* This post was written in 2011 before Mr. Roche founded Monetary Realism, which was formed due to several disagreements Mr. Roche and many other former MMT proponents had with the school of thought.  For more info on the difference in views please see here.  For more on MR’s views please see here.

One of the terms we keep seeing regarding the MMT Job Guarantee (JG) is this concept of it serving as a “price anchor”.  The idea that is always attached to the JG is that it will provide full employment and price stability.   This is right in theory and entirely unproven in reality.  Yes, the government could really hire everyone they wanted to and they can really set the price of just about anything.  That’s the power of being the supplier of currency.  But with regards to the price stability issue, the term “price anchor” is misleading as it gives the impression that the JG can serve as a highly effective way to contain inflation over the course of the business cycle (some MMTers have even gone so far as to make wild claims that the JG could eliminate inflation altogether!).  More likely, the JG would serve as a good deflation fighter and only a “soft ceiling” (per Warren) or marginally better inflation fighter than what we have today (sounds good in theory, right!?).

Of course, modern governments have become particularly adept at fighting off deflation so the deflation fighting effects of the JG shouldn’t be heralded too much.  After all, we’ve had one case of deflation in the last 50 years and it was more than short-lived.

It’s not the downside we’ve come to worry about so much, but the upside (today is a rather unusual circumstance given the 100 year balance sheet recession storm).  Modern governments have nearly perfected the art of “printing money” in order to offset negative shocks to the economy (by “perfected” I mean, avoiding deflation and nothing more).  Unfortunately, what they’re not so good at is stopping the ensuing boom or coming close to having policy measures in place that halt or alleviate it.  While the JG serves as a good deflation fighting policy, its effectiveness in stopping high inflation will still rely on the boys switching the policy levers at Fed, Treasury and Congress….In this regard, I think the JG is severely lacking and requires something greater involving counter-cyclical policy (not men with perfectly trimmed beards making predictions!).

I don’t want to get off track, but in my opinion, the entire JG discussion misses the point (so I am not even really against the policy as much as I just think it’s aiming at the wrong bulls eye).  Modern day economists seek the holy grail of macroeconomics which has come to be price stability and full employment.  These two features of modern macro are held up on pedestals as if giving a person a job and a steady wage is all one needs to live a happy and prosperous life.  I say these goals entirely miss the point and steal the potential lives that future generations can live.  What we should seek is the way in which we maximize our living standards.  In doing so we reach the true holy grail of macroeconomics – the thing that every human seeks – the fountain of youth, hence, more TIME.  After all, it is only through increased productivity, innovation, creativity and ultimately higher living standards that we are able to attain this (see here for more).

I keep saying that the idea of full employment and price stability miss what our real goal as a society should be – full productivity (leading to full employment) focused on maximizing living standards over a multi-generational period.  So I say we should use our proven MMT understanding to implement policy approaches that get the economy operating at full productivity rather than trying to fill in an economist’s model by putting a “100%” in the full employment box (which may or may not mean greater living standards in the future).  The counter-argument in MMT is that you need the JG because it will help contain inflation over the cycle by serving as a “price anchor”.  Of course, I am divorcing price stability as a secondary goal (it’s not “central” to my thinking though that doesn’t mean it’s unimportant) so I don’t know if that makes me non-MMT or not (perhaps it does)….Nevertheless, I think the inflation fighting argument is vastly overstated because the JG doesn’t serve as a price anchor at all.  It serves as a price buoy.   

Robert LaJeunesse wrote an interesting book titled “Work time regulation as a sustainable full employment strategy” in which he explained the misguided thinking of the JG as a price anchoring buffer stock:

“During robust economic times, buffer stocks offer little prospect of abating wage pressures in the primary sector.  Since buffer stocks target a minimum price of labor, an earnings floor if you will, and do not create a wage ceiling they will have little impact on the primary sector wage demands.  Capitalists will be able to maintain a significant degree of labor market segmentation, allowing them to avoid hiring from outside the primary sector.  As such they will avoid payroll expansion and attempt to squeeze more from existing workers in the form of longer hours and greater work intensification.  One only has to look at the history of commodity prices (such as oil) to realize that buffer stocks do not place a ceiling on prices.  Buffer stocks may mitigate priceswings, but they tend to prop prices up rather than restrain them, particularly when the commodity is in short supply.  Buffer stocks, therefore, do not serve as a price anchor but rather as a price buoy.  That is, they represent an earnings floor rather than an earnings ceiling.  Public and private sector employees alike will still face pressure to work long hours under a job guarantee – either to maintain insatiable consumption desires or to retain jobs that offer long hours on a take-it-or-leave-it basis.  Such behavior would most certainly become inflationary as Mitchell and Wray (2005) concede when they write, ‘if the government decides not to deflate demand, the ELR pool still allows the economy to operate with higher aggregate demand and lower inflation pressures, although inflation can still result.'”

The commodity buffer stock comparison has weak points, but one recent example of this sort of buffer stock idea surrounded the release of reserves from the Strategic Petroleum Reserve in the middle of last year.  I spoke to several analysts and traders who, at the time, said the move was a desperate attempt to pull prices down and stimulate the economy.  President Obama pulled hard on that buoy and released a small amount of this buffer stock into the market, but he couldn’t pull the prices down for long.  Capitalists got back to being capitalists and market dynamics took control once again as prices floated higher.   The labor market works a bit differently, but contains some of the same problems that specific commodity price targeting would.

The problem in the labor market is one of money neutrality (a concept that MMTers very publicly reject).  In order for the buffer stock to control the market it essentially has to be THE market.   But labor is not like any simple commodity.  It is a highly specific and specialized commodity.  We know this from the remarkable wage discrepancies that exist in the world today. A job at Goldman Sachs is a commodity unlike anything seen in the rest of the labor market.  So setting the price of low price unskilled labor doesn’t have a sufficiently uniform effect across the entire labor market to keep wages low when the economy is booming and Goldman Sachs is poaching from Bank of America, Boeing is poaching from Caterpillar, and Microsoft is poaching from Cisco.

To make this point clearer, arguing that the JG is a strong upside inflation deterrent is a lot like setting the price for wool and then claiming that you’ve stopped commodities from rising above a certain point.  Clearly, that’s not true.  You’ve set the price of wool relative to other commodities, but for instance, you haven’t stopped oil market dynamics from sending oil prices through the roof.  Now, if the government set all prices in the labor market then we’d be having a different conversation, but the JG would cover roughly 3-5% of the unskilled laborers at a point approaching full capacity.  Because this buffer stock will have been dwindled down to largely low-skilled workers whose convertibility into private sector jobs is likely negligible, it will have an equally negligible impact on the broader wage scale.

So the upside benefits will be relatively muted regarding price stability during an economic boom (when we’re nearing traditional “full employment”).  Additionally, the job guarantee pool at 3-5% of all unemployed will be so small and non-convertible into widespread private sector jobs that it won’t come close to impacting prices and wages (when it’s most needed) to the extent that private sector jobs will (which will see substantial wage pressure during a boom period as skilled laborers compete for the other 95-97% of jobs).   As Mitchell and Wray say, this would most certainly add to aggregate demand during the boom times which would lead to higher inflation.  Ultimately, we will still rely on men with perfectly groomed beards pulling levers regardless of whether we have a buffer stock of unemployed or employed so the fact that the employed buffer stock acts as a price buoy and not a price anchor is quite substantial.  Given the fact that modern governments have become particularly adept at fighting deflation, I think the price stability case for the JG is vastly overstated (not to mention that the policy, in my opinion, is off target).

Importantly, none of this even touches on the various other risks involved in such a program.  I have contended that there is potential for such a large government program to become overrun by other problems (corruption, praxeological issues, lobbyist/political controls, regulations, mismanagement, lack of productive work, various forms of moral hazard, etc) creating sizable risks.  The fact that its impact as a superior price stabilizer is muted is further cause for concern.  In addition, the goals of targeting price stability and full employment don’t necessarily maximize our true target – full productivity.  And perhaps most importantly, the idea that the JG is embedded in MMT as a “central” piece of the theory distracts from the core proven concepts and gives the impression that you cannot understand modern money without understanding a massive government spending program that is unproven in the real-world (on any scale as would be introduced in the USA) and entirely theoretical.

* See my list of broad JG concerns here.  

** This article was written using a different definition of “full employment” than MMT implies.  In the MMT paradigm full employment is zero involuntary unemployment whereas I was working from a more traditional definition of optimal use of resources.  Sorry for the confusion.  


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • SS

    Job guarantee? Who cares about the job guarantee. You’re debating a policy that won’t be implemented in the USA in our lifetimes. Hell, we can’t even get unemployment benefits extended and you’re here talking about job guarantees? What planet do you all live on?

  • http://www.pragcap.com Cullen Roche

    I dream about Heidi Klum all the time also. Is that so wrong?

  • FDO15

    This is the point I was trying to make last week. The JG doesn’t do anything on the downside that current policy doesn’t already do. We know how to beat deflation. That’s easy. It’s the inflation that’s a problem and the JG is not enough. So I don’t see how it’s so central to MMT as everyone keeps implying it is. It’s one option and given the multitude of other problems that will go down when it starts I think that TC and Cullen have a legit argument to steer the ship in another direction. Especially if it’s more likely to get us a meeting in Washington.

  • Hugo Heden

    Good article. Disagree here and there, but whatever. It’s been my understanding too (sort of like you suggest) that the price floor effect is stronger than the control of upwards movements.

  • Phil

    A major argument for the JG or ELR is that it is a more ‘fluid’ buffer, meaning that people can be shifted in and out of employment more easily as the result of macro policy decisions than is the case with an unemployed buffer (because it leads to less attrition of human capital, and people are more employment-ready). So it supposedly makes adjustments in the face of both deflation and inflation smoother.

