NEARLY 30 YEARS AGO, a New York fund manager named Warren Mosler noticed a discrepancy between what he saw day-to-day in his interactions with the Federal Reserve and the way almost all academic economists write about money. The way they write, you would think currency-issuing governments need to tax before they can spend — Mosler noticed it is the other way around.
Getting this wrong is not trivial. It biases policy narratives. It misleads politicians into thinking that there is something inherently good or sustainable about budget surpluses. It misleads them into worrying about finding the money to meet their commitments when that is the wrong question to ask.
Mosler wrote a book called Soft Currency Economics and reached out to the leading lights of the profession, eventually discovering a group who were interested enough to discuss his ideas. The group called themselves post-Keynesians, although, in fact, they are the modern-day economists who remain closest to the works of the great 20th-century economist John Maynard-Keynes.