[P2P-F] difference between MMT and functional finance?

Sat Oct 1 12:25:07 CEST 2011

Michel,
	the difference is more a matter of history and focus, because generally  
speaking they are integrated. MMT is derived from J. M. Keynes's later  
work related to money as an institution and as related to his advocacy of  
macro-economics. Functional Finance is based upon work of Abba Lerner (the  
New School for Social research through the 1960s and 1970s plus) others.  
It is based upon the experience with deficit based government spending  
during the "Great Depression/FDR's New Deal and into the transition after  
US Pres Nixon "closed" the Gold "window" on the redemption of US Dollars  
into gold in 1971. It is functional in the sense of how monetary and  
fiscal policy works relative to its outcomes. MMT includes substantial  
historical research into the history of the origin and issuance of money.  
Functional finance is more about the effects of the macroeconomics of  
Keynes and related people.

Here is a fairly clear and accessible essay by Abba Lerner on FF    
http://k.web.umkc.edu/keltons/Papers/501/functional%20finance.pdf

At this point they are often merged under the MMT heading. As before the  
major source of mischief in understanding MMT/FF is in the acceptance of  
neo-classical economics as the default paradigm, when it is more of a  
positivist/positing perspective (sciencism not actual science in the  
manner of science being based upon a running open discourse. The  
difference between fitting real time practice and fiscal policy into an  
ideology, as compared to related direct research by a community of  
discourse.

If this doesn't sort out well for you, please, say so, and I will approach  
it again. Using MMT/FF as a straw man and expecting the perspective to fit  
into posited ideology and assumptions of neo-classical economics, actually  
points to the problems and contradictions buried within  
neo-classical/positivist economism (ie not economics conducted as a  
science) as promoted by courtiers to wealth.

In some sense the difference between neo-classical economism and MMT/FF is  
also reflected in the difference between assuming that the banking sector  
(not at all actually a productive industry) is the center of sovereign  
economies, and the banking sector as a utility serving to develop the  
productivity of an economy. This is also reflected in the contradiction  
involved in bailing out casino banking rather than the productive  
participants in an economy, as also representing the "demand"  
portion/perspective on sovereign economis. These clashes are rather well  
represented in the current political stir regarding the future of the EMU.  
I recommend the Michael Hudson interview as a massive critique of the  
courtier advocacies of neo-classical/imperial economics. ...and I stray.

in open-ness

Tadit

On Sat, 01 Oct 2011 01:57:08 -0400, Michel Bauwens  
<michel at p2pfoundation.net> wrote:

> hi tadit, how are mmt and functional finance related to each other, see
> http://p2pfoundation.net/Functional_Finance