THE EVOLUTION OF MMT….

I’ve been fairly vocal in comments in recent weeks about my displeasure with the job’s guarantee (JG) that most MMT proponents are in favor of.  The comments have set off a bit of a firestorm with the JG coming under substantial defense and attack at various other sites.  Some notable attacks came from Rodger Malcolm Mitchell, Rogue Economist and John Carney at CNBC.  Bill Mitchell and several of the founders have been vocal about their support of the JG as it’s clearly a central component of their decades of work on MMT.

In his latest MMT primer Randy Wray elaborated on the debate:

“Bill’s post led to a bit of a scuffle over what is actually in MMT—with Cullen arguing that the Job Guarantee cannot be a component, while Bill insisted that it must be. Warren has sided with Bill and written very persuasive comments arguing that we need the price anchor.”

I haven’t been very clear about this so I should be.  It’s not that I think the JG “cannot” be a component of MMT (Bill drew a very clear line in the sand saying that the JG is “central” to MMT and not “peripheral”), but that our knowledge, understanding and implementation of modern money need not involve the JG.  The JG might be central to the idea the founders had when creating MMT, but that just means it’s central to the original concept of MMT as they saw it.  And they have by no means proven the JG to be the optimal usage of the government’s currency supplier powers (despite substantial evidence and persuasive arguments).   I’ll cover this in more detail in the near future, but I question whether the JG is the optimal usage of these powers.

But the most interesting point that arises from all of this is the clear evolution of the theory (something which is an excellent development whether you are in favor of the JG or not).  The fact that we are having these debates is important for the development of MMT.  Scott Fullwiler posted an excellent comment to a reader on another site:

“where MMT or Neochartalism go is not up to Bill or any other specific person, as the Keynesians proved.

By putting MMT out into the blog world and getting our wish of having a following, the consequence is that we don’t have control over the path it takes. We can do research and hope it influences that path, but it’s no longer ours exclusively. We could have kept tighter control if we had chosen to continue to work on the fringes and remain almost completely unknown.

So, going forward, and perhaps even now, whether the JG is required part of MMT is not for us to decide, even as it certainly is central to previous academic MMT literature. Such are the costs of gaining popularity and having others jump on board. I personally prefer this reality to the alternative path of remaining obscure.”

It’s clear that the founders of MMT see the JG as a central piece of the puzzle.  So exclusion of the JG would make you something other than the MMT that the founders envisioned (which is where I guess I find myself currently).  The always astute JKH referred to my stance as “post MMT” or Postmodern Monetary Theory (PMT?).  Whatever it is, it’s a good development.  Any good school of thought should hope to evolve and expand its reach and impact.  None of this implies that my thinking on the JG is somehow superior or makes for a better “brand” of MMT, but one thing is clear – MMT is becoming more mainstream and gaining a “following” as Scott said.  That’s enormous progress and the founders of MMT should be incredibly proud of what they’ve built.  No matter where it goes MMT will always be linked to the names Mosler, Mitchell, Wray and the other founders.  And given the strength of the arguments and work over the years I am certain that MMT won’t evolve too far from what they’ve always envisioned it to be.

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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  • http://jerrykhachoyan.com TheArmoTrader

    While I said with Cullen on the JG issue, I do believe that we can implement a ‘temporary JG’ program which would hire workers in the short-term (1-3 years) to work on projects that would benefit the public, like infrastructure spending…With this I do believe we can get out of the balance sheet recession much quicker. Not only that but it would lower unemployment (and increase aggregate demand) just until the private sector picks up.

    So you would have the best of both worlds; Lowering unemployment by doing some fiscal stimulus spending, and not having the problems that might come with a JG program.

    As for MMT gaining steam… HELL YES IT IS! I was just on youtube earlier today reading some comments and I saw one comment talking about how Europe’s problem is the Euro and the fact that countries do not have monetary sovereignty…Asked if the commenter follows MMT, he said he did. Awesome!

  • http://jerrykhachoyan.com TheArmoTrader

    “While I said with Cullen”
    Should say side*

  • SS

    Just a bit of advice for you. If you do separate yourself more and more from the founders of MMT then I would do two things. Don’t forget where you came from. And don’t politicize the debate.

  • Jo

    Plus, it’s not like anyone cares about the MMT freakshow anyway.

  • Ben

    First time poster here, but long time reader. I’ve been following the debate closely over the merits of a JG. Very interesting arguments on both sides. I’m in favour of a JG, because I think it is impossible to eliminate involuntary employment without the government stepping in. I don’t think we should accept involuntary unemployment as a necessary evil of capitalism.

    You’ve said previously that you may favour a small JG that replaced unemployment benefits. You’ve also suggested tax cuts and incentives for innovation as a means of driving demand. I don’t see why all these things couldn’t be implemented at the same time. I think you overestimate the number of people the JG would employ. You mention 13 million, but you would not need to hire 13 million to a JG to create 13 million jobs as the multiplier effect would work to create additional private sector jobs. As the economy recovers, the pool of JG workers would shrink.

    I do think the government needs to be prepared to employ those unable to find work, otherwise what do you do with these people?

  • Hugo Heden

    Will be interesting to see your thoughts on all this – full employment with price stability – the holy graal of macro and generally believed to be impossible to achieve.

    MMT argues convincingly (IMO) that JG solves this dilemma (although they dub their version of full employment “loose full employment”) – resulting in even better effects on price stability than today’s system (which uses mass unemployment to control prices).

    Now you claim that there may be yet other ways to reach the goal (if I understand you correctly?) based on MMT insights – but without JG.

    This will be very interesting!

  • stone

    The current system in the UK requires people to sign a form every two weeks to get unemployment benefit. You could say that the JG tasks people will be made to do are just more involved signing on formalities. The danger is that work done under the JG will out-compete goods and services provided by the private sector- So causing a slide away from well paid, efficient, private sector jobs to chaotic but subsidised JG provided employment.
    The worst case scenario seems all too predictable where the entire private sector morphs into being a parasitic FIRE sector whilst the entire real economy is covered by an inept JG program.
    I think it would be much better to have government spending matched $ for $ with an asset tax and instead of a JG program to have a citizens’ dividend paid to everyone irrespective of whether they earned other money ontop.

  • Hugo Heden

    > “I’m in favour of a JG, because I think it is impossible to eliminate involuntary employment without the government stepping in.”

    Yes, this is an argument often put forth by post-Keynesians. (Maybe not “impossible”, but “difficult” to say the least.)

    Neoclassicals (and new Keynesians like Krugman) believe that unemployment is in large parts due to “downwards sticky prices and wages” which in turn results from government and union intervention. “Wage cuts can clear the labor market” is the mantra, “but the government intervenes with minimum wage legislations etc which keeps the unemployed out of work” they say.

    Post Keynesians (from which MMT seems to have inherited quite a bit of thought) argue that not even with perfectly flexible prices and wages, unemployment would be eliminated. Price and wage stickiness is not the issue — it’s about deficient aggregate demand.

    Trying to lay out the argumentation in the MMT wiki: The_Role_of_Government_Deficits#Wage_Cuts_or_Government_Deficits.3F

    MMT also emphasizes deficient aggregate demand, saying that government deficit spending needs to offset the demand drag induced by non-government “net saving desires”.

    > “I don’t think we should accept involuntary unemployment as a necessary evil of capitalism.”

    Agree.

    Mass unemployment results in huge permanent losses every day in foregone output and income. Add to that the depreciation of human capital, increasing family breakdowns, child abuse, crime, medical costs, skill loss, psychological harm, ill health, reduced life expectancy, loss of motivation, racial and gender inequality and loss of social values and responsibility. The personal, family and community losses are enormous and persist across generations.

    Yet, many seem to prefer this to a JG. Why?

    There are those that argue that full employment can be achieved without JG of course. As I’ve been trying to sketch here, there are counter-arguments put forth by post-Keynesians and MMTers. It may be *possible* to achieve full employment and price stability without government stepping in with a JG program — under certain conditions? This may be what Cullen will show us?

    > “You’ve said previously that you may favour a small JG that replaced unemployment benefits. You’ve also suggested tax cuts and incentives for innovation as a means of driving demand. I don’t see why all these things couldn’t be implemented at the same time. I think you overestimate the number of people the JG would employ. You mention 13 million, but you would not need to hire 13 million to a JG to create 13 million jobs as the multiplier effect would work to create additional private sector jobs. As the economy recovers, the pool of JG workers would shrink.”