  • http://www.uncafelitoalasonce.com/ Aitor Calero García

    Good point. It would be great that you Randall, Mitchell, etc… would participate in a debate discussing this points!

    I share the same type of concerns regading JG as you do. However, to countercyclically fight against inflation, a GOLD rule could be established by the Goverment. When JG went below 4% by LAW the goverment would not be allowed to print more money to cool down the economy. Could that work?

  • Phil

    You didn’t mention what I consider to be a major obstacle to the JG idea, namely the “one-off” inflation that it might cause (according to Mitchell). The effects of this one-off adjustment could be very large, no one seems to know.

  • Phil

    The obvious problem with the idea that time = wealth, and that higher productivity = more time, is that with every new time saving device comes the opportunity for more work to be squeezed out of the the same number of workers.

    On the whole innovation and technology haven’t led to people working less, they’ve simply led to people doing different types of work, or else doing more of the same types of work.

    Back in the 60s all the talk was about how technology would bring about an ‘age of leisure’ in which people would only have to work a couple of days a week. Ha!
    Most people work longer hours today than they did then, and even when they are off work they still find themselves having to respond to business emails, answer calls etc, thanks to the omnipresence of mobile technology. On top of this, the retirement age is being steadily pushed back, meaning that people are having to work longer in order to enjoy the same period of retirement.

    Technology is only a tool. Political movements have been just as important (if not more) in improving standards of living and working conditions over the last 100 years.

    I basically agree with the view that productivity and output are goals that logically precede the goal of full employment. However I still think that full employment should always be a goal (and that in fact full employment could actually enhance productivity and output).

    The economy doesn’t only exist to serve the interests of a minority, or even the majority. It is supposed to serve the interests of the entire population (even if some get far more out of it than others). And political representatives also have a responsibility to the entire population, not just to the special interest groups that elected them. As such, the goal should always be to generate enough employment for all those that are willing, able and seeking to work. No one should have to be denied employment simply because the economy is set up in such a way that unemployment is mathematically inevitable. This doesn’t mean to say that everyone should be offered easy or cushy jobs, only that everyone should at least have the opportunity to work for their keep and to be of some use to society.

  • Nils

    Of course there is. She’s almost 40!

  • http://www.3spoken.co.uk Neil Wilson

    ” Because this buffer stock will have been dwindled down to largely low-skilled workers whose convertibility into private sector jobs is likely negligible, it will have an equally negligible impact on the broader wage scale.”

    That’s fine then. You have millions of people in this situation. Whole cities worth of people without anything to do and no income. How much compensation are you going to pay them for the failure of your system to provide them with a decent income and something for them to do?

    Because I reckon once the full compensation is paid to the unemployed for the system failure (which, remember, the remaining unemployed can do nothing about individually), then the objections to allowing them to do something instead will melt away – since that will reduce the compensation bill.

    All the arguments here boil down to “I want these people to have less, so I can have more”.

  • rfr

    You’ve started using a new term, “buffer stock”. Did you define it somewhere? What does it mean?

  • http://www.pragcap.com Cullen Roche

    In theory. :-)

  • http://www.pragcap.com Cullen Roche

    Not I….society. You’re viewing this too narrowly.

  • http://www.pragcap.com Cullen Roche

    You did not…..

  • CybrWeez

    But technology could already lead to more leisure, and certainly even more so in the future. The problem is we don’t know how to handle it. Currently, tech takes away jobs, and in place of it, people must work at lower paying jobs, therefore working more to keep their standard of living.

    The disconnect is figuring out how society handles the fact that tech is doing more for us in general. Its not hard to imagine tech doing everything needed (like the movie Wall-E), but transitioning to such a time could be real messy. We know we produce more food than ever, medicine, in sum, leisure, yet its not spread out well at all.

  • Geoff

    I don’t think govts have perfected the art of printing money. Most govts don’t even understand that printing money is mainly a fiscal operation.

  • http://www.pragcap.com Cullen Roche

    That’s a matter of opinion though. The fact is, deflation doesnt ravage modern economies like it used to. Because we have learned how to prevent it….the JG offers nothing really unique there….

  • 1111111233333555553333

    Lets face it. The JG is a big liberal policy. Nothing more. It doesnt give us magical inflation fighting powers. It gives liberals the ability to spread the wealth.

  • JKH

    Good stuff, Cullen.

    Here’s something that’s been bothering me, quite similar to your concern about the buffer economics:

    Warren’s list of potential buffers includes gold, FX, unemployment, and JG, among others.

    Let’s compare gold with JG in an economic expansion:

    – Price pressure up on gold (other things equal)
    – Gold outflow from the CB (other things equal)
    – Monetary policy tightening (interest rates) (and perhaps fiscal policy tightening as well) to dampen aggregate demand and general inflation pressures, and in doing so resist net price and flow pressure on gold

    – JG outflow to private sector employment
    – Price pressure up on private sector labour price level as well as the general price level (initially slowed by JG supply, but only initially)
    – Price level of JG remains fixed by administrative fiat
    – Fiscal and/or monetary policy tightening dampens aggregate demand and general inflation pressures, and in doing so resists both private sector labour price level increases and flow pressures on JG, but NOT with direct effect on the price level of JG (since there was no upward pressure to begin with)


    Gold is a buffer stock whose price is fixed and managed directly with the assistance of monetary policy (interest rates). The purpose of the gold fix assumes that it is reasonably highly correlated with the general price level, and in tightening policy the central bank attempts to manage both jointly. The gold price would vary wildly otherwise.

    JG is a buffer stock whose price is fixed but requires almost no management directly by monetary policy or fiscal policy. Buffer stock flows are INDICATORS of complementary pricing pressures on private sector labour, up or down. Fiscal and/or monetary policy act directly on these more general labour and knock-on pricing pressures; they do NOT act directly on buffer stock pricing. They DO act indirectly on buffer stock flows, by virtue of the effect they have on private sector demand on or supply to the buffer.

    So the main difference is that active fiscal/monetary policy targets the gold price and gold flows directly. It doesn’t target the JG price directly, and targets JG flows indirectly by virtue of targeting the general price level, which itself can be heavily influenced by the private sector labour pricing component at least as a partial pass through.

    That seems to me like quite a difference in the mechanisms (under the bold assumption that my descriptions of them are reasonably accurate).

  • Phil

    I think the anti-inflation action of an ‘employed buffer stock’ is more or less the same as that of an ‘unemployed buffer stock’. The difference is that the former is theoretically ‘better’ than the latter for a number of other reasons. Chief among these is the claim made by Mitchell that an unemployed buffer stock policy actually leads to greater unemployment over time, whereas an employed buffer stock would lead to less (non-buffer stock) unemployment over time. So it’s supposedly more efficient and effective on all sorts of different levels.

    “No rational government, which understood how its own currency works and the role of the budget deficit, would choose the NAIRU approach. The costs from lost output and social alienation are enormous.” (Mitchell)

    The other point of the JG is that it should make it easier to avoid inflationary bottlenecks and to respond to increased demand more effectively by increasing productive capacity (this is part of the ‘more fluid buffer stock’ argument).

    However, I think you’re making valid points, and am now using words like ‘theoretically’ because you’re right that much of this is still unproven, and could possibly lead to unintended consequences.

    It would be interesting to get a response from either Mitchell, Wray or Fulwiler to your points. Perhaps you could invite them to publish a response on this blog ? More info on their real-world studies and model simulations would also be useful. I’d also be interested to see what they have to say about some of the alternative full-employment suggestions put forward by other commentators (such as beowulf).

  • Ron T

    Cullen is back, with a vengeance. Good! I criticized him before for what I perceived as ideological arguments, but here we have a ton of substance.

    The argument that the JG acts better in preventing deflation that inflation is probably correct.

    The solution is simple though: to put a damper on prices one has to create a *second* buffer stock, hiring from… above: for unemployed hedge fund managers, paying $50000/hr ;)

  • http://www.pragcap.com Cullen Roche

    Assuming the various risks I’ve previously mentioned don’t all muddy the waters….

  • FrankH

    What will stop employers from firing current workers and swapping them out with JG workers at a marginally higher wage? Say, fire all your union workers and hire JG workers. Aren’t we risking swapping workers here? There seem to be a lot of holes in the JG argument. At least unknowns.

  • FDO15

    Cullen, you’re not an MMTer. I don’t quite know what you are, but I am intrigued.

  • jt26

    What’s often not appreciated is that specialization in the developed world labor market leads to higher productivity but lower flexibility.

  • http://www.pragcap.com Cullen Roche

    And the ability to command higher wages. :-)

  • http://www.pragcap.com Cullen Roche

    You probably know this, but MMTers flatly reject the gold std as a disequilibriating buffer. Interesting thoughts. I hadn’t really pondered his thoughts there.

    Warren and I are closer on all of this than some might think. We talked for about an hour yesterday and he’s got no issues with me taking the other side of the JG….He tried his best to sway me, but the risk manager in me is screaming free lunch….

  • http://investmentpropertycolorado.com dave

    Welcome back, Cullen.

  • http://netnet.cnbc.com John Carney

    Having read everything ever written on the JG by MMTers, I consider the point that the JG would operate more smoothly than an unemployment buffer very speculative. The arguments for it are largely conclusory rather than persuasive. They tend to ignore the counter-evidence.

  • Lifted

    I get it. Minsky always had this problem with his ELR. But once MMTers combined the JG with MMT it all clicked. The problem is, they’re plugging a political agenda into a presentation of economic fact. The veil is lifted and boy is it ugly how politically motivated MMTers really are.

  • who

    I haven’t formed my opinion on the JG, but when I do, I will have read all the MMT stuff and the counterarguments, including Cullen’s.

    However, I think we should be careful in terms of who we do and don’t classify as theoreticians and ideologues and who isn’t politically motivated.

