[Steve_American]

Without even mentioning MMT, this is an excellent video that explains an example of how and why mainstream economic theory gets everything wrong.

The channel "Money & Macro" explaines why the channel "Economics Explained" is just wrong when it predicted hyperinflation in the US some months or a year ago.

Among other things he explains the not so obvious assumptions hidden in the money supply theory of high inflation. For example, in the pandemic many people saved money because they could not spend it on services like they had been. This reduced the "velocity of money" which the theory usually assumes is constant. Also, much of the covid spending went directly into the bank accounts of corps which didn't have anything to spend it on, so they saved it. Which again, reducd the velocity of money.

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[Potemkin]

Without even mentioning MMT, this is an excellent video that explains an example of how and why mainstream economic theory gets everything wrong.

The channel "Money & Macro" explaines why the channel "Economics Explained" is just wrong when it predicted hyperinflation in the US some months or a year ago.

Among other things he explains the not so obvious assumptions hidden in the money supply theory of high inflation. For example, in the pandemic many people saved money because they could not spend it on services like they had been. This reduced the "velocity of money" which the theory usually assumes is constant. Also, much of the covid spending went directly into the bank accounts of corps which didn't have anything to spend it on, so they saved it. Which again, reducd the velocity of money.

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Like any scientific (or even pseudo-scientific) theory, economics is based on a set of simplifying assumptions. There is nothing wrong with that, and indeed it is absolutely necessary to make any progress at all. But whoever uses that theory must always be conscious of what those simplifying assumptions are, and when they are likely to be valid and when they are likely to be invalid. Problems can arise when the person plugging the numbers into the theory isn’t aware of its simplifying assumptions or (even worse) isn’t even aware that there are any simplifying assumptions. They regard the theory as divine truth revealed to Moses on Mount Sinai, which must be true under all circumstances. This is when the theory’s predictions depart from reality, sometimes with absurd or even dangerous results. But this doesn’t prove that the theory is wrong; it just means that the person using it doesn’t understand it and doesn’t know how to use it properly.

[wat0n]

It's well known that the velocity of money isn't constant (in fact, it's very volatile because demand for money is volatile and the Fed learned this quite quickly when it tried to apply a fully monetarist approach) which is why monetary policy is primarily done through fixing the interest rate.

Even Khan Academy has a video with a quick explanation, none of which has much (if anything) to do with MMT (and it's quite mainstream):

https://www.khanacademy.org/economics-f ... ney-supply

[Potemkin]

It's well known that the velocity of money isn't constant (in fact, it's very volatile because demand for money is volatile and the Fed learned this quite quickly when it tried to apply a fully monetarist approach) which is why monetary policy is primarily done through fixing the interest rate.

Even Khan Academy has a video with a quick explanation, none of which has much (if anything) to do with MMT (and it's quite mainstream):

https://www.khanacademy.org/economics-f ... ney-supply

Indeed. As I said, it doesn’t prove that mainstream theory is wrong; it just proves that a lot of economists (especially amateur ones) don’t know how to science properly. They just take the theory as a divinely inspired truth which exactly corresponds with reality, throw in the facts and figures like sausage-meat, crank the handle, and predictions come out the other end like sausages. That’s not how to science. Lol.

[Steve_American]

Like any scientific (or even pseudo-scientific) theory, economics is based on a set of simplifying assumptions. There is nothing wrong with that, and indeed it is absolutely necessary to make any progress at all. But whoever uses that theory must always be conscious of what those simplifying assumptions are, and when they are likely to be valid and when they are likely to be invalid. Problems can arise when the person plugging the numbers into the theory isn’t aware of its simplifying assumptions or (even worse) isn’t even aware that there are any simplifying assumptions. They regard the theory as divine truth revealed to Moses on Mount Sinai, which must be true under all circumstances. This is when the theory’s predictions depart from reality, sometimes with absurd or even dangerous results. But this doesn’t prove that the theory is wrong; it just means that the person using it doesn’t understand it and doesn’t know how to use it properly.

I disagree. The hard sciences are not based on simplifying assumptions. They are based on a few necessary assumptions, like what we see and what we measure with our tools is really there. Simplifying assumptions that are false are very rarely used. If you disagree, please, list a few examples.

Also, hard sciences are all about looking at reality to test predictions. MS Econ. pretty much ignores reality and handwaves away examples where its predictions were wrong. A hard science never, ever handwaves away a failed prediction.

In the money supply theory of inflations, the assumptions being made in the video are about the numerical values of the terms in the equation, like the velocity of money. They are not simplifying assumptions. Because that value is very hard to calculate the equation is not of much use. It is more like a thought experiment, which is meant to illustrate the point, than an equation meant to calculate a prediction of inflation to 2 or 3 digits.

In the last few days, I have been shown a YouTube video that predicts hyperinflation and one that predicts deflation for the US economy in the next few years. What kind of theory can predict opposite outcomes like that? IMHO, a false theory comes to mind.
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[wat0n]

Why do you speak about mainstream economics when this very thread of yours shows you're ignorant about it?

[Steve_American]

Why do you speak about mainstream economics when this very thread of yours shows you're ignorant about it?

I base my opinions of MS Econ. on the opinions of the founders of MMT and other MMTers.

Yes, I know I'm no expert on econ. But, my sources are experts.
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