    Agree. An MMT aware government could use general aggregate demand stimulus to rebuild infrastructure, the education system, health care etc — or choose to cut taxes if that is preferred by the electorate.. This could bring down unemployment to a few million perhaps.

    Eventually however, if this is taken too far inflationary pressure would build up. An inflation barrier is reached at some point. This is akin to what mainstream calls NAIRU.

    A JG could then offer employment for the last few millions. With a JG program, price stability can be maintained together with full employment. There are a number of advantages of using a bufferstock of employed rather than unemployed to achieve price stability. It has even better inflation fighting effects, and results in less human misery.

    > “I do think the government needs to be prepared to employ those unable to find work, otherwise what do you do with these people?”

    Right.

    Trying to summarize the MMT JG argumentation in the MMT Wiki: http://mmtwiki.org/wiki/Full_Employment_along_with_Price_Stability

  • stone

    With a citizen’s dividend system, the buffer stock would be self employed people who were doing casual work ontop of the basic citizens dividend. Employers would have to entice them away from their own entireprises into becoming employees. Having the entire tax burden as a flat asset tax would make it much less complicated and informal to have a micro-business.
    The root source of all private sector profits is either spending of previous profits, increasing private sector indebtedness or government deficits. Having no impediments to small “mom and pop” style businesses would mean that more profits got recycled back via consumption rather than leaking to savings as currently happens with corporations owned by institutional investors etc.

  • John Armour

    stone,

    If JG tasks are to be little more than “signing-on formalities” then there’s surely no danger they will out-compete the private sector.

    My understanding (from reading Bill Mitchell) is that JG jobs would be mainly in areas where the private sector has little interest. So the possibility of competition with the private sector is not an issue.

    I also think you may be missing the really important point inherent in the JG idea, that of the “buffer stock”.

    Whereas orthodox policy seeks to use unemployment to moderate inflation (the unemployed being the buffer stock), JG thinking turns that on its head and uses employment via the JG programme as a buffer stock to underpin price stability.

    http://bilbo.economicoutlook.net/blog/?p=17564#more-17564

  • Jack

    Outsider’s perspective. The intellectual elements of MMT are quite interesting (wanting to learn more). However, when you start talking about ‘founders’ and its creation, I start feeling nauseous. Maybe it’s just me.

  • stone

    John Armour, my worry is that what if the private sector predominately devotes itself to finance, insurance and real estate and that gives the few remaining private sector employees a very good income that enables them to buy all of the goods available (probably imported). There could be a class of people who have a rentier income and a good education and well paid jobs. There could be very little mobility between that group of people and the JG bunch so decoupling the buffer stock idea. Then thanks to the fixed JG wage, stuff becomes too expensive for the JG people. It then is a short slippery slope to having the JG people producing what the JG people need to sustain themselves all under government supervision.

  • Very Serious Sam

    “Europe’s problem is the Euro and the fact that countries do not have monetary sovereignty… Asked if the commenter follows MMT, he said he did. Awesome!”

    Come on. Even Krugman, cetainly not a MMT guy, claims that Europe’s problem is the Euro and the fact that countries do not have monetary sovereignty.

    Which is, BTW, a very simplified view, and, at least as an isolated claim, simply wrong. Regardless if the school behind is Freshwater, Saltwater, Keynesian, MMT, Martian or whatever.

  • D

    As I understand MMT (and I’m willing to concede that my understanding may be flawed), it appears to be just another theory providing intellectual cover for engaging in greater central planning of an economy. It seems to me that implementation of the social polices advocated by MMTers would dramatically increase US government intervention in the economy. Whether or not such central planning is considered a good thing invariably depends on one’s beliefs about a variety of topics.

    Below are some of my concerns with MMT as it relates to a JG.

    I believe that an announced application of MMT-inspired social policies, such as a JG program, would lead to an eventual boycott of the US dollar, and the currencies of other countries that inevitably would be forced to emulate us, by foreign suppliers. As a seller, I would not want to continue accepting or holding a currency from a government that has announced it will create unlimited amounts to satisfy domestic employment goals. Although this will play out in different ways, one likely consequence would be a more militarized foreign policy necessary to coerce to continued trade.

    There appears to be no consideration given to whether skilled labor would be readily available in the amounts and locations necessary to support envisioned infrastructure spending. How would local labor deficiencies be rectified? Implementation of social policies derived from MMT, like those derived from any centrally planned framework, would require development of other polices to make them work.

    By further destroying accurate price signals, MMT encourages poor deployment and overconsumption of natural resources. To see how this can play out, look at China. Think about the cost and waste of empty cities and thousands of ill-conceived infrastructure projects.

    Finally, if a JG-type labor policy were implemented, in response to our current economic mess, when and how does it stop? Or does it simply become a permanent feature of our government and economy? I’ve not heard clear answers to these questions.

  • supermundane

    “My understanding (from reading Bill Mitchell) is that JG jobs would be mainly in areas where the private sector has little interest. So the possibility of competition with the private sector is not an issue.” – John Armour

    This is crucial. Moreover, and perhaps this is what sticks in the throat for some of the more right-leaning commentators, including Cullen Roche is that there are some things which really shouldn’t be subject to private sector commodification and profit-taking. The JG could render some things, that which we might deem ‘the commons’ to be off-limits and not-for-profit for the sake of a viable and healthy society. If the current financial crisis has shown us anything, it’s the importance of protecting a sense of commons.

    The arguments I’ve seen thus far against a full-time JG essentially amount to falling back on Neoclassical fallacies and appeals to American exceptionalism and ‘progress’. Both contentious at best and at worst, pernicious myths.

  • Phil

    I get that feeling a bit too.

  • rhp

    “As I understand MMT (and I’m willing to concede that my understanding may be flawed), it appears to be just another theory providing intellectual cover for engaging in greater central planning of an economy.”

    Your opening line proves and emphasizes Cullen’s point that the descriptive and PRE-scriptive components of MMT need to be well delineated. Otherwise, we are very quickly getting into all kinds of debates that are meaningless because people are using two definitions of the same phrase (“MMT”).

    A large part of Cullen’s work has been devoted to helping people understand that MMT is NOT a theory in its description of how the monetary system works, but is practical reality. The “T” in the MMT becomes very confusing, because it relates to the PRESCRIPTION, which IS up for debate. JG (in my opinion) is part of the PREscriptive side of MMT and IS theory. Unless the descriptive and prescriptive aspects are well delineated, MMT’s beautiful description of the operational realities of money risks being discredited because of its theorizing.

    First off, we need to get people to understand how money actually works and the fact that we are NOT on a gold standard any longer. Then we can have an intelligent debate about JG.

    Just read Krugman’s article in NYT today to see how far we still have to go in basic education. AAARRGH!! He still thinks foreigners are holding our “debt” and that our taxes fund our debt.

  • Phil

    I totally get your suspicion of an open-ended government jobs program, Cullen. If you know of a way to avoid it in the long term, then I’m all ears. You might simply reach the conclusion that a certain level of (necessary) involuntary unemployment is an acceptable price to pay to avoid further government intervention into the economy. If so, I suggest it would be odd to deny the unemployed a basic subsistence income at the very least, along with basic services (either subsidised or directly provided) such as healthcare, education etc.

  • Scart

    Cullen, seen krugmans post on income from US “debt”?
    http://krugman.blogs.nytimes.com/2011/12/31/us-net-investment-income/
    Great stuff for kitchentable MMT-propaganda..

    Filled in the last piece of the “take away grandmas pension income”-argument for me. Another step in krugmans learning of MMT?

  • SteveK9

    (Warning: comment by newbie) There seems to be a hint of morality in the objections to the JG (encouraging laziness?). One could say that the goal should be to consider only an objective reality — i.e. ‘what works best’. But, morality can intrude into this pristine goal, if it indeed led to some loss in optimal efficiency … or whatever measure of ‘goodness’ an economic system should have.

  • Andrew P

    There are huge POLITICAL problems with a permanent job guarantee. Doing it as a strictly temporary measure during Depressions to replace long term unemployment benefits is one thing, and is probably a good idea. Having it as a permanent fixture is a very bad idea because it ignores the way incentives work on humans, and the proven paths on which political systems evolve. If it becomes permanent, it is inevitable that the people in the make-work jobs will become unionized, and they will use their political clout to grab ever better wages and benefits. They will evolve into an elite entitled class, just like Wisconsin public employees. And they will be so numerous, they might even take over the State more completely than the current public employee unions have.

  • Dunce Cap Aficionado

    Of course not Jo, that’s why you come here so often to attack it……

  • Andrew P

    During normal times some unemployment has to be the price you pay. Having a WPA like program during Depressions is a good idea.

  • pebird

    Cullen:

    I agree with this post 100%. The fact that we can debate a controversial aspect of MMT in a civil and productive manner is rare in the blogosphere. I cannot tell you on how many economic blogs, as soon as someone crosses a deeply held point, the discussion becomes impossible and nothing of value is gained. That is incredibly frustrating.

    This discussion is good in another sense – I often read comments that state how difficult it is to communicate MMT to friends/associates, as soon as the statement “the government in not revenue constrained” comes out, the blinders come down and the conversation stops. There is no doubt that all of us are subject to that same tendency. The JG is one of those sensitive areas where we may make assumptions that are true in certain contexts, but keep us from understanding all the consequences of our assumptions.

    The only way we can move forward and have MMT become more mainstream is by having these conversations to shape and sharpen our thinking. Otherwise we fragment and weaken the message.

    This does not mean that we should sweep disagreements under the rug – the discussions should continue while we agree to disagree on certain points.

    Very good post.

  • Imtheknife

    “John Armour, my worry is that what if the private sector predominately devotes itself to finance, insurance and real estate and that gives the few remaining private sector employees a very good income that enables them to buy all of the goods available (probably imported). There could be a class of people who have a rentier income and a good education and well paid jobs. There could be very little mobility between that group of people and the JG bunch so decoupling the buffer stock idea. Then thanks to the fixed JG wage, stuff becomes too expensive for the JG people. It then is a short slippery slope to having the JG people producing what the JG people need to sustain themselves all under government supervision.”

    Stone- why would the private sector narrow it’s selection of goods and services produced? There is no reason for this to happen. The JG would not change the fact that people have demand for televisions, cars, soda, etc- the private sector will continue to provide these things because the public sector/JG will not. You’re implying that all the major productive corporations in America would stop producing whatever they produce because the previously unemployed are now building infrastructure and community projects. This makes no sense. Your premise, contained within your first line, is simply wrong, and there is no basis on which to take it as an assumption.

  • stone

    “Stone- why would the private sector narrow it’s selection of goods and services produced?” (to the FIRE sector)

    They would do this because the FIRE sector is the most efficient way to harvest government deficits. The finance sector cuts out the middleman (the middle man being the real economy). I suppose it is a bit like evolution of the peacocks tail. That evolved because it tapped straight into getting female peacocks to accept the male peacocks genes without getting involved in helping the male peacock live its life. Similarly the FIRE sector taps straight into gathering money from government deficits without getting involved in the real economy. You can see it happening now. In the 1960s about 5% of corporate profits were from the FIRE sector. It went to >40% in 2007. If you personally have money, you can just import any real goods you want.

  • Wantingtoretire

    A JG is such a ridiculous concept to most Americans, it is difficult to see how it can even get a start, even if it is a good idea. Because it goes against the “grain” for so many American people, all kinds of arguments are put on the table to disqualify this notion as remotely sensible. Because everybody is biased, there can be no objective discussion. There is no such thing as an objective personal idea. That is how people work. There can only be acceptance of a particular bias and rejection of other biased ideas.

  • geerussell

    We all have to walk and chew gum at the same time. There’s work to be done in debating public policy within MMT paradigm and there’s work to be done dragging the masses, often kicking and screaming one at a time into that paradigm.

  • stone

    Also a key aspect of the MMT cumulative deficits program is having an ever growing stock of net financial assets (bank reserves or government bonds). Government debt is just another way of saying private wealth (inevitably this filters through to a few key institutions and high net worth individuals). extracting a juicy return with all that private wealth justifies an army of wealth managers. You then get financialized “asset manager capitalism” rather than capitalism being involved in the real economy.

  • Work

    Well now I know why the “T” in MMT. Whatever label is given to the descriptive (in which JG is not inherent but just one of the tools) I sure hope it doesn’t incldue “T”. Modern Monetary Operations?

  • Work

    But if we’re talking theory, how about government spending on improving infrastructure without using debt to fund it. Yes, print it out of thin air; but only so much it doesn’t cause out of control inflation – how much that is would be an interesting discussion.

  • http://www.rogueeconomistrants.blogspot.com rogue

    My post wasn’t an attack on JG, but rather I wanted to point out that it needed clarification on duration, and that there should be more yardsticks to deciding whether to grow such a program than just looking at how many people are applying for it. Program administrators need to be cognizant of what the regular economy is already trying to do, otherwise, it’s no longer just a countercyclical program. It would already be an alternate economy by itself. I want to stress that I agree that we need some sort of jobs program to get people working when the private sector is not hiring.

    But given that MMTers have indicated the JG is meant to provide ‘transition jobs’ only, I don’t get the insistence to continue it when the economy has jump-started and the private sector is already willing to hire.

    I know all the arguments for helping people who have lost jobs, I’ve made them myself. But now I’m going beyond, so that when we do agree to institute a jobs program, it’s clear what its aims would be,and to what extent its reach would be made. Otherwise, it risks having a mission-creep, and before we know it, it’s become the main constraint to encouraging private sector to create jobs.

    While the JG should help people survive loss of their regular jobs, it should not completely shield them from the difficult decisions of making the necessary adjustments and learning new skills, so that they can rejoin the regular economy, wherever its growth is going to be.

  • bob Foley

    I am also an interested observer of MMT and still thinking thru how it works.

    I agree (for now) with Cullen about the problems of including a Job’s Guarantee in MMT. It’s a great idea until you try to implement it. (It’s those pesky details that get you every time).
    It has five defects.
    • It competes with the private sector for workers.
    • There isn’t a way to end it when the labor is in short supply.
    • There isn’t an easy way to determine what the pay for the workers will be or how the qualifications of the workers vs pay is calculated.
    • In the private sector, the ultimate penalty for a worker not performing is firing. What could possibly induce a JG worker to perform if it is truly a guaranteed job? Who decides that a GJ worker isn’t performing?
    • What effect will the undocumented workers have on this? The GJ program will remove the competition for low end jobs which will increase the demand for undocumented workers.

  • Dan Kervick

    Great comments by Hugo Heden,

    “Post Keynesians (from which MMT seems to have inherited quite a bit of thought) argue that not even with perfectly flexible prices and wages, unemployment would be eliminated. Price and wage stickiness is not the issue — it’s about deficient aggregate demand.”

    And I think the Post-Keynesians are entirely right. Think of it this way: One way of viewing an employed worker is as a firm consisting of a single person. That firms provides services to other firms for a price. We happen to call the service “labor” and the price a “wage.”

    Now what happens to firms in a capitalist economy? Some thrive and grow. Some thrive more or less, but a stable long-term plateau. But many firms go belly up. Firms fail very frequently.

    And what happens when a firm fails in a competitive capitalist economy? Does it retool itself and go back to work doing something else? Sometimes. But mostly firms that fail are liquidated. So I see no reason to think that the natural endpoint for a lot of the labor in a capitalist economy – one run on market principles alone without an active, exogenous social support system, isn’t failure and liquidation.

    Of course, in our society, we don’t liquidate human beings in the most draconian ways one could imagine. We’re too civilized for that. Liquidation in our society means instead that we permanently jettison people from the productive sector of our economy, putting them either in jail or on a subsistence dole, and then forget about them.

    Now of course some people are able to re-tool and reconstitute their labor “firm”. If they were fortunate enough to have adequate savings, they might be able to do the re-tooling on their own. But many people who successfully retool don’t retool themselves; they get retooled by others. That is, some source of exogenous support comes along to finance the retooling, just as a failing firm of some other kind might rescued by an outside investor, and reconstituted and rebuilt for new purposes. Or the investor might juts buy of the firms assets, and then disaggregate and repurpose them.

    But that model of opportunistic capitalist finance buying up firms or their assets doesn’t work with individual people. People aren’t owned by other people. So know one can buy the failed human being, or part of the human being, and then invest in it to re-open it as a reworked “firm”. Even less is there a morally permissible, non-barbaric way for an investor to buy up a human beings “assets” and then disaggregate them for other purposes.

