Comparing Post-Keynesianism and Modern Monetary Theory: The Importance of Ontology and Sociology

Phil Armstrong and Neil Wilson

In this paper we utilise Marc Lavoie’s 2024 critique of Modern Monetary Theory (MMT) to contrast the ontological foundations, methodologies, and policy implications of MMT with those of Post-Keynesian (PK) economics. We argue that disagreements between these schools reflect fundamental ontological divergences rather than technical nuances.

Post-Keynesian economics models the economy as a private-sector-led system where the state intervenes reactively, while MMT positions the state as the constitutive architect of monetary systems, designing market operations through taxation, currency issuance, and fiscal policy. Key areas examined include treasury-central bank operations, external sector dynamics, unemployment, and interest rate policy. The paper also addresses MMT’s intellectual origins in financial practice rather than heterodox theory and analyses sociological factors shaping its contentious reception within economics.

We conclude that constructive MMT-PK dialogue requires acknowledging these ontological roots to reconcile divergent policy prescriptions.

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