    Why is the argument supporting the JG any more ‘political’ (in the pejorative sense) than the argument arguing against the JG? I haven’t viewed any of this to be political, but an intellectual debate about what’s best to achieve FE and PS (with Cullen potentially disagreeing with those goals).

    Additionally, I think we all our own ideologies and biases, despite our beliefs that we think we have strong theoretical and empirical support. For example, we can all agree on the need for fiscal stimulus right now and believe we have strong support for this prescription; but ultimately, we can’t prove it will work and the empirical data is not clear cut (as evidenced by disagreement amongst very smart people), yet we still advocate it very strongly due to our convictions. Likewise, some MMTers feel they have very strong theoretical and empirical support for the JG, which they have studied and thought about closely for decades at a PhD level. Cullen feels differently about the JG, but his disagreement is *partially* motivated by ideological beliefs regarding human nature /the supremacy of full productivity/what is or isn’t workable ‘capitalism’/his politics/etc, despite how ‘pragmatic’ or proven or risk-adjusted Cullen thinks his methodology is.

    My point is I would hate to see a divide being created in MMT circles, between labeled “socialist crazies” and self-described rational down-to-earth thinkers. We all have our ideologies we ultimately choose, and this sort of artificial rivalry would certainly be unproductive.

  • http://www.pragcap.com Cullen Roche

    There’s no divide. Warren created MMT. Let’s not forget that. And I have talked all of this out with Warren in great deal.

    My view is a statement of fact. I am working from what IS. The JGers are working from what could be. All of those people calling me an ideologue last week were being hypocritical (no offense to them). All I did was point out that the program has big unknowns and that it’s never been implemented before. Those are statements of fact. Like saying that the USA can’t run out of money. But saying that a JG will create an optimal output scenario is a statement in theory only. That is the difference.

  • http://neweconomicperspectives.blogspot.com Stephanie Kelton

    Cullen, you said, “some MMTers have even gone so far as to make wild claims that the JG could eliminate inflation altogether!”

    Can you please provide a reference/source to substantiate this claim, because I have never heard any of them/us say something to patently insane. I seriously doubt it is accurate.

  • who

    I agree. However, the distinction I am trying to make is that both sides utilize factual evidence to bolster their argument, but the ‘go’ or ‘no go’ analysis is inevitably a product of theory and ideology given the inherent uncertainty. Your view that the JG is not a good idea is not ‘a statement of fact,’ though you make ‘statements of facts’ in your argument. The same goes for the JG supporters.

  • who

    btw, this article and JKH’s comment is bookmarked in the ‘high priority arguments against the JG” :)

  • JRH

    Evidence (even theoretical) for a policy is not “politically motivated” just because it coincides with a particular, pre-existing political agenda. Admittedly, it is very easy to be so cynical as to assume that everyone’s theories are the result of ideological confirmation biases.

  • who

    Also, if you want to stop the JG publicity, you should probably stop making thought provoking posts about it :P

  • who

    JRH, my feelings exactly. Maybe I am giving the MMTers too much the benefit of the doubt, but regardless, an idea can and should be evaluated on its own terms without bringing in ad hominem claims as distractions.

  • http://www.pragcap.com Cullen Roche

    A few days ago my jaw dropped when Neil Wilson said this:

    “You are assuming that [the JG] allows the inflation to start in the first place.”

    That’s in addition to various other “free” lunch sort of comments here and at other websites from vocal supporters. Some from very high up MMTers who I won’t cite here for sake of respect. I know Neil isn’t an academic MMTer, but he has become a very vocal and oft cited. We need to be more careful phrasing our commentary because when you imply that inflation cannot even get going you’re living in la-la land and risk discrediting the entire idea (which I basically think the JG does a good job of already but that’s another matter).

  • http://www.pragcap.com Cullen Roche

    Let me be very clear on this point. I have never said the JG is a “no go”. I have said I am worried about it for various reasons and more importantly, I’ve said it doesn’t directly target what I believe our true goals should be. I have never said the JG is not a good idea. I said it is filled with any number of unknowable risks. That’s nothing more than a statement of fact. The JGers are doing something totally different. They are applying a highly theoretical policy prescription into a theory of understanding money….

  • Lifted

    Minsky was a socialist for much of his life (perhaps even all of it). But the problem he ran into was that he couldn’t make his policies mesh with his economics. So he had to drop the ELR altogether. I don’t know about Mosler, but Mitchell has stated that he discovered the JG buffer stock idea in the 70’s. He didn’t meet Warren and start using MMT until the 90’s. I don’t mean to imply politics, but this all has a very nasty political feel to it. If the JG is not sound theoretically (I think Cullen makes a strong case there) then it is not needed in MMT and the only reason one would include it is due to political and moral beliefs.

  • http://www.pragcap.com Cullen Roche

    I hashed this all out with Warren yesterday. I told him point blank – I am not going to support your JG. And he said, “that’s fine with me, just don’t blame me when inflation shoots up”. I honestly don’t think Warren is playing politics even remotely. In fact, politically, it sounds like we’re near equivalents….

  • who


    Broadly speaking, one can either be for, against, or undecided on the JG. I think your position is totally reasonable. But from you: “I actually think I came closer to confirming my original position which was ***anti JG***” and “he’s got no issues with me taking ***the other side of the JG***.”

    It seems pretty clear that your current assessment leads you to be net ‘anti JG’ or against it. Meaning you currently aren’t convinced that it would be a good idea to implement. Conversely, if you thought it was holistically a good idea, then you probably wouldn’t be ‘anti JG’ and instead for it. Or maybe you’d rather label your position as undecided?

  • who

    And you just wrote below : “I am not going to support your JG.”

    I don’t understand why it’s not fair to label that position as believing the JG is not a good idea. If you thought it was, in total, a good idea, why wouldn’t you support it?

  • http://www.pragcap.com Cullen Roche

    I can be against something because I don’t know the potential outcome. I don’t see how that’s unusual. I don’t buy stocks all the time because I don’t understand the company. That doesn’t mean I am against the company. I am just not in favor of it. There’s an important distinction. I am rejecting the JG based on a factual lack of evidence proving it to be optimal. Just like I buy some stocks over others because they are optimal. It doesn’t mean I am shorting those other stocks….

    I’m not short the JG. I’m just not long it. But that doesn’t make me undecided. How’s that for convoluted? :-)

  • Colin, S.Toe

    As usual I agree with Phil: on the grounds of both ethical and productivity concerns, maximizing employment opportunities for those who want to work needs to remain a direct priority of society and public policy.

    Cullen’s arguments above remain theoretical. A way to test all the theoretical assertions would be through well-thought through and designed limited public jobs programs, whose relationship to price stability and overall employment could be observed over time, along with issues of liquidity, implementation, and contributions to productivity. Measures to address problems, and expanding or limiting such programs could occur depending upon need and outcomes.

    A national CCC-type program focusing on the most critical infrastructure and disaster prevention/preparedness/relief would be one starting place. Programs administered primarily at the state and local level, to target local service needs, and modeled/expanding on existing successful ones would be another.

    Another issue raise by Phil is what constitutes ‘improved living standards’. It has been a truism that the technological explosion here has led to increased demands on time (at least for the employed. Anthropological observations suggest ‘hunter-gatherer’ groups, generally existing in harsher environments such as the Kalahari, are able to subsist on a few hours of such activity per day).

    Some may thrive on constant interaction with and through high-tech devices. Others may set a priority on innovation directed toward enabling more undisturbed ‘face time’ with others, engagement with the outdoors (through physical labor, recreational activity and/or ‘meditation’) and limiting deterioration in the natural and social environment.

    Perhaps some combination of breakthroughs in technology and shifts in societal values will enable the maximization of potential in directions that currently seem mutually exclusive.

    Discussions over New Year’s weekend were intense. However, the civility and open-mindedness I have come to value here seem to have survived and perhaps been strengthened. Is this what change feels like?

  • http://www.pragcap.com Cullen Roche

    I should clarify this point. Much of my basis for rejecting the JG is based on fact. The unknowns scare me. That’s just the risk manager seeing the red flags and saying slow down. Nothing like this has ever been implemented so it’s not a statement of theory to say that this hasn’t been done before. The risks apparent are based on factual evidence. No theory. Not even an ounce.

    As for where I go from here. Well, any theoretical diversion as an argument opposite the JG would certainly be theoretical. So yes, there is a component of theory built in here….

    I fully reject the idea that technology is making our lives somehow worse. My dad made this argument when I was home for Xmas. He said that a farmer in the 1800’s wasn’t necessarily more or less happy than a farmer today. I said he was wrong based on the fact that the farmer of today can do much more in his life. As an example, look at someone like Bill Gates. Think of how full his life has been. I know it’s an extreme example, but man could only dream of living a life so full 200 years ago. It was impossible! We have so much more time because we are so much more productive (thanks to innovations). What you choose to do with your time is up to you. You could go flip burgers. You could be a lawyer. You could start your own company selling widgets. But if you don’t understand money and what it means to be truly wealthy then you might as well go be the farmer in the 1800s because the odds are that you won’t live a substantially fuller life than he did….

  • Colin, S.Toe

    Funny, I took JHK’s comment comparing gold and the JG as ‘buffer stocks’, to favor the latter.

  • who

    I think ‘more time’ is a very interesting observation and would probably throw it in the ‘pro bank,’ but I am not ready to say that definitively means people live fuller lives, and how do we define ‘fuller?’ Also, this comes to mind, http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice.html. And what’s your definition of ‘truly wealthy?’ And why is Bill Gates the paragon?

    Again, I don’t have a position here, but I do know anthropologists and philosophers would view this to be a much more variegated, complex, and nuanced issue. Cullen, have you ever debated an anthropologist? Coming from 1st hand experience, if you want to be challenged and frustrated, try it :).

