James Montier: Why Does Everyone Hate MMT?

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James Montier recently released a great paper titled – Why Does Everyone Hate MMT?, Groupthink in Economics. In the paper he argues that MMT is misunderstood by the ‘great and the good’ such as Rogoff, Krugman, and Summers, saying:

Q4 hedge fund letters, conference, scoops etc

James Montier

Modern Monetary Theory (MMT) seems to provoke a visceral reaction amongst the ‘great and the good’ such as Rogoff, Krugman, and Summers. However, when reading their criticism I am often left with the impression that they haven’t actually bothered reading anything on the subject of their critique.

Rather, they seem to prefer to knock down straw men based on massively caricatured paraphrasing, and by using name-calling and scary (but empty) stories to make their case. These are not the actions of people interested in open and honest debate, but are more reminiscent of the actions of ‘mind guards’ in defense of groupthink. In my experience, MMT provides a much more accurate and insightful framework for understanding the economy than the precepts of neoclassical economics.

Montier concludes the paper with his nine characteristics of the Groupthink mentality, saying:

Sadly, the behaviour of the great and the good is far from exemplary in terms of economic debate. Terms like mess, foolish, fringe, nonsense, and voodoo alongside fear-mongering mentions of hyperinflations may make for an exciting story but they do little to advance the debate. In fact, the use of these words and the generally dismissive (but thoroughly unsubstantiated) nature of these articles appear to be typical of the output of those suffering from groupthink.

The term ‘groupthink’ was coined by Irving Janis in 1972. In his original work, Janis cited the Vietnam War and the Bay of Pigs invasion as prime examples of the groupthink mentality. However, modern examples are all too prevalent. Groupthink is often characterised by:

  1. A tendency to examine too few alternatives;
  2. A lack of critical assessment of each other’s ideas;
  3. A high degree of selectivity in information gathering;
  4. A lack of contingency planning;
  5. Poor decisions are often rationalised;
  6. The group has an illusion of invulnerability and shared morality;
  7. True feelings and beliefs are suppressed;
  8. An illusion of unanimity is maintained;
  9. Mind guards (essentially information sentinels) may be appointed to protect the group from negative information.

The failure in some cases to even bother to read – let alone understand – the elements of MMT coupled with name-calling suggests that the great and the good are acting more like mind guards (defending a broken orthodoxy) rather than academics evaluating an idea on its merits. A truly sad state of affairs.

You can read the entire paper here – James Montier, Why Does Everyone Hate MMT?

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Tobias Carlisle is the founder of The Acquirer’s Multiple®. He is also the founder of Acquirers Funds®. The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates.