govt can’t just absorb everyone!”

and then they go into all this analysis about debt/gdp ratios, and deficit/gdp ratios, and psbr/gdp etc etc and in a totally defensive way say that well these indicators are okay. implying (not very hidden) that if they weren’t okay then government intervention into the rotten mkt place would not be justified.

so if you had 10 per cent UR and a bad debt/gdp ratio then you could not do anything. totally defensive and within the ambit of the monetarists-new classical-call them what you like camp.

i have never thought like that. warren doesn’t even. his paper tells us why we don’t have to worry about these stupid bourgeoise indicators.

john interprets the paper as supportive of private enterprise with a human touch added. warren doesn’t care for such labels although he is pro market i guess. i think of the ELR (or my buffer stock) role as very pro socialist and anti-market and it could be used as a means to drive the cappos out of business (off-shore – until there are no more shores left!).

… so if the govt. employed all the unemployed why would you get inflation?

the question you have to ask first is: why are these people unemployed? if they are truly demand deficient un. then you have to believe on the supply side that there is capacity left for the expansion of real goods and services.

if you don’t believe that then you are really saying the current unemployment rate is the NAIRU.

if you don’t believe that the current ur is the NAIRU then there is room for expansion.

so then you have to ask: is a job in the public sector different to a job in the private sector? does a job in the pub sector not add to real output? private sector? does a job in the public sector not generate real output?

well if you believe that then you are in fact in the crowding out camp. and therefore warren’s elr will not appeal at all.

so if they are truly inv un and a public sector job is the same as any job then where is the inflation coming from?

in addition, there is another great advantage of having the public sector as a buffer stock employer (BSE) (ELR). it is likely to discriminate less and can also structure jobs (as services) more easily to absorb those we might say are structurally un. (SU) SU can arise through Demand deficiency (DD) btw. the categories are very blurry. both can be inv. un (IU).

the idea of SU is that if it is chronic it takes a while to reabsorb the workers (relocation, retraining). AD policies may not encourage the private sector to do that immediately, although it is clear that when the LM gets tight they also lower their hiring stds. but this doesn’t even matter in the BSE-ELR model b/c the public sector is more omnipresent than the private sector (therefore relocation is less of a constraint) and is likely to be able to employ the workers in environmental projects etc (hopefully) which may also overcome the skill obsolescence.

in other words the BSE-ELR model can dig deep into the un. pool (into the SU pool if you want) and still create immediate real output gains.

so where is the inflation?

another complaint about the financing that might be raised is the intergenerational costs that bond financing impose.

so what? who are paying the costs. our kids. how best can we prepare them to pay them? by having the parents working and earning and giving the kids skills and etc.

if we really believe that we are leaving our kids (collectively) a low cost future the way we are currently going then we have rocks in our heads. first, we are creating a pool of anti-social and very dangerous kids through prolonged poverty of the parents (principally through unemployment) and the lack of opportunities that they experience …

kind regards

February 20, 1997

From Wed Feb 19 22:03:25 1997
20 Feb 1997 16:02:56 +1100
Date: Thu, 20 Feb 1997 16:02:56 +1100
From: bill mitchell
Subject: Re: Mosler seminar – replies to replies

Warren said:

>Transaction demand for dollars, for example, can come only after dollars
>exist. (no, I don’t have any historical references for this
>assertion) Again, if dollar demand springs up without taxes,
>(which I doubt would actually happen) fine, the
>gov can spend without taxes, until the sellers dry up. Then taxes
>can allow additional govt purchases to be made with dollars.

and recall that under BSE-ELR a significant component of the demand will come from workers not direct orders from the govt. and are private firms going to have two queues – one for BS workers and one for “fine robust” private sector workers? not likely.

so if they have stuff to sell and they know the cash is acceptable elsewhere then they will sell to the first worker that comes in (and the second etc) no matter where they work.

critics of the labour market scheme have to show that the private sector will not recognise the wages of the BSE workers …

kind regards

February 20, 1997

From Thu Feb 20 02:27:57 1997
20 Feb 1997 20:26:50 +1100
Date: Thu, 20 Feb 1997 20:26:50 +1100
From: bill mitchell
Subject: Re: Mosler Seminar — The Paper So Far Fails

In reply to a critic of Warren’s seminar (February 1997), I wrote this:

… first, do not impute that my anti-inflation BSE (for warren = buffer stock employer) model does not depend on “on organizing principles other than those employed by free market capitalists.”

i might have a philosophical preference for that but i am also very pragmatic …

February 22, 1997

From Fri Feb 21 17:02:13 1997
22 Feb 1997 11:01:07 +1100
Date: Sat, 22 Feb 1997 11:01:07 +1100
From: bill mitchell
Subject: Re: Mosler Seminar: Who Sees the Inflation Threat?

