by

Robert Cauneau – MMT France

January 28th 2025

1. Introduction

In economics, as in many other disciplines, it seems that it is better to be wrong collectively than right alone. This maxim perfectly illustrates the visceral resistance that so many economists oppose to Modern Monetary Theory (MMT)[1]. However, this approach, by rethinking the very foundations of our monetary system[2], offers valuable keys to understanding and resolving contemporary challenges. Why, then, is a theory that corresponds so well to the reality of sovereign-currency states[3] so systematically rejected by the academic and political establishment?

I have asked myself this question many times since I discovered MMT, six years ago now. After spending my entire career in public finance, I thought I had a solid understanding of public finance, until this theory came along to shake up my certainties. In particular, MMT revealed to me a truth that most economists seem to ignore or deny: the fundamental distinction between a fixed exchange rate regime and a floating exchange rate regime. Indeed, this monetary approach is based on the fact that, under a floating exchange rate regime, a country that controls its currency has never defaulted on that currency, except voluntarily. And this fact has never been empirically denied.

It was in 1971 that President Nixon ended the gold standard[4], profoundly transforming the international monetary system. Yet, this major transition seems almost invisible in mainstream economic analyses[5]. Few specify in which monetary framework they reason, and many, by default, still think as if we were under a fixed exchange rate regime. As developed in 2 previous articles[6], this bias, anchored in economic teaching and practices, considerably limits their vision of the possibilities offered by modern public policies.

This situation raises a fundamental question: why do economists so often ignore the implications of the current monetary system? And more broadly, how is economic knowledge formed, and why does it seem so impervious to new ideas, such as those brought by MMT? This article aims to explore these questions, by questioning the academic resistance, intellectual inertia and dogmas that continue to fuel an obsolete vision of the economy.

2. Fear of intellectual isolation: why it is so difficult to break ranks

In the economic field, new ideas, even when they are well-founded, encounter social and institutional resistance. MMT is a perfect example: by challenging the foundations of traditional paradigms, it exposes economists to a risk of intellectual isolation that inevitably slows down their adherence to its principles.

Academic pressure: conformism or marginalization

The academic world is structured around incentives that promote conformism: publications in prestigious journals, access to funding, promotions, or peer recognition. These incentives are based on dominant theoretical frameworks, where orthodox postulates (such as the need to reduce public debt or finance spending through taxes) are rarely questioned.

To deviate from these frameworks, as MMT does, is to risk losing professional legitimacy. A critical economist might struggle to publish his work, attract funding, or even be taken seriously in circles of influence. Conformity thus becomes a pragmatic choice: following established dogmas guarantees a smooth path.

Cognitive dissonance: hard to admit your mistakes

For many economists, adhering to MMT would mean acknowledging that decades of research or teaching were based on erroneous assumptions. Accepting that public deficits are not inherently dangerous, or that sovereign states do not have to “finance” their spending like a household or a business, would be a radical challenge to their training and beliefs.

This phenomenon, known as cognitive dissonance (the psychological discomfort of holding two contradictory ideas), makes paradigm shift psychologically costly. Why acknowledge today what we could have understood yesterday, at the risk of exposing our past mistakes? Many therefore prefer to reject MMT, not for its theoretical weaknesses, but because it threatens their own intellectual construction.

The weight of consensus: a reassuring refuge

Economics is also a social domain, where peer recognition plays a key role. Defending a minority idea, such as that public deficits are « natural » in a floating exchange rate regime, exposes one to a form of marginalization. Economists who dare to challenge the dominant dogmas risk being perceived as « heterodox », or even as activists, thus losing their credibility with the general public and decision-makers. In this context, group dynamics become a powerful force: it is more comfortable to be collectively wrong than to be right alone.

A brake on intellectual progress

These mechanisms, academic pressure, cognitive dissonance, and the weight of consensus, contribute to maintaining traditional paradigms, to the detriment of truly innovative economic thinking. However, it is often by challenging dogmas that real progress is made. MMT illustrates this tension between the quest for truth and the fear of intellectual isolation.

Being alone against a majority does not mean being wrong. But in a world where consensus prevails, agreeing to go against the grain requires rare audacity. Perhaps this is the real lesson of MMT: daring to question what seems acquired, at the cost of intellectual comfort.

3. Lessons from History: When Progress Meets Resistance

History is replete with examples where revolutionary ideas have faced massive rejection before gaining acceptance.