  • who

    (and whatever the definition of ‘fuller life’ is, how does that relate to whether we are worse or better off, happier or sadder, etc, and how could we ever prove this?)

  • http://www.pragcap.com Cullen Roche

    Time is the ultimate goal. With more time you can do whatever you want. I only mention Bill Gates because he has lived many lives in one. He’s been a success on so many levels and now all the guy does is travel the world and give back. To me, that is a very full life. Balancing personal needs with societal needs. He’s given so much to others, but he’s also enjoyed the ride. I don’t know of many people who have probably done much more with what they have. Of course, there’s different ways to think of this. Ghandi might have impacted more lives had be been able to fly to America. He might have impacted more lives had he lived longer (thanks to modern medicine). There are many ways you could attack the question of time. To me, it is the endgame. And I don’t necessarily see that reaching 100% employment means optimization in this regard (and in fact, might not be in-line with this goal at all!). Then again, this is all a work in progress so we’ll see where it goes over the years….

  • Colin, S.Toe

    I could quibble over whether the risks in something that “hasn’t been done before” are actual or potential, but my innate conservative instincts are in full agreement with your concern here.

    (And I have never heard of a successful farmer, now or in the good old days, who didn’t work his tail off. That’s part of what those who stick with it seem to love about it.)

    And @ who: I was a college anthropology major, and it remained my epistemological home when I was trying and failing to negotiate the statistically oriented approach to psychology at the University of Chicago.

    Whether you consider it ‘political’ or ‘bias’, or not, much of the debate on these issues is a matter of values and choices, rather than ‘fact’.

  • tim

    Agreed. The JG is so politically impossible, it’s hardly worth talking about. They’re trying to throw old people out in the street because they think we’re out of money, and somehow we’re supposed to get a job guarantee program. Let’s get the bankruptcy myth gone first.

    I agree with many of the other comments about the JB being a politically motivated part of MMT. I think it’s great that there’s at least one main MMTer who’s vocally against the jg.

  • Lifted

    Mitchell is a Marxist or at least heavily influenced. I think most of the other really vocal MMTers fall somewhere further right (though not by much). If you read Mitchell’s work you know that he came across the JG idea before he learned MMT from Warren. Just like Minsky. So connect the dots on all of that. He’s applying politics to economics in the same way that all other economists do.

    I trust Cullen’s opinion on Warren, but it’s still hard to see how this isn’t politically motivated.

  • geerussell

    “Because this buffer stock will have been dwindled down to largely low-skilled workers whose convertibility into private sector jobs is likely negligible, it will have an equally negligible impact on the broader wage scale.”

    It’s been said but needs to be repeated: involuntary unemployment is a systemic outcome of the state money system. It is not a failure of workers to be employable.

    As Bill Mitchell points out in great detail, training/skills do not equal jobs. There will *always* be 100 dogs and 95 bones in the system we have.


  • SS

    That’s not really true. At full employment there are some dogs who are transitioning and just don’t want to look for bones. It’s called frictional unemployment. The key is using the fiscal measures to get us to that point.

  • FXTrader

    The Marxist MMTers are going to be pissed at you about this one. You’ve discovered their political agenda and boy are they upset!

  • geerussell

    As I understand it, there’s a boundary you hit before you reach frictional unemployment where attempting to reduce unemployment through deficit spending will become inflationary due to inefficiencies in how that money is distributed.

    So if frictional UE is say 2% you’ll hit the inflationary wall around 5%. The gap between the two is where you will have either a buffer stock of 2-3% unemployed as conventional nairu thinking calls for or a buffer stock of 2-3% on a JG.

  • SS

    That’s the flaw in the JG. It won’t stop inflation from rising. It only cushions it on the way down. So you’re going to get the bad inflation in an economy at full capacity no matter what. The difference is whether you have a few million people on the government dole when the ish hits the fan or not.

  • geerussell

    Yes, an economy at full capacity can experience inflation. This is a simple truism, not a flaw in the JG.

  • http://modernmoney.wordpress.com Senexx

    I don’t view Warren as creating MMT, I view Warren as adding a piece to the MMT puzzle.

    There is no such word as “co-independently” but it seems much more likely to me that Wray, Mitchell, Mosler co-independently developed MMT.

    I very much view MMT as Neochartalism (Wray’s term) and if forced probably call Wray, the creator. However, that is very much an aesthetic view and contains nothing of substance.

    And I must say Cullen indeed has not said the JG is a “no go” but he also hasn’t said if his “full productivity” option was not on the table that he’d be in favour of the JG.

    I do note that his “full productivity” goal has expanded to a “multi-generational” issue which I don’t think was touched on before. However, with or without a JG that would in all likelihood be multi-generational. My personal view of course is it will arrive quicker with a JG as it will be easier to see how to get there.

    Until then I look forward to seeing how we could achieve full productivity via Cullen’s recommendations.

    PS. Depending on my health I may come back and address the article where I find flaws with it.

  • SS

    That’s the point. The JG doesn’t help fight inflation when it’s rising and only helps when it’s falling (which we’re already good at) so all the JG does it add to the size of the government labor force. The role of “price stability” in the JG is overstated. I don’t even see why we need the JG at all, but as MMT is advertised it’s vital in stabilizing prices, but it won’t really do that at all when compared to traditional policy.

  • http://www.pragcap.com Cullen Roche

    Well then, no offense, but you just don’t know the history very well. Warren is most certainly the founder. I talked to him about all of this yesterday for about 2 hours and he was very clear in pointing out that “none of them had this before I showed it to them”. He told me to go read their early work before he introduced SCE in the early 90s because it only contained pieces of all this….There is no MMT without Warren Mosler.

  • geerussell

    There are a lot of ideas out there about how to implement a JG and though the government would pay the wages, the jobs themselves could be administered in a variety of ways. Some government, some private sector, non profits… there’s room for a lot of outside the box thinking as to how individual jobs would be provided.

    If there are inflationary forces on a full capacity economy so strong that they siphon off every last worker from the JG and then keep on wage-price spiraling from there, these forces would overwhelm the UE buffer stock just as certainly as they would the JG. This is still not a flaw in the idea of a JG.

    The main difference is instead of a few million unemployed we have a few million employed as a buffer. Unemployed people are not a public free lunch either. They cost society in terms of safety net spending (the actual money while not working dole as opposed to having a job where the govt pays the wage), a cost in the deterioration of human capital as long term employed become less employable and a more nebulous but still significant cost in human misery as individuals and families fail to find means for subsistence.

    A JG is risky in the sense that any change from the status quo involves risks and unknowns but there are potential benefits to be weighed as well.

  • SS

    So that extra 2-3% of employed is worth the corruption, the lobbying, the manipulation, the one off inflation, the lack of upside inflation controls, the behavioral changes, and on and on.

    You guys sound more and political about this as time goes on. You just want the government to give everyone something and you don’t care what the cost is to the rest of society.

  • FXTrader

    The socialists are having an identity crisis. They think that socialism means getting something for the 100% even if it makes 98% worse off.

  • AWK

    I just want to add some thoughts about the nature of this JG debate that concern me. Many people seem to accuse others of political bias, either explicitly or implicitly. Unless we want to define “economics” and “politics” in artificially narrow ways, let us all realize that there is no divorcing the two, ever – never was, never will be. Politics and economics in theory or reality all depend on and result from the same underlying forces that compel individual humans to work together in societies. EVERYONE here has implicit political and economic biases whether they choose to explicitly push them or not. Harping on this is almost as silly as if biologists wanted to remove the bias of chemistry and physics.

    The more conservative among us tend to see everything that could go wrong with the JG, and for very good reasons, but that makes us tend to refrain from doing anything much when millions are suffering. I admire the liberal concerns for the unemployed and their inventive spirit and willingness to experiment but it disturbs me greatly how many of them brush off conservative concerns and often appear naive in doing so. In order to to deeply understand and sell an idea I believe you have to be its greatest silent critic and skeptic too. A great debater can take either side of any issue. If we don’t want the adversaries of MMT to define it then we always have to be ahead of their criticism. The worst problems often come not from answering a question wrong but from not knowing what questions to ask. Whether or not one is for the JG, as long as we remain fairly civil and listen to each other, I expect these discussions will lead to better JG formulations and/or arguments or better JG alternatives (if they exist) and better implementation strategies both political and economic. But let’s try to keep in mind that the best strategy to help society may not always employ the best theory, at least at first. We have to respect the fact, like it or not, that we live in a pluralistic and conflicted political world that tends to get more conflicted when we’re in trouble. If our ideas are good and true, I think they will eventually win out. The question is how long? That depends on how it gets sold politically.

    I have big problems with the JG like Cullen and have been arguing to try to prevent an MMT schism from developing that I think would be detrimental to its advancement (via some semantic tweaks I’ve pushed in other fora). Yet, I also have to admit that some deference has to be given to the founders of the “theory” as to how they define it whether we followers like it or not. Economic “theories” are far more tentative and difficult to prove (actually falsify) than hard science theories. No comprehensive economic “theory” that has ever been proven to my knowledge and probably never will be except in very limited contexts. So-called “economic theories”, be they Keynesian, Monetarist, Marxist, etc., are really more like schools of thought that embody a worldview (involving politics implicitly and/or explicitly) and prescribe and predict from that perspective. Implicitly then, at some point economic theories have to take at least one tentative stance that is falsifiable.

    What many of us love about MMT is not theory (I’ll call it just “MM”). It’s a factual descriptive understanding of fiat money that trumps conventional popular thinking. (I realize there are some subtle areas where this may not be completely true but I don’t think they’re significant. If wrong, I’d love an MMT founder to comment). It’s not falsifiable, like any fact. The theory is the JG which is also the prescriptive part and it is falsifiable.