    I think that’s the way we need to thing about programs like the JG or similar proposals. We have many people who “fail” as labor firms. Sometimes the cause is a general downturn that temporarily shrinks the market for what that firm offers. Other times there are structural changes in the economy that permanently destroy the market for that firms offerings. What kinds of exogenous public investments make the most sense, then, to deal with these failed one-person firms?

    But there is a moral dimension here that goes beyond the purely economics-oriented approach of optimizing value through investment. Economics treats workers simply as “resources”, and applying economic reasoning alone in a vacuum of morality and humanity would just recommend liquidating or disposing of the workers that have little productive value, and for which the cost of the investments needed to raise their productive value are higher than the added value that would be realized by the investment. So ultimately, it comes down to what kind of society we want: a social Darwinist, sink-or-swim society in which people are regarded as economic inputs who are disposed of, jettisoned and excluded from the productive sector when they are no longer as productive as prevailing market conditions require? Or a society in which we make commitments to each other and continue to invest in developing each other and working with one another even when the costs of these commitments exceed their marginal value?

  • Hugo Heden

    Those being *unemployed* today could organize themselves similarly, though? Or is there a big difference?

    Honestly, I don’t really see the big problem in these workers forming lobby groups (or unions) to protect their interests. There is already so much lobbying going on all over the place. Oil industry, war industry, financial industry etc. A JG workers’ union would perhaps provide with a beneficial balancing force. I wouldn’t be too upset about it.

    And it’s not like they’d have huge amounts of bargaining power.

    I do think that the wage level that the JG offers should be a political question, explored in political debate — debate preferably including the JG workers as well. So yes, there would be some political fighting about this.

    I realize that anything constructive going on among the poorest is a scary thought for others. Agreed, it would feel more comfy if “they” (JG workers or the unemployed) shut up while “we” discuss what wage/benefit package they deserve. And I guess people with jobs potentially constitute a stronger threatening force than the job-less.

    Of course, if the electorate really dislikes the idea of these people organizing themselves, we could prohibit it. That could go for the unemployed today too — all organization forming prohibited. That would perhaps give the rest of us some peace and quiet? (I would very much oppose that though, obviously.)

    But granted, it will be complicated. There will be mistakes. It won’t be smooth all the time. Instances of corruption can occur. There’s probably many mistakes to learn from yet to be done. Much like current unemployment benefit systems, or educational systems.. Or the U.S military — a hugely complex system that has the potential of running amok. Yet, over all it is working pretty well (or maybe it isn’t?). The modern states in the Western world has some experience in managing big complex “programs”.

    Lots of such arguments are discussed at length in the MMT literature.

  • Hugo Heden

    Yes I saw that, some good discussions with Tom there :-)

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

    Thanks Rogue. Didn’t intend to mischaracterize your perspective. Duration is the most important of these concerns. For instance, there is a reason why UE claims are finite. If they weren’t the beneficiaries would be less inclined to look for work. This creates a sense of urgency and motivation. I would imagine that the same sort of complacency would arise from a JG without a specific duration. That’s just one of the many issues here. The bigger issue, in my opinion, is that the obsession with FE and filling it with govt programs that just offer a mundane job and a steady wage is a misguided approach to economic prosperity. It helps economist’s models look pretty, but that doesn’t make it a long-term solution leading to prosperity. I am working up a process streamlining this thinking….More to come.

  • jaymaster

    My first comment here too, after lurking a long time….What the hell, it’s a new year.

    I’ve argued over at Warren’s site that “MMT” be redefined as “Modern Monetary Truths”, as opposed to “Theory” because it is, in its very essence, based on observation.

    As in, “we hold these truths to be self evident”: The US Govt is not revenue constrained; deficit spending is private sector saving, etc. In other words, it’s a description of the way the current monetary system works.

    The job guarantee, on the other hand, is different. It is not based on observation, but is still just a theory of what MIGHT work. At least I am unaware of any cases where it has actually been successfully implemented under a modern fiat system.

    So in that way, it is separate from the core current operational realties of MMT.

  • Hugo Heden

    > “That’s just one of the many issues here. The bigger issue, in my opinion, is that the obsession with FE and filling it with govt programs that just offer a mundane job and a steady wage is a misguided approach to economic prosperity. It helps economist’s models look pretty, but that doesn’t make it a long-term solution leading to prosperity. I am working up a process streamlining this thinking….More to come.”

    Your position is still somewhat unclear to me (although you probably stated it several times already — sorry)

    MMT holds that involuntary unemployment can be eliminated, pretty much for free.

    Do you hold that:

    1) Sure, but that’s not that important after all. There are more important things. Unemployment is acceptable. And compared with a JG program, it’s even preferable. Nobody died from a little unemployment. Or maybe they did, but the society as a whole is still better of without a JG program.

    2) Yes, that is all very good important, but there are better ways to eliminate involuntary unemployment than using the JG. Faster, more efficient etc..

    3) Something else?

    Also, it sounds that you are not in favor of “economist’s models” and making them look pretty etc. Not sure how to think of the economy without using models though? That would just be random chaotic ad-hoc thinking, wouldn’t it? Or is your point rather that they use the wrong models, and you suggest that other models should be used? I could agree with that (depending on which economists you would be referring to).

  • LVG

    MMT is very clearly a theory as Bill Mitchell envisions it. He is explicit about the JG being a core point in MMT’s framework. And that means that MMT is something entirely different than what Cullen often describes. The MMT of Bill Mitchell has no operational reality vs prescriptive aspects. It is a core set of beliefs based on very theoretical ideologies.

    Scott Fullwiler has been less explicit at points and I believe Warren would even agree to a large degree. Wray and Mitchell seem more rigid about the JG. Cullen clearly is post MMT and views its operational aspects as being totally outside of the prescriptive options.

    I think Cullen has the most accurate and reasonable perspective here. Bill Mitchell has been (unsuccessfully) selling his brand of MMT for 20 years. Cullen has sold major mainstream Austrians and Keynesians in less than a couple of years. Bill Mitchell (stupidly) drew a line in the sand pitting Cullen against the others. Cullen’s position is so much more reasonable that I have no doubt where the public will fall and who will lead the MMT influence going forward.

  • SS

    I think the most interesting development here is the dividing lines. We see Beowulf, Traders Crucible, Rogue Economist, Rodger Mitchell and Cullen all falling on the anti JG side while the academics are almost universally in favor of it. Warren is obviously pro JG, but I wonder how much he has simply been influenced by the academics.

    The difference is clear though – the academics are just trying to fill in models. The other non-academics are trying to fill in a reality.

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

    I really don’t like how people are trying to pit me against other people. We are on the same team. We just disagree how the team should be run.

  • Tom Hickey

    Hmm. We haven’t had a JG in the US and we not only have endemic poverty and unemployment but it is growing to the degree that some Very Serious People are proposing a “new normal,” that is, a natural rate of unemployment of not 4-6% but 6-8%. We are also faced with wages being globally fungible, cloud computing threatening to extent fungibility to a great of white collar work, and automation and robotics are soon to make more and more workers completely expendable. In addition, many countries have an underclass that results in intractable social problems that extend far beyond economic data in terms of quality of life and standard of living.

    I am not saying that the JG is the only way to do this, since I am not an economist. But it seems clear that something is chronically very wrong with existing societal arrangements that result in poverty amidst plenty, ignorance where knowledge is available, disease where it could be prevented and treated, and host of other social ills that really are unnecessary given available resources including knowledge. For the most part we are not talking about it seriously in economics, politics or even polite discourse, at least for the most part, even though it is the elephant in the room globally, even in the most developed countries. This is really a shame, since MMT shows that affordability is never the problem and that real resources are the only constraint.

  • Ben

    I don’t see duration as being an issue. If training is an element of JG work (as is advocated by its supporters), and those in JG jobs never have a prospect of career progression or increased earnings whilst in the JG, then that should be incentive enough to encourage workers to seek work with better prospects elsewhere.

    Those without the ability to improve their skills might wish to remain in JG work, but with unskilled jobs increasingly being replaced by machines, down the road an increasing number of workers will need to upskill or be placed on the scrapheap. For me a JG is preferable to parking those people on welfare indefinitely.

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

    You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones dinner. Very little, aside from great parenting and education, was handed to me in life. My psychological development through having to earn things has been a building block that no govt program can ever provide. Ever.

