The year 2022 has brought a suffocating energy price shock, inflation peaking at over 11 per cent and strikes at levels not seen since Margaret Thatcher was prime minister. Such an environment would seem ripe for radical new economic thinking. Yet, if anything, it’s the more heterodox theories of left and right that suffered most from this year’s events.

On the left, inflation has killed off Modern Monetary Theory (MMT), for example. Before the pandemic, many leftwingers noted that a government borrowing in its own currency could always repay its debts through printing money. This truism led more and more of them to conclude that governments could deficit finance just about whatever NHS or spending packages they wanted, without hitting any meaningful constraint.

The limit to borrowing, MMTers told us, was not financial distress, but running out of workers and capacity to absorb the extra money, which would then lead to inflation. We were way off that point, they insisted. Governments could simply raise taxes to choke off inflation as it occurred. There was little to fear from deficits and printing money.

Well, the pandemic led to money and borrowing explosions, as economic capacity suffered from Covid-19 and then the Ukraine war. Inflation soared. Yet MMTers’ reactions were all over the place, suggesting it was never a serious economic programme but a political project for bigger government.

None of them warned of the inflationary consequences from running expansive macroeconomic policy even as the economy’s productive capacity was impaired. When inflation came, they blamed external factors, despite aggregate demand running well ahead of its pre-Covid trend here and in the US, showing that macroeconomic policy was far too loose even if you discount the supply shocks.

As inflation rose, they abandoned tax rises as the solution too. One of Britain’s biggest MMT advocates, the campaigner Richard Murphy, has argued for tax cuts and more spending today, funded by the Bank of England creating money. Other global high priests of MMT have argued for price, rent, ownership and competition controls to try to compel lower prices, or else huge new investments in childcare and supply chains to raise production.

Perhaps unsurprisingly given this lack of rigour, MMT’s moment has gone. Global searches for “modern monetary theory” on Google have collapsed since its 2019 peak and left-wing parties preach fiscal responsibility again. Ironically, the final nail in its coffin here came with Kwasi Kwarteng’s mini-budget, which showed that too much borrowing can indeed cause financial distress for a country without an international reserve currency.

That fateful September day squashed wishful thinking on the right too. Liz Truss’s economic thinking was more conventional in seeing tighter money as the medicine for inflation. The rhetoric behind her fiscal tax-cutting agenda, though, was interpreted to disavow a constraint that chancellors had paid lip service to for decades: that the present value of current and future spending should not exceed the present value of currently available and future revenues.

Was her additional planned borrowing for tax cuts and the energy price guarantee just the straw that broke the camel’s back? Other governments have been imprudent, the long-term debt outlook given welfare promises to an ageing population remains dire, and many factors exacerbated the market turmoil that followed her chancellor’s statement, not least the way pension funds were affected by falling gilt prices.

What is undoubtedly true, however, is that right-wing claims that tax cuts might magically pay for themselves were (correctly) deemed incredible by financial markets. There’s no easy “tax cuts” lever to pull to boost Britain’s growth rate sustainably, much as a smaller state might be desirable longer-term.

This is the harsh macroeconomic lesson of 2022. Both left and right thought they’d found theories that might liberate them from the constraints of budgeting in pursuing their objectives. They were wrong.