    I would prefer to keep MMT intact by replacing the JG with a more generic buffer stock theory (perhaps incorporating Cullen’s productivity/living standard concerns in some way) of which there could be sub-schools of thought including various forms of JG, JIG, IG, and perhaps others forms nobody has thought of. Different societies might choose to implement different facets of these sub-schools.

    If we can’t hold MMT together, I don’t see how anybody can or would want to claim exclusive ownership of the MM part. In fact, as silly as it may sound, I could envision a separate schism among the Austrians that could lead to a faction adopting MM. Let’s face it, no economic theory dealing with our fiat currency reality can be taken seriously without it. So MMTers (I stress the “T”) have a vested interest in keeping intact as long as possible lest the co-opting of the MM by splinter groups and other adopters dilute the MMT brand.

  • http://www.pragcap.com Cullen Roche

    Thanks for that AWK. Very well put.

  • MMTer

    Just to summarize. The JG:

    1. Won’t help stop rising inflation much if at all.
    2. It won’t stop deflation much better than current policy
    3. It will add a huge liquid buffer stock to the economy in case of downturn.
    4. ???

    I always thought the JG was included in MMT because of its inflation fighting feature. But that seems way overstated. So what’s the need? Why don’t we push forward with the other pieces and eliminate the baggage? It sounds like politics are the only thing blocking MMT from going mainstream and this is probably the #1 hurdle.

  • Anonymous

    Senexx, as I understand it, MMT began with Warren’s “Soft Currency Economics” (1993), and I recognize Warren as the founder, based on the fundamental insight that the currency issuer enjoys a monopoly. Everything flows from that.

    Shortly thereafter, Warren encountered Randy Wray, who was writing a book on monetary theory and it recognized Warren’s ideas as a valuable contribution and incorporated those ideas into his understanding of the history of economics, theory of money, and macroeconomics. Bill contributed the emphasis on the buffer stock of unemployed. The first comprehensive statement of MMT as a monetary theory and a macro theory was Wray’s Understanding Modern Money: The Key to Full Employment and Price Stability (1998). The details of the theory were fleshed out and articulated in many papers by the initial developers and later the other economists that joined them. That’s where things stand today.

  • Tom Hickey

    Ooops. I didn’t sign in. I posted the above.

  • http://www.pragcap.com Cullen Roche

    Correct. Warren is the founder of the theory. The JG is just Minsky’s ELR rehashed. The unique aspect (and key aspect) is the operational aspects that Warren discovered when trading. The JG or ELR was irrelevant until Warren came along and even then the JG was adapted to MMT, not vice versa. Warren has always been the founder. He’s just too modest to say it out loud (although he has made it pretty clear to me).

  • Tom Hickey

    Interesting post but it avoids the basic question that MMT deals with as a macro theory, that is, reconciling the big three, GDP growth, FE, and PS. A macro policy tool has to encompass all three to be taken seriously by policy makers, who are elected politicians that know voter care about all of the big three, and ignoring any of them puts one’s seat at peril. It is very difficult to reconcile these satisfactorily, as economic history shows, and the political consequences of failing to do so satisfactorily in the public’s eye are well-known to politicians.

    So I don’t see FE and PS “normative” concerns that can be easily dismissed if productivity is emphasized. Even granting for sake of the argument that “productivity “should” be the chief concern, no policy maker will buy into the argument if following that course ends in either rising unemployment or high inflation, both of which spell loss politically. Yes, the JG may be unpopular among some people and even quite few people, but high unemployment in times of contraction and high inflation in times of expansion are more poisonous politically, since these issues most people are deeply concerned over, their pocket books are affected directly. That is a real concern. Concern about creeping socialism pales in comparison.

    So I don’t see that this post advances the game in the larger purview that the MMT economists are dealing with.

  • TofuNFiatRGood4You

    A JG was established in Argentina around 10 years ago.
    Two papers discussing the results:

    (“The Jefes experience allows us to move from the realm of theory to the reality of practice.”)


    Admittedly, these are by JG advocates.

    A buffer stock of unemployed with no benefits favors capital, while a buffer stock of unemployed with a JG (or living wage benefits) favors labor. Right now, with 88 cents on every additional dollar earned going to capital (from Mosler or Mitchell), we should be heavily favoring labor. We should be striving for a balance between both parties over the long run.

  • http://www.pragcap.com Cullen Roche

    So, when you guys don’t want the JG to be political it’s not political (like when I say that the JG is a huge political distraction). But now since the theory deals with the “big three” then it’s a viable “policy tool” and my post is irrelevant because of that?

    You’re trying to have it both ways. Half the time you guys say the theory doesn’t have any policy application (theories aren’t built around policy and politics or some nonsense like that) and that you’re perfectly happy waiting for the public to come around to your position. But now I write a post basically showing that the JG is a piss poor inflation fighter and now you use the political argument. Sorry Tom, but that’s just nonsense.

    And ironically, the reason why MMT will never be taken seriously by policy makers is because it’s got this massive 30MM person tumor slapped to the side of it….It’s a cancer dragging the whole idea of MMT down….

  • http://www.pragcap.com Cullen Roche

    Well, we should be doing a lot more right now. I certainly agree with that. But the Jefes program proves nothing about the USA (it’s not remotely comparable to the idea here). The other plan in place in India has exhibited massive corruption so the real-life examples are largely useless. We’d need to see this ramped up in small scale or in some other country before it ever became viable. Not saying it can’t but hey, let’s be realistic.

  • beowulf

    Which, by definition, means over 30.

  • http://www.pragcap.com Cullen Roche

    Besides, the fact that it doesn’t really help fight upside inflation makes it a very poor price stability tool. So yeah, even by your “policy tool” definition, it’s still lacking. The JG is sold as this great inflation fighting tool. It’s not even close to that….It can fight deflation, but we don’t need a JG to do that….

  • beowulf

    Or he’s the one true MMT that the others fall short of. Too early to tell.

  • beowulf

    Right, it was the always awesome William Vickrey (he wrote that Trans Keynesian paper I emailed you) who encouraged Warren, after he wrote SCE, to check out a Post Keynsians mailserv. That’s how he met Wray and Mitchell.

  • JKH

    public sector competition for the great vampire squid wrapped around the face of humanity?


  • beowulf

    To give an sense of the nonideological nature of Warren’s ideas, not only was the liberal Bill Vickrey an early fan of his work, so was Donald Rumsfeld.

  • Tom Hickey

    This is a sincere practical question, Cullen. I just don’t see an economic policy emphasizing only full productivity with FE and PS secondary as being realistic politically. You have claimed that the JG is politically impractical. I agree it has problems politically. I don’t like it very much for other reasons I explained in various comments at heteconomist.com, namely that it is backward thinking rather than forward thinking about new challenges and emerging opportunities.

    As I have said, I am interested in this for practical reasons more than theoretical, since I am not an economist. However, I do think that the theoretical arguments offered by the MMT economists have to met on the level they are offered. I am not qualified to go there, but I don’t think that their theory can be dismissed without addressing it at the level it has been offered.

    The question I am putting here is different from that. I am just saying that FE & PS are big deals politically because unemployment in contractions and inflation in expansions affect people in the pocket book. And then there was the Seventies stagflation that many people remember and fear a return to. These are real concerns of real people.

    Maybe people are concerned with creeping socialism or resent the government employing more people, etc. as matters of principle, but these things don’t affect people as directly as employment and inflation do, and politicians are very will aware of this. So I think that as a practical matter, FE and PS is something that has to be considered.

  • Tom Hickey

    Cullen: We’d need to see this ramped up in small scale or in some other country before it ever became viable.

    You just rejected two examples are irrelevant to the US. What would the criteria be for a small country experiment relevant to the US?

  • beowulf

    “No one answered my other query, and so I thought I would risk it 1 more time.
    Isn’t the military recruitment of our young adults a form of the JG?”

    No, the military is too selective (that’s why you register for “Selective Service” and not “Guaranteed Service”). :o)

    About 75 percent of America’s 17- to 24-year-olds are ineligible for military service due to lack of education, obesity and other physical problems, or criminal history, according to a report issued by the Mission: Readiness group.

  • http://www.pragcap.com Cullen Roche

    The lack of MMT’s implementation is hurting more people than Goldman ever did. And only we are to blame for that. :-)

  • beowulf

    Over the weekend, I emailed you Vickrey’s Trans Keynesian paper too! If I may quote from your inbox:
    Even if inflation should threaten to get out of hand as a result of a vigorous full-employment policy, there are ways of keeping it under control that do not involve tolerating unemployment. One of these would be a system of tradeable rights or warrants to value added, whereby anyone who ends an accounting period without holding warrants sufficient to cover his value added would be subject to a suitable penalty tax. Warrants would be issued to firms for successive periods on the basis of previous value added with adjustment for changes in inputs of prime factors such as invested capital and labor… Firms enjoying strong markets for their products will be able to realize higher value-added profits only by purchasing warrants from firms having a less fortunate experience, effecting a kind of profit sharing among firms and reducing risk to investors.

    Ultimately, some form of third major macroeconomic control instrument is necessary, in addition to monetary action through interest rates and fiscal action through income generation, if full control is to be exercised over three major macroeconomic variables: the rate of inflation, the level of employment, and the division of the product between current consumption and provision for the future. While with a sufficient dihedral, one can fly a plane in good weather and make gentle turns with rudder and elevator, it was the Wright brothers’ invention of wing warp, later realized as ailerons, that allows landing in a cross-wind without disaster. If value-added warrants won’t do the trick, it is up to economists to devise something that will.