    This comment was written in haste and not well thought out. I have corrected my views several times in other comments and explained my position clearly, yet I continue to see people source this hasty comment as some sort of definitive view of mine. THESE PEOPLE ARE INTENTIONALLY MISLEADING EVERYONE AND BLATANTLY MISCONSTRUING MY POSITION ON THIS MATTER. I took a very personal anecdote and applied it to an aggregate concept in a form that shouldn’t have been stated as such. I do not believe there is a “need for unemployment” although I do question the efficacy of the JG as a tool in achieving prosperity. I am open-minded to the potential use of the JG, but I would prefer to see more evidence on its efficacy.

    I also corrected this position in a very clear statement here since some MMT commenters started to use this one comment to maliciously and intentionally misportray my position on this.

    Sorry for the error here and hasty comment. That came out sounding much stupider than what I actually think on this matter. Thanks for your understanding.

  • Colin, S.Toe

    I appreciate the gracious tone here, especially with regard to those Cullen clearly values as mentors and colleagues.

    However, I’m also heartened by the emotions aroused in previous debates. They indicate a deep concern that makes a refreshing contrast to indifference/denial/stubborn adherence to ‘knee jerk’ stereotypical reactions.

    A couple of quibbles related to undocumented labor. A properly designed, publicly funded workforce to meet part of the demand that has relied on such labor (offering a competitive balance of cost/efficiency) could reduce the reliance on the former.

    Also this labor is commonly provided by ‘contractors’ (typically older residents of the same ethnicity) who provide legal cover to the end user, can pay less than the legal wage, and exercise other controls that to an extent amount to ‘ownership’ of the labor of other human beings.

  • Geoff

    It’s a shame that MMT, which has always claimed to be apolitical, is threatening to split along political lines. I prefer to keep it simple:

    1) Decide as a people how big a government you want (i.e. get the politics out of the way first).
    2) Adjust the deficit accordingly to ensure full employment/price stability.

    Bam, you’re done.

  • LVG

    We can eliminate unemployment for free? Are you delusional? So, you think the government can employ a few more million people by giving them a pay check to pick up garbage so they can go out and bid up gas and food prices and your definition of that is free? Why should I pay more for food and gas so that other people can have a job? Is that free? Is that fair? The JG sounds like an excuse to spread the wealth. Nothing more.

  • LVG

    I don’t know why you’re so intent to hang onto THEIR mmt. People like Bill Mitchell, with socialist tendencies, are holding you back. Unleash yourself Cullen. You’re an innovator in your own right. You’re an entrepreneur. You can take MMT to the next level. But not if Bill Mitchell is poisoning your water with socialist programs.

  • Tom Hickey

    Cullen, MMT began with Warren’s “Soft Currency Economics,” and then Randy and Bill incorporated this into a macro theory drawing on a lot of input from the history of economics, bringing it together as a unique macro paradigm to challenge New Classicalism, especially its neoliberal variety, and New Keynesianism, as well as to develop Post-Keynesianism in a different direction. Warren funded a lot of the research and academic work in creating the new macroeconomic school of thought now called MMT or Neo-Chartalism, although some incorrectly call it Chartalism, since predates MMT.

    On the other hand, Warren, like you, is a financial guy, and he wrote his “Soft Currency Economics” based on that experience independently of academic concern with macro. It was the academics that came later that have developed MMT into what it is today as a specific macro school of thought through their professional publications — which, by the way, many people who consider themselves pretty well versed in MMT have read only a smattering of. Many focus chiefly on the soft currency economics underpinning of MMT rather than the macro theory, and some of these think that the macro theory itself is peripheral to MMT, not to mention the JG.

    I think you have two basic choices. You could take off in a different direction from “Soft Currency Economics,” emphasizing the monetary and financial aspect of MMT instead of entering what is now an academic debate over the future of macro, or you could enter the academic debate and attempt to influence the debate through contributions to the professional literature, which alone will be considered serious.

    But whatever you choose to do, one of these options or something else entirely, I think that being very clear about this upfront is necessary to keep the discussion on track and avoid confusion. Right now I am not clear on where you intend to go with this.

  • Greg

    ” The MMT of Bill Mitchell has no operational reality vs prescriptive aspects. It is a core set of beliefs based on very theoretical ideologies.”

    And of course YOUR core beliefs are simply based nothing theoretical, youve got just the facts!

    More to the point of course is that the neoliberal econ mindset that Bill is attacking is PURE fantasy, PURE ideology with no backing form real world facts

  • Greg

    ” People like Bill Mitchell, with socialist tendencies, are holding you back. Unleash yourself Cullen. ”

    Yeah Cullen is being held back. What a piece of work you are LVG…… *dick*

  • Greg

    Geoff

    NOTHING is a-political. Nothing

  • LVG

    Wray said that Warren gave them funding to pursue MMT. But the MMT developed by the academics is specific about the JG. Warren’s MMT is not. In SCE he says:

    “There is a very interesting fiscal policy option that is not under consideration, because it may result in a larger budget deficit. The Federal government could offer a job to anyone who applies…It is meant to illustrate the point that there are fiscal options that are not under consideration because of the fear of deficits.”

    The key word is OPTION. Unlike Bill Mitchell who says the JG = MMT. The academics have muddied the waters here by politicizing Warren’s theory.

  • Hugo Heden

    Keep it civil there, dickweed. Seems you need to read up a bit.

  • LVG

    Yeah, Bill Mitchell is so righteous huh? He is trying to sell an economic theory as politically unbiased when it involves a government job guarantee. Are you kidding me? Read some of his work. This is a man who hates capitalism. If he had it his way he’d blow up wall street and redistribute the wealth to the poor. He’s the definition of political.

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

    LVG, you need to stop making this so personal. It’s not personal. Let’s stick to the facts of the discussion. Thanks.

  • Colin, S.Toe

    No need to stay away too long.

    I doubt Adam1 is an economist by training, but he sure knows how banks operate.

    Nor am I but I bring a combination of early intimate exposure to the then PTB (PTW?) and the academic world; direct and indirect experience with various minority communities and issues; housing needs, residential construction and mortgages; double-entry accounting; nonprofits; VISTA/AmeriCorps type programs; social services; and the realities of life in a rural, low-income area.

    It was informative to learn a little of Tom Hickey’s background and that he is not a professional economist (he had me fooled). How if we could only figure out where Beowulf is coming from.

  • JKH

    “Warren, like you, is a financial guy, and he wrote his “Soft Currency Economics” based on that experience independently of academic concern with macro.”

    Huh?

    Mosler is a macro thinker, big time.

    Macro is not the academy.

  • JKH

    “I think that being very clear about this upfront is necessary to keep the discussion on track and avoid confusion. Right now I am not clear on where you intend to go with this.”

    or exactly what is not necessary upfront, Tom

    this is not an exercise in control

    its an exploration of ideas

  • Greg

    First off no one, including Bill, has ever said this isnt political. Virtually all societal decisions are political, you are trying to paint him as the only political player here. Where we sit today is not because of natural forces or physics its because of politics. We dont have millions unemployed and hoping for a job in an apolitical environment, it is politics which has put them there.

    The politics which says regulations are bad, the politics which says govt can do NO good, the politics which says privatization of all services is superior. There is no unbiased observer which can arbitrate and say this is true or not. You’re spewing garbage LVG, simply trying to argue that only a left leaning view is political.

  • beowulf

    “I think you have two basic choices. You could take off in a different direction from “Soft Currency Economics,” emphasizing the monetary and financial aspect of MMT instead of entering what is now an academic debate over the future of macro, or you could enter the academic debate and attempt to influence the debate through contributions to the professional literature, which alone will be considered serious.”

    The only professional literature that will really counts are those papers that begin with the words, “Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled”. The rest, as Rabbi Hillel said, is commentary.

  • rhp

    I disagree, Greg. The circulation of the human body is a-political. MMT’s description of money flows IS apolitical. That’s the NON-prescriptive part. I agree that as soon as prescriptions are included in the theory, a la JG, a la Bill Mitchell, then things become politicized…….

  • Greg

    “So, you think the government can employ a few more million people by giving them a pay check to pick up garbage so they can go out and bid up gas and food prices and your definition of that is free? Why should I pay more for food and gas so that other people can have a job? Is that free? Is that fair? The JG sounds like an excuse to spread the wealth. Nothing more.”

    So its your position that we are currently maxed out in what food and fuel we can produce? We’ve reached peak production in food and fossil fuels? You might be right about fossil fuels which is why a huge renewable energy push needs to be made ( How bout all JG recipients use battery powered transportation) but you are dead wrong about food production.

