Ep139: Economics "math": from MMT to mainstream, with Sam Levey (guest host: Jonathan Wilson) [SPECIAL VIDEO EPISODE]

Welcome to episode 139 of Activist #MMT, which is part two of a special video episode series. I'm your guest host, Jonathan Wilson, and today I'll be interviewing Sam Levey. Sam is currently studying to get his PhD in economics at the University of Missouri at Kansas City. In this episode, we'll be discussing in detail Sam's 2022 paper Optimization in a Neo-chartalist Model of the Determination of the Price Level. The paper contains some rather advanced math, but I'll be asking Sam questions from the perspective of a non-math expert for the benefit of the audience. (Here's a link to part one in this special video series, on the "math" in economics, with Jeff and Sam. A list of the audio chapters in this episode can be found at the bottom of this post.) In the first section, we introduce the purpose of the paper and explain some basic assumptions in mainstream economic models and the advantages and disadvantages of using the mainstream approach. In the second section, we start looking at the text of Sam's paper. It contains six variants of the model, and we spend this section of the video looking at the basic, one-period model. In the third section, we go on to the multiple-period model. About fourteen minutes into discussing the multiple period model, we shift from looking at the paper to viewing an interactive modeling software that allows Sam to show in real time how the model reacts to changing various inputs. In the final section, we conclude by discussing more of Sam's concerns with the underlying assumptions behind mainstream economic models, including: the economic definition of rational behavior and the trouble applying it to the real world; whether we need formal models to validate the existence of behavior that can be directly observed, such as precautionary saving; whether markets clear and what models with non-clearing markets look like; and whether the Lucas Critique, which argued that models need optimization, actually improved economic scholarship. Let's get started. Audio chapters 3:43 - Section 1 - The purpose of Sam's paper 26:22 - Section 2 - The one period model 1:14:49 - Modern Money Lab sponsors Kerberos/KRTD media (1 minute, 20 seconds) 1:16:22 - Section 2 continued 1:53:33 - Section 3 - The multiple period models 2:19:43 - Section 4 - Interactive representations of the model 2:27:44 - Section 5 - Discussing the implications of the model 2:49:40 - Final thoughts and goodbyes