    He’s talking about controlling cost-push inflation (A variable payroll tax holiday moving inverse to unemployment will do just fine controlling demand pull inflation). Since oil is the pushiest of costs, I’d start with controlling gas prices (1. boosting domestic supplies/fuel efficiency, 2. tripping up oil speculators, 3. Marty Feldstein’s market rationing plan) before going to an economy-wide regime like Vickrey suggests. But if inflation is your concern, you can’t beat Vickrey’s “OPA in a box” plan.

  • http://www.ourdime.us Dustin

    I think you are making a mistake with this argument that all of your critics have missed so far.

    You are ultimately correct in your assertion that it is a price-buoy, but by your logic, EVERY buffer stock is ultimately a buoy, not an anchor. Since there is nothing that can be created without limit, there is always the possibility that the market will continue to demand something beyond capacity to provide it at a given price level. This goes for Gold, Oil, Unemployed, and JG.

    Ultimately, When it comes to rising demand, any buffer stock can only hold the price for as long as it’s build up of stock can be maintained. You are right that there could in theory be so much demand pull that we run out of unemployed people. The same thing can happen with our current unemployed stock. Or a gold stock, or an oil stock. With a JG, if you graphed against demand, you would see the price of unskilled labor be flat until JG stock ran out and the price would start creeping up.

    I would make another observation about inflation\deflation. You say deflation has been pretty well defeated as it’s only occurred once in 50 years. I would make the same argument about inflation. Our current policy regime has very effectively learned how to fight inflation: Raise interest rates, wreck the economy, and throw people into unemployment. We have not had very high inflation(in the United States) since the oil crises of the Seventies.

    The problem with the current policy regime is that it doesn’t know how to fight inflation without accidentally causing unemployment. An understanding of MMT and the JG offers possible solutions.

    Ultimately, As a previous commenter stated, this questioning of the JG may be beneficial to MMT to tamp down on expectations of a JG. I think it would be more properly described as smoothing out short-term, medium bumps and falls in demand. If there is a large demand increase, tax increases may be necessary just as Warren currently advocated large tax decreases in our current environment of have a large deficiency in aggregate demand.

    I can respect your political issues with the JG, but this “price anchor vs. buoy” critique is ill conceived if you advocate ANY kind of buffer stock.

  • http://www.pragcap.com Cullen Roche

    Your assertion that there are weaknesses in all buffer stocks is precisley in-line with my thinking. Welcome aboard. :-)

  • beowulf

    “tax increases may be necessary just as Warren currently advocated large tax decreases in our current environment of have a large deficiency in aggregate demand.”

    That’s the beauty of a variable payroll tax rate. If its pegged to unemployment rate and adjusted, say, quarterly, FICA rate automatically decreases if U3 goes up and increases if U3 goes down. The variable tax rate could stabilize demand pull inflation without Congress ever having to vote to raise taxes.

  • http://www.ourdime.us Dustin

    Thanks for the response. But it doesn’t make sense to me, do you not advocate an unemployment buffer stock. Is there a better idea that you have to buffer stocks? Full productivity is a goal (one that I share, and believe is helped by a JG), not a policy idea.

    Perhaps your problem with the JG is based on the way it’s been presented. Have you read Ralph Musgrave’s alternative ideas on a JG? I have some issues with his proposals, but it’s good food for thought and much different from anything discussed by Wray or Mitchel.

  • PG

    Can you give a single exemple of economics that dose not carry site it a políticas framework or motivation? Just one…

  • http://www.ourdime.us Dustin

    I’ve often pondered that route. Having a board that sets a tax rate every ‘X’ amount of time, the way the fed sets the overnight interest rate. However, I see this wreaking havoc on employers trying to collect payroll taxes.

    It’s not a bad thought, but I’m willing to hold out for a better idea.

  • Tom Hickey

    The JG is both a buffer stock and a price anchor. These are different in that they serve different functions, with the JG performing both functions. A buffer stock of employed supports employment during a contraction. At all times, and in particular during an expansion when inflation is most likely to manifest, the JG provides a price anchor for a nonconvertible floating rate currency, which is otherwise not tethered to a real numeraire like gold. Gold or silver at the convertible price tethers the nominal unit of account to a real numeraire in a convertible system. The numeraire under the JG is the constant (unindexed) floor wage that establishes the real value of the nominal unit of account as an hour of unskilled labor. This actually as an advantage over gold because gold has no use value and its worth is impossible to assess based on return. But labor has real value in terms of what it can produce in exchange for the nominal wage. Labor is also a “natural” numeraire in a sense, since people tend to assess value relative to price in terms of exchanging their labor for it based on their income level.

  • Andrew P

    There is no way the price level of a JG will remain fixed by administrative fiat in the real world. There is enough history to know how the politics would work. The unions would obtain the clout to get Congress to boost wages and ease working conditions. The result would be the 1970s on steroids – a massive wage-price spiral. The Guaranteed Labor Workers would morph from a bunch of unemployed beggars to a privileged entitled class like Wisconsin Public Employees in just a few decades. A JG can only work as a temporary measure during Depressions, and never as a permanent program.

  • Dan Kervick

    There is always politics involved. Don’t you think the idea that we should care only about aggregate output and the maximum achievable aggregate productivity, without any significant attention paid to distributional issues, represents a political value? Every policy recommendation is a normative statement, and therefore there is no policy recommendation that doesn’t reflect values. There is no such thing as apolitical policy. Sure Mitchell’s economics reflect his political value; so do Cullen’s

    The picture presents human life as a world of disconnected and blobs of wealth, and the value of human populations mere sums of the value of the blobs with nothing actually resembling a society. That picture appeals to some people. But others don’t want to live that way. They care more about sharing, getting along and advancing together than just piling up the largest possible horde.

  • Tom Hickey

    Vickery sums up the issue succinctly. This is the nub of it.

    Ultimately, some form of third major macroeconomic control instrument is necessary, in addition to monetary action through interest rates and fiscal action through income generation, if full control is to be exercised over three major macroeconomic variables: the rate of inflation, the level of employment, and the division of the product between current consumption and provision for the future.

  • http://www.pragcap.com Cullen Roche

    I disagree. FP can be a policy idea just like FE and PS. You just have to think outside the box a little instead of just filling empty boxes in economist’s textbooks. There is nothing in FE and PS that ensures FP. That’s the major flaw here….

  • http://www.pragcap.com Cullen Roche

    Well, it’s not really a price anchor. :-)

  • http://www.pragcap.com Cullen Roche

    Wait til the lobbyists get involved. $8 quickly turns to $12….Then your “one off” is a permanent…. :-(

  • Dan Kervick

    I also agree it’s a good article and poses telling criticisms of the JG as a price stabilizer at the top end.

    However a lot of people are attracted to the JG as a policy measure that will deliver what they believe to be myriad human and social benefits, and whether the JG contributes to price stabilization is only one among many other considerations.

    I am attracted to MMT because I believe it explains a lot about how our contemporary economic system actually works, and because people who understand MMT can therefore draw on it to explain how to design and implement policy options that appeal to them. Whether the JG is core MMT, or only a policy add-on, is not that important.

    I support expanded public education too. And obviously nobody thinks a public education proposal is part of MMT. But MMT can help one understand how to implement public education policies.

  • Dan Kervick

    Perhaps. But the “unemployment buffer” is cruel and barbaric. So we should end it. Frankly, I have trouble believing people aren’t ashamed even to use language like that. It’s like Scrooge’s Malthusian invocation of “reducing the surplus population.” Dickens Scrooge was a parody of arrogant greed and hard-hearted cruelty. Maybe that’s what submerging oneself in the world of finance does to people.

  • Tom Hickey

    I believe that as a real numeraire, the hour of unskilled labor that is exchangeable for the JG nominal constant floor compensation package for would act in a similar fashion to gold convertibility wrt anchoring the nominal value of the unit of account to real use value that is measurable and exchangeable. Economists consider inflation to be a continuous rise of the price level, which includes the price of labor. This fixes the floor wage (nominal) to a real commodity, an hour of unskilled labor, controlling for cost-push inflation. The floor wage is held constant and cannot inflate since it is either indexed nor negotiable. The idea is that other prices are relative to the floor compensation package, just as they are to gold in a convertible system, anchoring nominal price to real value.

  • Dan Kervick

    That’s passing the buck Cullen, because you are defending that social choice. But different society’s have made different choices, and can make different choices.

  • http://www.pragcap.com Cullen Roche

    You’re assuming labor is sufficiently undifferentiated.

  • Dan Kervick

    With more time you can do whatever you want.

    Um, time and money right? There are lots of unemployed people who have plenty of time. But they can’t fly to Africa whenever they want.

    I have been discussing this issue of time with some other people recently. A lot of folks are of the opinion that increases in productivity and enhancements of technology are going to deliver to us a life filled with leisure and fun. I don’t buy it. People are mortal and their desires are limitless, as are the things that thwart their desires. No matter how productive we get, the improved productivity in the fulfillment of old ends will only enable us to fill up the newly available time with more hard work of kinds we could never even imagine before.

    Yes, Gates’s time is more productive than the time of people who lives 200 years ago. And his likely life span is longer as well. But on a day to day basis he has no more time itself than they did. And he fills his time up with work just like they did.

  • Tom Hickey

    Unskilled labor is presumed to be undifferentiated.

  • http://modernmoney.wordpress.com Senexx

    I don’t take offence easily on the internet of all places.
    Like I said, it doesn’t really matter. It is of aesthetic value only. Unless we all want to start calling it Moslerism (I wouldn’t particularly object)

    The mechanics or the operational realities are what matter.

    What I’m really waiting for is the meat on this full productivity sandwich.

  • Tom Hickey

    that is, is a fungible commodity that is universally exchangeable for performing unskilled labor, like those guys that hang out in recognized areas were day laborers gather looking for work. You drive up and make an offer. The way it often works is that some are better than others, and a few are worth-keeping. They get hired on for the duration of the job so you don’t have keep going back for laborers each day. The really good ones get a permanent offer. But when you drive up, you don’t know what you are going to get.