    What else exactly might a person making 320$ week be in the bidding for besides food and fuel? 600$/month housing?
    Clothes form the salvation army?

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

    I’m glad to see the conversation returning to a more open discussion of the merits of a JG. Thanks Cullen. Dan Kervick hit most of the arguments I would have made, but here are some thoughts.

    It sounds to me like much of the opposition to the JG is due to it’s “permanency”. A temporary jobs program is fine, many readers argue, but a permanent arrangement to absorb those that are periodically “released” by private firms into the pool of the unemployed isn’t considered necessary or efficient. I wonder whether some of the opposition rests on the mistaken notion that supporters of the JG want to offer a government job for life. The job, itself, is supposed to be temporary — a resting place that affords our fellow citizens the opportunity to continue to work for a basic income even when there is no demand for their services in the private sector.

    No capitalist economy has ever *sustained* full employment. OK, some economists will argue that market economies exist in a perpetual state of full employment as every unemployed person is simply revealing her preference for leisure, given the current structure of real wages. Others design arguments like a NAIRU (non-accelerating inflationary rate of unemployment) to disguise the fact that market economies will never achieve and sustain full employment on their own. Best to redefine full employment so that we are conditioned to view 5, 6, 7, or 8% unemployment as a practical best. But anyone who hasn’t had his head fuddled with this nonsense by a Chicago-type knows better.

    So what do we, as Americans, want to do to cope with the fact that millions of citizens who are ready, willing and able to work will be denied, by the impersonal forces of the market, employment in the private sector?

    Warren used to tell the story of the dog and the bones to make the point: Burry 95 bones in a field and send 100 dogs out to look for them. The best possible outcome is that 95 dogs return with bones. The more likely outcome is that some of the dogs (because they are more skilled or just luckier) return with more than one bone. The dogs without bones are like workers without jobs. No matter how much training they receive or how much discipline you impose upon them, you will never succeed in bringing all 100 dogs home with a bone. Like jobs, there just aren’t enough of them.

    Can policymakers stimulate job creation without a JG? Of course. Can they adjust taxes, interest rates, etc. enough to bring about *and* sustain full employment? Not a chance. There will be economic booms and the private sector will create millions of jobs during the upswing. But there will also be busts — Enrons, AIGs, bubbles, etc. — and millions will become unemployed. A JG is the impersonal mechanism that absorbs and releases workers in response to these endogenous cycles. We can (and should) attempt to limit the size of the JG by preventing the kinds of bubbles, failures, etc. that have avoidable causes (e.g. control fraud). But we will never eliminate the business cycle, I have not encountered a better way to deal with the resulting (involuntary) unemployment than the JG. I am open to suggestions.

  • Greg

    Let me restate.

    Nothing which involves human choice is a-political. All our choices are influenced by how we think and how we think is influenced by where we were raised, when we were raised etc etc. We choose what we like for political reasons on a certain level. The bigger the decision, the more political.

  • LVG

    So these people are going to be farmers? Oil producers? Engineers. Not exactly. They’re going to be people picking up garbage in parks or filling out forms so I can go hunting this season where the government lets me. Meanwhile, they’ll be driving up the price of everything else that they’re not helping to produce. This is a direct redistribution of wealth from those of us with real producing jobs to people who are essentially getting a government handout. This isn’t rocket science. I am surprised at how the MMTers just shrug this subject off as if it’s not a concern. It’s a real weakness in the argument.

  • Tom Hickey

    Well, Jamie Galbraith publicly referred to Warren as an inspired “amateur” in praising him. I took that to signal something.

    BTW, did you read Winterspeak’s recent?

  • Phil

    Cullen, I think you may be missing the central argument underlying the JG concept: i.e. that a certain portion of the population will always have to be unemployed without it.

    Heteconomist explains this quite well (from a left perspective):

    “Unemployment is a macro problem. It is not due to shortcomings of individuals. MMT makes clear that the problem occurs whenever the non-government intends to net save more than is possible given the government’s fiscal settings. Unless markets can induce a change in non-government net saving behavior consistent with full employment, unemployment will persist. Past theoretical attempts to demonstrate such a capacity of the market mechanism have failed, and so no automatic tendency to full employment has been established.

    Earlier neoclassical economists did claim such a tendency, but the work of Kalecki and Keynes showed that they had succumbed to a fallacy of composition. The capital debates further undermined the notion of a full-employment tendency, and aggregation problems uncovered by general equilibrium theorists ended the efforts of the neoclassical orthodoxy to make its case.

    The bottom line is, any argument that depends upon the price mechanism having systematic effects on aggregate output and employment is without legitimate theoretical foundation. Therefore, those who oppose both a job guarantee and a basic income guarantee need to explain how this is morally justifiable given that unemployment is beyond the control of the individual.”

    He neglects to mention the phenomenon of accelerating inflation beyond a certain employment rate, which the NAIRU attempts to pin down.

    By the way, in many countries unemployment benefits are not automatically finite. In the UK you can theoretically claim benefits your whole life, however after a certain period you are obliged to take whatever employment is offered or face having your benefits cut.

    Have you ever wondered why there is so much crime in the US compared to most other western countries?

    I agree that the aim should always be for maximum productivity. The problem however is that even maximum productivity will not provide full employment. Even with a low unemployment rate, the US could still end up with millions unemployed.
    Either these people need to be given a (conditional) basic income, or they need to be given a job at a fixed wage. The charity sector is incapable of covering them on its own, and shouldn’t even have to.

    However, the government could potentially pay voluntary organisations, charities etc to employ them rather than employing them all directly.

    It is unlikely that the only job that could be provided is the raking of leaves in the local park.

    The point of the basic income is both a moral and an economic one – it also serves as an automatic stabiliser during economic ups and downs.

    The JG concept takes this one step further to argue that it is better to give the unemployed an opportunity to work than to pay them to be ‘idle’.

    However, I can see why one might dislike the idea of a government jobs program. But I would argue that even if you reject this, you will still need to provide a basic income.

  • Tom Hickey

    Beowulf, I think that Winterspeak has this about right.

    One point I will add, though, is that I think attempts to pin the failure of MMT to spread (Steve Keen, Steve Keen! seems to be doing better) on politicians is misplaced, as are attempts to make it easier to understand to laymen, and attempts to reconcile it with standard macro.

    This stuff is technical, and on technical material like this the government takes its marching orders from the University. If Obama or Paul or Cain or whomever were to take to the podium and begin spouting MMT he would be a laughing stock before the ink on Paul Krugman’s takedown column was even dry. The Fed and the Treasury are staffed by guys who learned from the same textbooks written by professors at Harvard or Princeton. A populist movement to take over the academy in this day and age is ludicrous, it ain’t 1968 and it ain’t going to be….

    Secondly, while making MMT easier to understand is a laudable goal, the outcome of this will be to win over Austrians, the other leading candidate for a “people’s economics”. This will not help in the Academy, but it will fill the blogosphere with semi-correct rantings and it will make Austrians really mad.

    Finally, the history of paradigm shifts in the Academy is well documented, and they have always happened via dead bodies, never by the future playing nice with the past. When something is true, that is enough. (source)

  • Ben

    “So these people are going to be farmers? Oil producers? Engineers.”

    No, but isn’t it conceivable that those who are already farmers, oil producers, engineers etc, when faced with increased demand for what they produce could quantity expand rather than just raising prices?

  • JKH

    “It sounds to me like much of the opposition to the JG is due to it’s “permanency”.”

    I haven’t researched JG enough to offer much on this.

    But I’d say scope is as much the concern as permanency, if not more so.

    And if 100 per cent scope is inherent in the mission statement of MMT, it seems to me that permanency is a moot issue anyway.

  • rhp

    Totally agree, Greg. That is why I’m so keen to get the descriptive aspects of MMT clearly delineated from the PREscriptive aspects. Otherwise, politics enters and the operational aspect that is so clear in describing “money circulation” gets thrown out and we go back to leeching the patient based on an erroneous operations construct……..

  • Tom Hickey

    JKH, I am all for an exploration of ideas, and I have insisted that thinking out of the box is required. I am not attempting to dissuade Cullen or anyone else from exploring ideas freely. I went into philosophy because it is a license to explore.

    Hereare my thought on this just up over at Mike’s place.

