In the previous post we looked at the peculiar theoretical orientations of MMT to understand their boastful confidence in the efficacy of government controls over the economy. While this may present certain near-term advantages in the most apparent and nominal interpretations of data, it is exactly in the unseen and unaccounted for costs of their policies that their weaknesses are to be found.

At its most basic level, a cost expresses itself in the loss of something–the loss of an opportunity, of chances not taken, of resources not used, or used differently from what would have been freely chosen by the owners of a resource. When you lose ownership, or what amounts to the same thing, when you lose effective control over your own earnings and property, you have incurred a cost. The highest cost is when you are deprived of your own physical self, either through slavery or the deprivation of life. 

Given the enormous levels of national debt, we are now effectively mortgaged to our government. The government remains ours only in the sense that we may have voted for its members (though certainly not all of them). But let there be no mistake. It will be controlled not by us individually but by the articulate and well-placed leaders of our day, whosoever they may be, from whatever party they may come. And they will exact real costs through such programs of finance and regulation. Without special care to constrain them, those costs may well prove greater than any might wish to pay. 

In this, MMT will encourage just the opposite counsel from that of restraint, encouraging administrative overreach and experiments in social reorganization because of its peculiar orientation to the seen and the intentional. Without a full accounting of costs, including the unseen and the largely subjective, MMT prescriptions will have many more accelerators than breaks.

MMT will count jobs as they exist nominally, but not the unseen ones never created. MMT will count factories built, but not industries never started. Its theorists will gauge the rate of inflation measured in total expenditures of existing economic and public activity but will never consider the costs of plans thwarted and freedoms curtailed. MMT theorists won’t do any accounting of the things not seen because it is only the legally extant and physically tangible that they value as the expression and form of a new national social order. 

And here is where the Austrians could very well either meet the challenge or fall down dramatically in the current context. 

Rather than Mises and Rothbard’s overly predictable predictions of crisis, I would suggest taking a page from the playbook of Ludwig Lachmann. Lachmann understood that real thorough-going subjectivism applied to all aspects of life, and worried precisely about what his colleague Karl Mittermaier once called the “mechanomorphism” of an overly deterministic rationality in economics. 

Lachmann’s debate with Mises on the nature of Austrian business cycle theory was directly on this point. The human mind is much too variable to be constrained to just one pattern of outcome. Even business cycles can be experienced differently from one period to the next. Tradeoffs are in the nature of action, but interpretation and perception of their effects can change. People learn and adjust. They can also forget or think and even value differently.

To better grasp these subjective processes, Lachmann turned to Max Weber to understand that institutions are not merely external conditions, but internalized rules of behavior held in the minds of persons. Such rules form a part of the content of specific purposes, the effects of which cannot simply be grasped from the mere axiom of purposefulness itself.  As such, human beings can and will act differently depending on how those rules are situated amidst all the other ends and means that comprise the belief structures of individuals.

It follows then that the visual presentation of the current crisis and its aftereffects could well turn out to look very much like MMT says it does, and if the MMT theorists have their way, the actual costs will never be seen, or at least seen only by a few. Owing the sum total of our properties to ourselves, they will tell us, we really owe nothing. Managed by our own government, they will assure us, we have actually no reason to complain. In fact, WE, so they will say, still “own” everything.

That is, of course, what socialists have always said and wanted to believe. It will have merely taken the form of a massive mortgage on the homeland to do it in America. That would in fact be the most devastating cost, but would anyone recognize it as such?

To know a cost, a people has to perceive it. That is the full implication of the meaning of subjectivism. If we are unsuccessful in articulating the very real economic consequences that will follow from such a massive loss of liberty, we will be politically and intellectually eviscerated. 

Under sufficient conditions of crisis, a population could well be nudged to internalize most any narrative initially. Facts and figures will be collected, for sure, but there is no necessity that such measurements will be done in any particular way. Standards of data collection can change to suit. 

And the perception of unemployment, need not be a problem at all as far as MMT theorists are concerned, if the form and kinds of employment can be managed and directed through government command and control. Such implements in the tool kits of these theorists will tempt our ruling elites who hunger after easy answers—answers that can be immediately understood and executed. MMT is calling out to them. It is pulling out all the stops to draw them in by the lure of endless debt financing. 

Austrian economists, on the other hand, are especially well placed to call attention to the very real costs involved in such MMT policy prescriptions if they become more attuned to the variability and complexity that true subjectivism makes plain. But that will require them to surrender their claims to apodictic certainty and to  stand down from overly bold predictions of the same old patterns of booms and busts. 

And they best do so quickly.

 

Hans Eicholz is a historian and Liberty Fund Senior Fellow. He is the author of Harmonizing Sentiments: The Declaration of Independence and the Jeffersonian Idea of Self-Government (2001), and more recently a contributor to The Constitutionalism of American States (2008).