In the 17th century, Galileo claimed that the Earth revolved around the Sun, defying the dogma of the time. This idea, although supported by scientific evidence, challenged a cosmic order supported by the Church. More than facts, it was an ideological upheaval that was rejected. In the same way, MMT shakes the foundations of an economic consensus based in particular on the fear of public deficits and debt.

In the 1930s, John Maynard Keynes proposed a radically different approach to managing economic crises: state intervention to support demand. At the time, this idea was seen as heretical. But World War II and its massive deficits proved its validity. Even today, Keynes is an essential reference, showing that a rejected idea can become dominant.

MMT, like Galileo or Keynes in their time, challenges powerful beliefs: in particular the primacy of financial markets, the problematic nature of an excessively high public deficit and debt. These dogmas are not simply economic. They are deeply cultural. And, as always, it will take time, probably a crisis, for these ideas to be fully recognized.

4. The resistance of paradigms: a philosophical perspective

To understand the indifference and persistent opposition to MMT, the work of Thomas Kuhn, in particular The Structure of Scientific Revolutions, offers valuable insight. Kuhn shows that the dominant paradigms, far from being purely rational, function as frameworks that structure thought, but also institutions, careers and powers.

Paradigms offer a reassuring and shared analytical framework. In mainstream economics, concepts like fiscal responsibility, fear of government deficits and debt, and faith in markets are untouchable pillars. Challenging these ideas, as MMT does, involves more than just intellectual disagreement: it challenges decades of teaching, research, and institutionalized beliefs.

Kuhn explains that paradigms don’t fall simply because evidence contradicts them. They change when new frameworks are imposed, often after a major crisis. MMT proposes that, under a floating exchange rate regime, government spending is limited only by the availability of real resources, not by financial constraints. It challenges conventional wisdom about the nature of government deficits and debt. These ideas are too innovative to be easily accepted, despite the strength of their arguments

5. Conclusion: For intellectual audacity in the service of the general interest

The history of ideas shows that great intellectual advances often arise from a courageous questioning of established paradigms. However, in the economic field, many prefer to cling to outdated theoretical frameworks, unaware that they are thus depriving States of an essential understanding of their full potential.

By rejecting MMT, mainstream economists are missing a historic opportunity: that of showing States how to fully exploit the space of their public policies.

MMT does not only propose a new reading of economic mechanisms, it offers a toolbox to put an end to sterile debates on the « acceptable » level of budget deficits, debates that too often lead to unjustified austerity policies, and to build policies that serve the greatest number. Rethinking public debt, understanding the deficit as an economic lever and thus redefining the role of the State are all avenues for responding to the challenges of today and tomorrow.

It is therefore urgent to abandon the idea that “it is better to be wrong collectively than right alone”. Being right, even alone, means giving States the means to act effectively for the common good. This issue goes beyond intellectual quarrels: it is about transforming lives, responding to crises and acting much better for the well-being of all. An effective approach, particularly with the objective of full employment, such as that supported by MMT, should not be marginalized. It should be explored, debated and, above all, finally implemented.

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Notes

1. The reader will find many articles concerning MMT on this blog : https://mmt-france.org/

2. The reader will find in this article a presentation of MMT, in particular how it suggests obtaining both full employment and price stability : https://mmt-france.org/2021/06/08/mmt-principaux-elements/

3. Warren Mosler’s description of the monetary system in his founding book on MMT was endorsed by Fed executives. The reader will find the translation of this book from this 1st article : https://mmt-france.org/2021/10/17/soft-currency-economics-preface-il-y-a-vingt-ans-une-epiphanie-italienne/

4. Read this article : https://mmt-france.org/2021/11/01/soft-currency-economics-3-la-monnaie-fiat-le-mythe-du-multiplicateur-monetaire/

5. Read in particular this article : https://mmt-france.org/2020/03/07/etalon-or-et-taux-de-change-fixes-des-mythes-encore-dactualite/

6. These are https://mmt-france.org/2020/05/31/finances-publiques-et-espace-politique-les-2-alternatives/ and https://mmt-france.org/2020/06/13/implications-du-regime-de-taux-de-change-flottant-sur-lespace-de-politique-economique/

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Illustration : https://www.grainededen.com/ce-nest-pas-parce-quils-sont-nombreux-a-avoir-tort/