    For example, in my own field of philosophy I decided long ago to abandon academia since I found it to be a wall instead of a door, or even a bridge. One forgoes the feedback of professionals in one’s discipline through ordinary channels, which is extremely useful, but one can find people to work with outside of normal channels, and I have done so. Nothing wrong in my book with being an independent thinker.

    What I see in the MMT debates, however, is a lot of potential misunderstanding, as well as and actual misunderstanding and confusion judging from many comments on the blogs. As we all know from experience, even some very smart professional economists say some stupid things when they venture out of the confines of their specialty.

    I am just saying to be clear, and suggesting a couple of avenues that would be taken seriously by people that count. I am saying to choose what people actually count in one’s opinion and then craft a presentation to reach them and position it in the appropriate venue. That will determine the results one gets.

  • http://www.moslereconomics.com warren mosler

    Hi,

    You all are making way too much out of the jg.

    it comes down to this:

    with ‘state currency’
    there necessarily is,
    always has been,
    is,
    always will be
    a buffer stock policy.

    call that the mmt insight if you wish.

    so it comes down to ‘pick one’-

    gold
    fx
    unemployment
    employed/jg/elr
    wheat
    whatever!

    I pick ‘employed/jg/elr
    as it works best as a buffer stock based on any/all criteria for a buffer stock.

    so yes, it’s an option.
    you are free to pick one of the others.

    Best!
    Warren

  • Greg

    Your missing the point LVG. You dont have to have these people doing the farming in order to increase food production. The question is will the demand they produce at the grocery store be met with simply higher prices or do we have excess capacity for additional food production? I say we do. If your story were true these millions of unemployed people with their decrease in demand would have had a downward affect on food prices. Is that what we’ve seen?

    Oil prices may not be so inelastic simply because weve reached peak oil, in my view. But that still is not a justification to leaving millions of our brethren without an income.

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

    CULLEN: “Obviously, the govt can set prices and employ everyone. But can doesn’t = should.”

    KELTON: No one is arguing that the government should “employ everyone”. It is a job offer. Many unemployed people will not accept the offer. They will have the resources to survive long enough (savings, spousal income, etc.) without entering the JG.

    CULLEN: “What should we, as a society, really seek? We could have some really deep conversations here as you can imagine. And we need to have them because I am beginning to question whether people really understand what money, wealth and happiness are.”

    KELTON: Well, how happy will those those without sufficient income/savings be when, through no fault of their own, they find themselves unable to find work? More importantly, I don’t think we’ll ever get anywhere if we frame the JG issue this way. We aren’t suggesting that the government make “happiness” a policy goal. Employment, on the other hand, is already a policy goal.

  • Anonymous

    Wow, I get some time on the holidays to visit the blog and things are nice and hot!

    Stick to your guns, Cullen. Who’s the boss of the MMT Club anyways? The Church did all it could to prohibit/oppress schism too. It’s still full of dissenters. If the holy council of MMT cardinals decide that their canon will include prescriptive measures such as guaranteed jobs, so what? When ideas fail, there is always someone who can say “I told you so”.

    Couple of thoughts on JG:

    -UE benefits are also intended to help a person survive while looking for new employment. Eliminating these completely (which is implied by “replace”) would not be a productive prescription. Rather, substituting some sort of JG program for continual extension of UE benefits (current strategy) seems more logical. UE benfits lasting longer than six months (maybe a year) are not productive. JG might be the answer to this sort of waste.

    -JG will ALWAYS compete with private and arguably more efficient/productive private employment. Abstractly viewing JG in the context of affecting only some small part of private employment does not mean someone somewhere has a harder time being productive on their own (and offends my libertine notions). And no, I don’t believe private industry is always better then government at all, nor am I a supporter of current political efforts to throw regulations under the bus.

    -JG (improperly implemented) creates moral hazard in a similar way to bank bail-outs. You are right on the money regarding holy grail of economics, or at least practical economics rather than mystical. I wish I could bold that.

    -JG in various forms has been tried throughout history. What lessons are there from these implementations?

    Initially my impression is to shun based on the following complex equation: job guarant(JG) = government jobs (GJ). Many (not necessarily myself) would argue the US already has a bloated and often inefficient, unproductive JG program in a sense. Clearly it can’t compensate for current unemployment. Maybe there is an approach from this perspective to implement a better JG scenario?

  • Tom Hickey

    I disagree with this, Cullen, and the pope agrees with me. :o CARITAS IN VERITATE

    The fact is that in a modern complex society a person needs at least a subsistence income. In fact, according to traditional Catholic teaching, a person that cannot make subsistence is morally obliged to take other means, including stealing from those who have a surplus that they refuse to share.

    Addressing unemployment is a moral question as well as an economic one.

    But it is also a question of efficiency (doing things right) and effectiveness (doing the right thing). In a society in which the government is formed to provide for the common welfare (Preamble to US Constitution) one of the goals determining the effectiveness of economic policy has to be providing the means of livelihood where the individual cannot for no personal fault provide. This is also a matter of economic efficiency, that is, optimizing resources use, human resources being the most valuable.

  • Phil

    The core MMT insight is that only the government can create net financial assets, and that it is not technically constrained in its ability to do so.

    The real limit to its net-financial-asset creating ability is inflation (or as Bill Mitchell says, the productive capacity of the economy).

    Most MMT’ers seem to be united in the belief that the government should therefore create the quantity of net financial assets needed to achieve optimum productivity, without creating high inflation.

    Similarly, beyond a certain rate of employment, only the government can create further (paid) non-inflationary employment (and it is also technically unconstrained in its ability to to so).

    The real limit to its job-creating ability is productivity (i.e: the more employment it creates through a job guarantee program, the lower overall productivity becomes. Inversely, the higher overall productivity is, the less employment it has to create via a JG program).

    Given that employment is better (and more productive), than enforced idleness, the government should create as many jobs as are necessary to ensure full employment, without negatively affecting overall productivity. That is, it should do all it can to ensure maximum overall productivity so as to minimise the need to create jobs via the JG program.

  • Phil

    The sort of conditions that are usually attached to unemployment benefits, such as the need to look for non-JG work and to accept offers of employment after a given period, could also apply in the case of a JG program. However, people would have the additional option of working during their period of ‘unemployment’ instead of wasting most of their time, as is often the case.

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

    Cullen,

    Forget the dope smokers. That’s a cheap trick to diminish sympathy for the unemployed.

    Let’s suppose, instead, that a bunch of hard-working Wall Street types (call them “the makers”) innovate all kinds of new goodies, not iPads and Macbook Pros but CDSs and CDOs. Now suppose these little inventions help fuel a housing bubble and, eventually, lead to a catastrophic meltdown that decimates state budgets. So the unemployed are construction workers, teachers, police/firefighters, and so on. They don’t have the munchies, but their children do. 4.5 job seekers for every 1 job vacancy. Now what?

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

    Ugg. Let’s not bring religion into this. Are you trying to make the internet explode?

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

    Well, a key tenet in full productivity would be steering people out of Wall Street jobs. I’ve written hundreds of pieces on the utility of Wall Street jobs, money manager capitalism and the social tragedy that results in our best and brightest choosing to work at Goldman Sachs over the leading engineering firms….

    This is part of my broader argument. There are ways we can use the govt to retool and refocus efforts to maximize productivity. I am simply pointing out that a JG is perhaps the wrong goal to have here….I’d rather spend $100B a year on my innovation initiative than having the govt hire $100B worth of unemployed. From an investment in society perspective, the innovation initiative has a potentially much higher payoff….You want a real buffer stock for a society? How about 18 year old kids at Harvard dreaming of winning a govt contract to implement the next world changing corporation? Now that’s a buffer stock.

  • SS

    Now I’m really confused. Randy’s article said you sided with Bill. But now you’re saying that the buffer stock of unemployed is not necessarily a key piece of the MMT puzzle?

  • JRIgs (formerly anon)

    This idea came up in a conversation I had recently. I love it, but it in practice it was decided such a thing might be subject to even worse abuses then UE benefits. Maybe that’s irrelevant though. I know if I were unemployed I would prefer this option for sure.

  • John

    The underlying intractable problem is capitalism, and pragmatism is merely a kind of philosophical bandaid over the problem. Ca;pitalism is inherently unworkable and unjust, and it is an anomaly, just as industrialism is. Both tend towards the destruction of the human and of the planet–communism is just the flip side of this aberration.