  • http://modernmoney.wordpress.com Senexx

    Politically or Public-Relations speaking I’ve never liked the term unskilled labour – it generally means hard labour – little things that the whole system is built on – laying pipes for plumbing/sewer – digging the holes to specification – laying railway tracks, and so on.

    Anecdotally, from my own physical build these things to me are skilled labour even if they are all typically blue collar jobs. Now on a lot of white collar type jobs I could handle myself quite easily due to my education.

    It’d be a long road for me to take one of these blue collar jobs on and complete it successfully.

    That said human beings aren’t static – we’re all capable of learning.

  • beowulf

    A $5 billion federal weatherization program intended to save energy and create jobs has done little of either, according to a new report obtained by ABC News on the one-year anniversary of President Obama’s American Reinvestment and Recovery Act….
    The Department of Labor spent most of the past year trying to determine the prevailing wage for weatherization work, a determination that had to be made for each of the more than 3,000 counties in the United States, according to the GAO report.
    Secondly, many homes have to go through a National Historic Preservation Trust review before work can begin. The report quoted Michigan state officials as saying that 90 percent of the homes to be weatherized must go through that review process, but the state only has two employees in its historic preservation office.


    To which Morgan Warstler added this comment:
    I actually sat very very close to the “weatherization” plans Obama put out, and watched them happen at the local level in two different states – places where I knew contractors who actually SAT THROUGH the meetings all the way to doing a couple houses.
    Worse than ugly. From catered lunches to administrators letting everyone out of the mandatory 8 hour meetings early, to unions insisting these workers needed $50 per hour, to the labor dept demanding polling done across the country to determine the proper wages… I’m convinced it was weatherization that caused Obama to decide there is no such thing as shovel ready jobs.

  • geerussell

    “all the JG does it add to the size of the government labor force.”

    There’s also the small matter of not having millions of people unemployed.

  • http://www.pragcap.com Cullen Roche

    Yes, I know. There are a lot of presumptions going into all of this (like the myth that $8 will be the permanent wage after lobbyists get their hands on this legislation). Still doesn’t matter. At full capacity the differentiation in wages will still cause substantial inflation making the JG a weak inflation fighter.

  • http://www.pragcap.com Cullen Roche

    And the small (or large?) matter of the side effects of this policy….

  • http://www.pragcap.com Cullen Roche

    You can’t have it both ways Tom. You guys rant and rave about income inequality and now you’ve built a JG model that is based on undifferentiated wages. I’ll tear that to shreds in a nanosecond. The hypocrisy there alone is almost enough to kill the JG idea….

  • geerussell

    The reply thread was too deep to allow another one above.

    Cullen said:

    “And the small (or large?) matter of the side effects of this policy….”

    I fully grant you that there are side effects to a JG, as there are to UE. I think the attention, debate and criticism on the JG is a good thing. Maybe in the end after hashing it out it turns out the JG is worse than the status quo then so be it but that process is just starting and it’s an effort worth making.

    Fear of the need for problem solving (both political and practical) isn’t enough to warn me off of giving a fair hearing to a JG. Not when the potential upside of having a robust safety net against unemployment in good times and bad is out there.

  • Tom Hickey

    Cullen, I don’t agree with this approach either but for vastly different reasons from yours. However, I am sticking with Warren and the MMT academic economists on this as a policy choice, since their rationale seems sound to me that the JG is superior to the current buffer stock of unemployed. But I think that the whole approach so far is backward looking and furthers the status quo rather than forward looking and dealing with the challenge and opportunities we face going forward. But so far we have not sufficiently recognized the elephants in the room and probably won’t until the doo-doo gets so deep it can’t be ignored or denied any longer.

  • beowulf

    I’ve often pondered that route. Having a board that sets a tax rate every ‘X’ amount of time, the way the fed sets the overnight interest rate. However, I see this wreaking havoc on employers trying to collect payroll taxes.
    It’s not a bad thought, but I’m willing to hold out for a better idea.

    Its a rule-based system not discretionary (Congress isn’t about to give away discretion over tax policy). Congress would create a formula that would automatically adjust quarterly. To use a simple formula, The U3 rate at the end of each quarter (or to be precise, the U3 rate announced a week into the new quarter) would be multiplied by 10. So the 8.5% announced last Friday would mean FICA tax withholdings would be reduced by 85% from standard FICA rate (as with current payroll tax holiday, Tsy would continue transferring funds into SS trust funds as if full FICA rate were being collected).
    Might as well uncap SS FICA at the same time to account for U3 never reaching 0 (and let’s throw in Medicare FICA at the same time). $900B w/ capped SS becomes $1100B uncapped. reduced by 85%, that’s $935B in annualized stimulus, nearly filling the projected $1T output gap. Of course it would adjust again in April, July and October so I doubt the payroll holiday reduction would stay at 85% very long. If an employer can’t adjust its tax withholdings 4 times a year (it wouldn’t matter if its adjustment lagged each rate change by a month), they need a new payroll company.

  • jown

    Hey Mr. Roche!

    Moving closer to the Rocheian MMT Synthesis I would say!

    In the original piece you state: “So I say we should use our proven MMT understanding to implement policy approaches that get the economy operating at full productivity … ” Great. Policies, name ‘em, work ‘em out, offer them so that we may advance the economy to getting to your ends: Max FP (full productivity) & Max LS (living standards).

    Maximize FP & Maximize LS subject to no binding employment constraint? I am not sure where or if your proposal has an “employment” policy. If so I would love for that to be addressed as well.

    I look forward to hearing the alternative policy. I absolutely acknowledge your outlines/sketches/thoughts/hopes/surmising/etc. re “Maximizing Productivity” and “Maximizing living standards over a multi-generational period.” I do hold that a solid proposal for any policy action needs to be quite a bit more explicit than simply, vaguely and idealistically, calling out to FP & LS however.

    Advancing the (your) ball here is the “name of the game.” If the Rocheian MMT Synthesis is to have any legs whatsoever it needs an affirmative analysis. (Fair, I gander)

    I don’t buy the Goldman Sachs wage point and the wool analogy off of that as being even theoretically persuasive or a credible point against the JG/inflation issue. Just because even in a JG environment the wages on the top won’t be “reigned in” doesn’t mean there won’t be an effective price-stabilizing mechanism (maybe this is just my missing your point & apologies if so; I AM trying to hear you out here).

    Also, I find the claim that full employment and stable prices as “goals [that] entirely miss the point and steal the potential lives that future generations can live” to be quite whack. (sorry) I feel, alternatively, that getting to them lays the foundation for the future; and not current “knob” tweaking for some entrepreneurial ideation of FP. If one is to build a “middle class” one lays a foundation and doesn’t just invite “innovators” to the second floor.

    Like I have mentioned before – from Minsky – we have seen these pump priming attempts since the mid-60s; THEY are inflationary and they do not trickle down (I suspect you are not a “trickle down” guy but if you are offering a policy proposal that looks to increase productivity FIRST and then get to FE maybe later, then, to me, you are offering a “trickle down” policy proposal). Again, Minsky’s 1986 book takes this up quite well and Dr. Tcherneva is working on this now too I believe.

    You know me though, I very much look forward to Mr. Roche’s “The General Theory on Full Productivity, Involuntary Unemployment, and High Living Standards” !!! (let Dr. Wray, Dr. Mitchell, Mr. Mosler and the rest of us lovelies have a look !)

    The necessity that “something must be done in the slump” is agreed; but the fight continues, firstly, as to what should be done in the slump (i.e. what should be the direction of government intervention) and secondly, that it should be done only in the slump (i.e. merely to alleviate slumps rather than to secure permanent full employment). (Kalecki, 1943)

    Thanks Mr. Roche.

  • http://www.pragcap.com Cullen Roche

    Crazy talk! I am not an economist. I am just a good investor with an above average common sense quotient and the ability to challenge conventional wisdom. Maybe I’ll do what Warren did and work with some other economists to build something? Either way, I look forward to develop my thoughts here. Very early stages of course. And your sentiments are flattering (but crazy). :-)

    As for this:

    “I don’t buy the Goldman Sachs wage point and the wool analogy off of that as being even theoretically persuasive or a credible point against the JG/inflation issue. Just because even in a JG environment the wages on the top won’t be “reigned in” doesn’t mean there won’t be an effective price-stabilizing mechanism (maybe this is just my missing your point & apologies if so; I AM trying to hear you out here).”

    Who spends all the money in this country? The rich! So who controls the market prices (at least to a large degree)? The rich! I think the top 20% do 50% of the spending or something like that. That’s why it’s hypocritical for MMTers to complain about OWS and income inequality and then portray the JG as having an embedded assumption of undifferentiated wages. This program wouldn’t contain skilled labor at all. It might even increase the disparity in income inequality (well, until the lobbyists jump in and boost the wage to $12, then $16, then $20, oh my!)….You can see where I am going with all of this.

    The JG has big big holes in it as it’s been presented.

  • jms.grmwd

    What’s to stop employers now from replacing their union workers with the unemployed at a lower wage ? The productivity trade-off and the laws of the land. No change under a JG.
    Some have suggested that the JG should be a wage subsidy for the private sector. Now that really does sound like an invitation to game the system.

  • jms.grmwd

    Ditto. The idea that ANY economic policy is apolitical can only be sustained by assuming that the system as it is is natural and immutable. But any economic system is more than anything a legal framework for assigning rights and responsibilities over the physical world. Nothing natural or immutable about human law.

  • Winslow R.

    ”  I spoke to several analysts and traders who, at the time, said the move was a desperate attempt to pull prices down and stimulate the economy.  President Obama pulled hard on that buoy and released a small amount of this buffer stock into the market, but he couldn’t pull the prices down for long.”