… and you have to see that the govt in warren’s scheme does not compete for private sector labour via wage offers. it only pays the labour discarded by the private sector. when investment is high and the private sector needs to exploit more labour to increase profit volume the buffer stock employed by the public sector falls. the wage paid by G stays unchanged. it is perfectly elastic as it should be.

whether the higher employment in the private sector strengthens the bargaining power of workers who then squeeze margins is totally unrelated to the BSE-ELR model. that happens in every upswing. it is not a consequence of the fact that workers know that in the downturn they will be back doing productive things for the public sector maybe repairing the damage the private sector creates (well create is hardly the right word) but at a significant wage cut on the prevailing private sector wage. they will be able to eat and pay their mortgage but they can forget the yachts!

so john the wage pressure you describe is not a consequence of the model.

there is no inflation impulse from the G acting like this.

February 23, 1997

Date: Sun, 23 Feb 1997 14:41:49 +1100
From: bill mitchell
Subject: Re: ELR

James wrote:
>So far, it seems to me that ELR is being presented as a regular day-job
>that people serve 40 hrs/wk at. As such, it would tend to take people out
>of the job market, since time they might be spending job-hunting would be
>spent at their ELR job.
>I would suggest that a more practical format for ELR would be a simple
>day-labor system, where the jobless reported at a central point every
>day,and were sent out to do things like cleaning roadsides and parks,
>painting out grafitti, and other low-skill but necesary infrastructure
>maintainance jobs. Pay would be minimum wage. Appearance would be voluntary.

I cannot speak for Warren but my BSE model (which is equivalent in mechanics to ELR) certainly does see these jobs as regular day to day jobs providing dignity,
security, and an attachment to the LF that i might currently have.

they are not casual, temporary positions. they do not require people to line-up each morning and be told what to do in military fashion …

>The ELR jobs would not replace existing social services, but would go to
>those who fall between the cracks now.

no they would replace the unemployment benefit system. and the expectation would not become one that you get a job if you don’t somehow fit into a category that has a benefit attached. you get the benefit if you are old, disabled, or sick.

otherwise you work. everybody would expect and be expected to work. b/c there will always be jobs on demand.

this would not prevent the govt paying supplements to families etc (but these would be paid to private and public sector workers alike).

>Incidentally, minimum wage works out to about $10,000/yr. Nobody pays a
>mortgage with that kind of money.

that is US data which i cannot comment on. In OZ, with current interest rates and inducements, workers on the lowest award wages could still afford to pay a modest mortgage and feed their families.

to me BSE-ELR models provide dignity not the sort of scheme you have in mind. you seem to see the private sector as the default employer with good proper jobs and the public sector as something well – form crews and line up sort of jobs.

for me it is probably the opposite. the public sector has the opportunity to provide proper, discrimination-free, green jobs. and to me it is the public sector’s responsibility. we know what the motivation of the private capitalist sector is – to accumulate capital. it must hurt them to have to provide incomes to workers. it is certainly not their main game and is antagonistic to their aims (to pay decent wages and provide good conditions).

kind regards

February 23, 1997

In reply to that post, Warren wrote:

Date: Sat, 22 Feb 1997 23:48:11 -0500
From: Warren Mosler
MIME-Version: 1.0
Subject: Re: ELR

This is exactly the type of dialogue all would be engaging in if they understood modern money and desired 0 unemployment and price stability. The political process would come up with a program and then modify it over time.


March 9, 1997

Randy Wray entered the debate at this point and later followed up with a longer offering that I will publish in due course.

> Från: Randy Wray
> Till: POST-KEYNESIAN THOUGHT > Ämne: Re: elr/homogeneity of labor
> Datum: den 9 mars 1997 06:39
> glad to see the elr seminar is carrying on; bill m. and warren have
> made some interesting contributions, but i want to print them so i can
> examine bill’s exposition in detail.

March 16, 1997

Date: Sun, 16 Mar 1997 13:48:10 +1100
From: bill mitchell
Subject: NAIRU
To: PKT: ;

… there is nothing natural about capitalism. so any artifact of capitalism is not natural. the trees are natural. the ocean is natural. any vindictive, nasty, selfish, unemployment rate that the capitalists determine is hardly natural.

under the BSE/ELR model, this would disappear …

January 2, 1998

From: bill mitchell
To: POST-KEYNESIAN THOUGHT Subject: Re: What Deficit?
Date: Friday, January 02, 1998 7:16 PM

… The size of the deficit is irrelevant. If there is unemployment then it indicates that the deficit is not high enough. That is all you can really say about its size. It doesn’t matter how big or small it is if it is scaled to eliminate the unemployment by recycling “lost” purchasing power”.

You bring about full employment without inflation by introducing a Buffer Stock Employment policy (or as Warren terms it an Employer of the Last Resort policy) and make sure the government holds the line on the buffer stock wage which has to be around the bottom of the wage structure.

