Modern Monetary Theory Will Only Be Respectable When It’s Depressing

There is no canonical explanation of what Modern Monetary Theory is. There are explainers, and there’s an understanding, but there’s not one official text.

MMT is still catching on, and I’m sure someone will get around to writing the official MMT book one of these days. But it hasn’t taken the world by storm, to its adherents’ surprise. This fits a normal pattern. Ignoring whether or not a theory is true (it’s economics; you’ll never know), there are three things that make a theory popular:

1. It makes anyone who holds it sound smart and contrarian.
2. If people believed it, the theorists would be more powerful and influential.
3. It’s depressing.

Take the efficient market hypothesis: it sounded contrarian to say that throwing darts a list of stocks would outperform the average mutual fund after fees, but it was true. It made academics more powerful relative to money managers by making money managers less powerful overall. And it’s depressing to think that everyone who ever got profiled by Fortune for their fund performance was basically famous for being the one person in a thousand to flip a coin ten times in a row and get heads every time.

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