    Obviously not MMT traders :) The U.S. government selling oil into the market acts like a tax removing currency from the system. Hardly expansionary, unless the removal of cash was exceeded by a reduction in Saudi savings. Looks like the move worked at cross purposes at best.

    Not sure the point that government purchases of labor would fluctuate counter cyclically with the economy agrees with you. The government would have a tough time selling labor rather than buying labor. The economy does have to fit into a sweet spot of either constantly expanding GDP or increasing saving desires for a JG to work at stabilizing prices without making changes to the wage rate.

  • AWK

    Something Neil Wilson said above caught my attention and I wanted to explore it in a separate discussion (FYI: we’ve been engaging in some prickly debate over at bilbo but I respect his intelligence and motives):

    “All the arguments here boil down to “I want these people to have less, so I can have more””

    Though I think this statement is overly presumptive with respect to personal motive, it made me realize that we may not be asking the right questions from the right perspectives.

    The so-called “Haves” like Cullen and I obviously place a different personal priority on inflation compared to an unemployed guy with no income at all. But all three of us understand that both hurt people and hurt the economy to varying degrees. And I recognize how much I still have to learn about the breadth of economic and social theories and data when I say that I don’t really know what model-ready metrics exist and have been validated to measure economic and other societal damage caused by inflation or unemployment in any fair interchangeable manner (which I suspect must be highly non-linear). If it’s not clear what I’m getting at, please bear with me because if what you think is I’m addressing something like NAIRU or other competing ideas (most seem like BS to me) I’m not. I’m actually trying to stand arguments for those types on their head in some ways. I’m not trying to find a model right now that predicts inflation for any level of employment or vice versa. I want to better understand the true costs (or possibly even benefits) of inflation and unemployment as if we could set either one independently.

    The most fundamental motivation, when push comes to shove, that people like Neil give to support the JG is that millions of our fellow citizens should not be forced to suffer for the “failure” of the system to supply enough jobs. We have to do SOMETHING even if it is unproven and a bit risky. To some extent, for people like Neil the tentative benefits of the supposed buffer stock reconciliation of unemployment and price stability are probably secondary though a great selling point as well as an academic tour de force if it proves to be correct.

    Likewise, Cullen and I are very quick to scream inflation with very little distinction as to whether we are talking about spiraling out-of-control inflation or high, yet stable inflation, recognizing that while the first is terrible, both are problems. Moreover, some of this inflation concern is immediate and some is long-term. Cullen primarily addressed the immediate to mid-term concerns above. The long-term effects, if any, come only after long-term side effects of a sustained JG program accumulate, e.g., JG-exploiting organizations “game the system”, the JG distorts incentives and work practices, etc.

    Whether you’re an inflation or unemployment hawk, I believe it is most prudent to take a pragmatic position that acknowledges that political compromises may have to be made and that we should always try to limit complexity that doesn’t return “sufficient” benefits to society (in statistics, one penalizes complex models using a Bonferoni statistic for which economic policy seems to offer no analog). One then has to ask, how do we measure those benefits of return and the costs of complexity? What is the net cost (or benefit) to society of an inflation rate of 2%? 4%? 10%, etc.? Likewise, what is the net cost (or benefit) of unemployment rates of 3%, 5%, 10%, etc.? I realize I’m oversimplifying things a lot and that the trending or volatility of these elements (especially with inflation) can have a large impact but let’s just pretend steady state for now.

    What’s better for society, to have a sustained unemployment rate of 5% and an inflation rate of 4% or a sustained unemployment rate of 3% and an inflation rate of 8%? It’s not clear to me that we know how to answer these questions or that anybody wants to focus on it. But if we have to make choices potentially affecting these numbers we should spend more time understanding their true cost (or benefit) before we do too much quibbling about which competing theory best describes the relationships between them. However, I realize this is probably a very difficult calculus to really do. So we have to start with some qualitative common sense and experience.

    I want to give my personal perspective which influences as my biases. I’m 50 years old and grew up in a blue collar home and later became a successful entrepreneur. My wife is from a poor family. I’ve seen both unemployment and inflation directly affect poor, middle class, and rich over the years. I remember the stagnant high inflation 70’s well. Inflation has always seemed to me a persistent nuisance. Obviously the impact of inflation depends on the ability of wages and investment return to keep up. My personal sense is that deleterious effects of inflation increase roughly linearly, probably until you get near some avalanche point for hyperinflation, that I have never seen in my lifetime in the US.

    Unemployment, from my perspective, presents different linear and non-linear regimes. I realize things have changed in many ways regarding income distribution, the growing persistence of an underclass, the value of various forms of work, union membership that I do not seek to address now. Nevertheless, it has been my observation that as long as the unemployment rate has been under 5-6%, any able-minded person who really wanted to work and put in a good effort could expect to find work within the normal time allotted for unemployment insurance. There’s plenty of employment turnover in this regime and it can be argued, as Cullen has, that we might not be doing many people real good, and may in fact be harming them and/or society, by giving them a JG here.

    As a high-tech employer (where unemployment is usually less than half the overall rate) I have found that it becomes increasingly difficult to get good people when the overall unemployment rate gets to 4% and it seems to get exponentially worse as you go below that. Moreover, the costs for recruitment and turnover increases and the sense of entitlement one sees hurts productivity. But for me, those are problems that force one to be a better employer and well worth living with to have a good economy.

    Where things really get difficult is when unemployment starts to go above 6-7%. The effects seem to compound non-linearly into a curve that breaks steeply when people start to drop out of the workforce (which is why we should probably use the employed population percentage rather than unemployment rate). Staunch conservatives will still argue that any person who really tries to find work can, even if they have to clean toilets or collect aluminum cans. And we all have heard the stories where such adversity produced more valiant and successful people. But the Great Depression and our current depression have proven that this a ridiculous position to take on the whole. Otherwise, we have to argue that depressions produce lazy unreasonable people just when they need work most.

    I don’t see how we can weigh the needs and costs of anything approaching a good, much less optimal, public policy without understanding the true net costs and benefits of inflation and unemployment. As a person skeptical of all economic theories, especially untested ones, I think we have to consider how the pragmatic 80-20 rule applies to any price buffer program lest we bite off more than we can chew. I would argue that some level of significantly higher inflation is a price worth paying to enable every able-minded person who wants work to be able to find a job under the parameters I discussed. At the same time, this is where economic models should compete to predict and better understand the interrelationships otherwise my fear is we are only kicking the can of a deeper underlying socio-economic ill down the road.

  • http://www.ourdime.us Dustin

    >>There is nothing in FE and PS that ensures FP
    That was not my suggestion. I said FE is a step forward toward FP. A start, but not end. FP, btw, would require FE. If there are people still wanting to work, then you are not, by definition, at Full Productivity.

  • http://www.concertedaction.com/ Ramanan


    Don’t have a direct quote and my comment is somewhat related to your comment.

    MMTers have claimed using agreements such as “government is the price setter” which sometimes extends to the price level in addition to the usage of price for “interest rates”.

    The phrase “price anchor” is also suggestive of this.

    Perhaps Randy Wray’s text “Modern Money” says this more explicitly when he talks about exogenous pricing.

    “There is an alternative. The government can instead let quantity ‘float’
    and fix prices exogenously. While the govemnment can, in principle, set the
    price of anything and everything that it wants to buy, it is probably
    preferable and certainly sufficient (for reasons discussed below) for the
    government to fix only one important price.”


    This view is incorrect in my opinion. Control of financial “things” (such as the short term interest rate) is different control of real “things” (such as the price of goods and services).

  • Phil

    “Randy Wray” (or Randy Ray) sounds like the name of a porn star.

  • AWK

    Make sure you get Randy’s latest video, “Randy Wray does MMT 7″ coming out from Vivid Video. It’s 2 hours of sexy non-stop economic action that will engorge your head and make it explode!

  • Colin, S.Toe

    Tom, I think I share your sense that we could see major changes going forward (for instance, such as might change the political viability of publicly funded employment). It is for this reason that at this point, I support trial of various initiatives, rather than committing to a single panacea (however, discussions such as of the JG may be good preparation for contingencies).

    I would be very interested in your thoughts on what a “forward looking approach” might look like.

  • Colin, S.Toe

    An ideal buffer would be elastic; the size of the military should reflect its targets (assuming it can fill them), not external labor conditions. However, service people would seem more likely to choose private sector employment over extending a military career when job prospects were good. The military would then have to increase recruitment, most likely from recent graduates and the low-wage end. This might have a ‘buffering effect’ at the mid-wage level (but perhaps the opposite at the low end) in an expanding economy. I have also suggested that undocumented labor is an actual buffer stock.

    It is for such reasons that I think it impossible to predict a priori the effectiveness of any potential ‘buffer’ on price stability under varying conditions, as its effects trickles up (or down) through the economy.

    Moreover, ‘buffer stocks’ are only one kind of ‘thermostat’ of which federal spending, taxing, and interest-rate setting are other forms. With the aid of MMT concepts, policy makers could identify and/or recommend creating additional ones controlled or strongly influenced by federal policies, examine their actual macroeconomic correlates, and perhaps achieve much better PS/FE (and productivity) results through a combination rather than relying on just a couple of sledge hammer ‘levers’.

    What is needed is an MMT/TPC ‘think tank’. Donations?

  • Colin, S.Toe

    I support abolishing payroll taxes and ‘replacing’ them with a VAT-type tax on consumption. Could the same countercyclical principle be applied to that?

  • beowulf

    Yup, in fact there’d be a tighter correlation between AD and consumption tax than between AD and payroll tax. The fly in the ointment is that than unlike Australia, Canada, UK (and everywhere else) we don’t have a federal consumption tax.

  • Nils

    Well you guys are the economists. I’ll just leave you to discuss the term depreciating assets.