The rest of the “fangled” solutions will not work. In fact, if you don’t do this you can never have full employment with price stability. you will always be using unemployment to control costs/demand in the economy.

kind regards

January 3, 1998

Date: Sat, 03 Jan 1998 18:19:51 +1100
From: bill mitchell
Subject: Re: What Deficit?

… I would say employment is a human right which our agent the government has to guarantee. if there is not enough spending in the private sector then the idle workers are provided with a socially useful public sector job. The inflation control is as you indicate build into the wage the government pays. But this is not the only role for the public sector.

I would have much more “regular” public sector involvement in education and health and natural system improvement etc. The buffer stock would still operate to ensure full N and price stability. But the regular public sector would be big. the size of the public sector is of-course a political issue not to be confused with an economic issue. My political judgement is to make the PS big and assume the role for many allocations currently being poorly delivered by the private sector (i have argued before for complete public education and no private education provision.

That goes for health as well! Are you really trading places with me John and advocating more public allocation than I would).

The buffer stock policy operates separately to how big the public sector is as a discretionary fact.

And please don’t attribute to me the statement that I would leave “public needs and environmental reclamation and repair to the market…” This is
patently false and not at all implied by the buffer stock model. I think the private sector has totally failed and cannot deliver socially useful environmental outcomes nor socially useful public goods. That is why i would have a bigger public sector.

kind regards

Call for financial assistance to make the MMT University project a reality

If I am to get the – MMTed Project (aka MMT University) – up and going to provide formal courses to students in all nations to advance their understanding of Modern Monetary Theory then I need financial assistance.

We have established the – Foundation for Monetary Studies Inc. – aka The MMT Foundation to serves as a legal vehicle to raise funds and provide financial resources for the MMTed Project.

The Foundation is a non-profit corporation registered in the State of Delaware as a Section 501(c)(3) company. Its legal structure allows people can make donations without their identity being revealed publicly.

Some sponsors have already offered their generous assistance.

We need significantly more funds to get the operations off the ground.

Please help if you can.

We cannot make the MMTed project viable without funding support.

If you are in Melbourne tonight and want to hear some live music …

Then my band – Pressure Drop – is playing at the Maori Chief Hotel, 117 Moray St, South Melbourne, from about 20:00 to late.

This is a great little inner city pub in Melbourne which has consistently supported live music. Such venues need the support of all of us.

And, what else is there to do on a Wednesday night in Melbourne anyway?

Lots of great dub, rock steady and reggae coming up tonight. We will throw some jazz in there somewhere too!

I can also discuss Modern Monetary Theory (MMT) during breaks in the sets!

That is enough for today!

(c) Copyright 2019 William Mitchell. All Rights Reserved.

This Post Has 7 Comments

  1. Dear senexx (at 2019/11/27 at 3:05 pm)

    The archives were lost when a computer crashed at Roosevelt University in Chicago.

    But copies that had been made previously as an archive survived and I now have the full archive. I will re-create it when I get time and make it available as a searchable archive then.

    best wishes

  2. Dear Bill,

    I’m an economic novice (though glad to be learning through heterodox sources such as yours). One of the things I’ve been a bit confused about is when you say that governments do not have financial constraints (this much I understand) but are instead constrained by real resources. This sparks all kinds of follow-up questions in my mind such as: what are these resources/how is that term defined, how are they measured, are any countries in the world today with a sovereign currency spending beyond their own real resources? etc. I’m sure you’ve answered these before elsewhere so I won’t beseech you to repeat yourself. But I saw this in the above listserv conversation:

    “If there is unemployment then it indicates that the deficit is not high enough.”

    and I’m wondering, does this mean in your formulation that it is impossible for real resources to be exhausted/exceeded if there isn’t full employment? Is that an oversimplification on my part? Or am I on the wrong track entirely?

  3. Its great to see the debates.

    Kind of sad that this is from 20 years ago. Economists are none the wiser.

    Love the smackdown the professor gives to the private sector.

    You just don’t see a leftist really punch anything or anyone.

    Took me awhile, but in reading more and more, I realize that capitalism/business is the problem and not the solution.

  4. @Basil Pesto

    I won’t presume to answer on Bill’s behalf, but one of the resources that constrain government provisioning is labor — so for ar least that part of your question, as long as there are unemployed, the government has not yet maximized the utility of at least one resource. Where other resources are concerned, I would need specific examples before commenting.

  5. @Basil Pesto
    One real resource you will not hear about from Bill or the other MMTers is land. It has been written out of the economic textbooks – even the latest one. One of the 2 big things I learned from Prof Mason Gaffney at a Henry George Foundation AGM is that unused usable land is a permanent loss to production, as much as unemployment. For this I will be dismissed as a georgist;o)

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