  • http://www.moslereconomics.com warren mosler

    I believe a careful read of Bill will show he entirely agrees with me.

    mmt shows how there is necessarily some kind of buffer stock at work with state, tax driven, currency.

    mmt shows how using one buffer stock or another alters outcomes:

    http://www.moslereconomics.com/mandatory-readings/full-employment-and-price-stability/

    http://moslereconomics.com/2010/10/04/exchange-rate-policy-and-full-employment/

    MMT shows how the outcomes of an employed buffer stock/jg/elr serve public purpose as currently defined as full employment and price stability vs the other buffer stock choices.

    And you can know all this and still select any buffer stock you want, each with its associated outcomes, which MMT also describes.

    Does that help?

  • http://www.moslereconomics.com warren mosler

    as long as capitalism wins the wars it’s likely to be what we are dealing with.

  • Tom Hickey

    Not a matter of religion but of morality and human rights. A problem that many find with the way economics is practiced is that it is assumed to be amoral. I am not the only one who has a problem with that, as the reference I provided shows. I could have provided other references, too, but I think that Benedict has stated this pretty well, following on Rerum Novarum, Quadragesimo Anno, Mater et Magistra, Octogesima Adveniens, Laborem Exercens,  and Centesimus Annus, source.

  • Android

    good comments dan. you seem to be getting to the heart of how to think about labor.

  • Android

    i agree jaymaster. btw, i am also a long-time “lurker”. my 3rd comment was to dan above.

  • Tom Hickey

    Wow. Well, I can tell you what the response to that will be. Solyndra?

    It’s pretty much a key fundamental of capitalism that a capitalistic society doesn’t need government to be funding innovation. There are public goods that government should fund when private enterprise is unwilling or unable to do so, but financing innovation isn’t one of them. That is the quintessential role of capital and the whole reason for all the emphasis in a capitalistic society on the precedence of capital formation.

    I’ll be interested in seeing how you work through this though.

  • Dan Kervick

    I think there are two distinct questions here related to the job guarantee about what is “part of” MMT. We can distinguish these two statements.

    1. Given the nature of our modern monetary system, it is possible to create a job guarantee program that would serve to stabilize prices and achieve full employment.

    2. Monetarily sovereign countries should institute a job guarantee program.

    The first is a more directly factual statement that can be evaluated with respect to its truth or falsity on the basis of theory and empirical evidence. We can ask whether it is true or false, and what kinds of evidence support it, and to what degree that evidence supports it. But even if one becomes convinced that (1) is true, it is still an open question as to whether we should or should not institute a job guarantee program. Someone might become convinced, for example, that even though (1) is true, there are other factors in play, beyond price stability and full employment, that would make a job guarantee a bad idea.

    Those who beyond statement (1) to assert the advisability of a job guarantee program, by making an outright prescriptive like (2), are committed to more than those who simply assert (1). And they are also probably relying on values or moral commitments that go outside the realm of economic expertise per se.

    Perhaps we could all agree that at least (1) is part of MMT?

  • Geoff

    The beauty of MMT is that you can do both, and spend $200b, as long as we are operating below capacity.

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

    Why do both if one has a potential higher ROI?

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

    It was just one example of many different policies we can implement….but yes, the political hurdle with regards to spending is not something we’re going to overcome any time soon. Although I do think the II, if implemented correctly with pvt sector entities having skin in the game, has the potential to be politically attractive to both sides. And anyone who responds with Solyndra needs to do some more research into the business of private equity and investing. Losing is a big part of winning.

  • Geoff

    It helps me. Thanks for contributing here. Just like Krugman jumps to criticize MMT without having all the facts, or doing much reading on the subject, it seems that many people are quick to attack the JG without a full understanding.

  • Hugo Heden

    You’re out of paradigm, damn it :-)

    It’s not really an either-or-choice between JG spending or “innovation initiative” spending (if I understand MMT correctly).

    Do the innovation initiatives etc as much as possible — sounds excellent to me! But it only works up until the “inflation barrier”.. (something akin to what mainstream calls NAIRU).

    Say that you let the government invest in really interesting future oriented research projects. Deficits increase. Aggregate demand increases too. This trickles down in large parts to the job-less and creates new jobs. Typical Keynesian stuff. Works well.

    But at some point, inflationary pressure starts building up. No more deficits then. Unemployment could still be at 5% unfortunately. Still, good job so far! (We unemployment-phobics like you.)

    However, the inflation barrier is a point where more general aggregate demand stimulus is inflationary. The real economy is reaching some maximum capacity level. Firms (in some sectors maybe) start raising prices instead of hiring more workers. Government spending that entails hiring professional productive people at market wages contributes to bidding up wages and thereby possibly whole wage structures.

    General aggregate demand stimulus is good stuff (if spending is correctly directed obviously!) but only up to that darned inflation barrier..

    There is this interesting thing you can still do: The JG program. You offer a floor level wage- and benefit package to those out of work, to help them maintain job-readiness. Keep the bench-players in training.

    It’s either that, or leave them in unemployment. There is no “either JG or innovation initiatives” — it’s JG bufferstock or unemployment bufferstock.

    Either form of bufferstock has inflation fighting effects, but JG stock is more effective in that regard, and is so much better in many other ways.

    No cost-push inflation? The constant floor level wage ensures that market wages are not chased after or bid up in upwards spirals.

    What about demand-pull inflation then? A JG program being in place works as an automatic stabilizer for aggregate demand over the business cycle. JG spending increases during slumps, counteracting the downturn, and vice versa.

    Granted, there could be an increase in aggregate demand at the time JG was introduced. The JG workers in question will (hopefully) have more spending power than when they were unemployed. Also, the JG requires management and tools. All adds to aggregate demand. My bet would be that a (small?) tax hike would be needed at the time of introducing JG. This would constitute the “cost” of the program.

    On the other hand there should hopefully declining social costs in the slightly longer term (crime, drugs, family break-downs, ill health etc etc). The resulting “costs” in terms of aggregate demand seem unclear, given that.

    So, the principle would be: Spend on good stuff (innovation initiatives etc!) up until the “inflation barrier”. From then on, you can either leave people in an unemployment bufferstock or have then employed in a JG bufferstock (for a non-overwhelming cost). It’s not an either-or-choice between JG spending or “innovation initiative” spending.

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    The point of the JG is that those aren’t mutually exclusive. If you spend more on those sorts of things, then your JG pool ends up smaller. But since the JG is a net gain on its own (reduces social and economic costs of unemployment–including displacement of working people that have to deal with all those issues in govt/non-profit/for profit sectors that can now focus on the productivity of the nation).

    The only point to be discussed is if you want an unemployed buffer stock or an employed buffer stock. You don’t get to have capitalism without some sort of buffer stock to enable price stability. All the other issues–innovation vs. JG–are red herrings that have nothing to do with this essential point.

  • Tom Hickey

    I agree that that the Solyndra thing is way overblown, but it is like Weimar and Zimbabwe wrt “printing money.”

    Off-base maybe, but deeply ingrained. Remember how even Krugman screamed “Zimbabwe,” and he is on the left.

  • Geoff

    Sorry, Cullen, I’ll have to read up on your ii. I was assuming that it would not be able to pick up all the slack.

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    Forgot to finish my sentence–doh!

    But since the JG is a net gain on its own (reduces social and economic costs of unemployment–including displacement of working people that have to deal with all those issues in govt/non-profit/for profit sectors that can now focus on the productivity of the nation), whatever innovation-inducing spending desired can be that much more effective while not inducing inflation (since JG spending falls in-kind the more effective the other spending is).

  • Hugo Heden

    Maybe “innovation initiatives” was a bad example. Could spend on infrastructure, educational system, military system, tax cuts — whatever the electorate prefers. But only up until the inflation barrier.

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    Wrong analogy. “Both are NPV positive” is the correct analogy. You’re making a “capital rationing” comparison where it isn’t applicable–with a currency issuer and capacity utilization less than complete, there is no need to ration.

  • Phil

    An aside:

    Modernism was/is based on two basic aims: 1) to apprehend the actual reality of a given situation through rigorous analysis. 2) to perfect that given situation within its own terms through the rigorous application of knowledge.

    Postmodernism held on to the first aim but found it to be incompatible with the second, given its verdict that everything is inherently riddled with imperfection and contradiction, and that it is in fact precisely this which gives life its vitality. Attempts at achieving perfection inevitably lead to a loss of vitality, a loss of life.

    MMT is modernist in that it lays bare the actual underlying reality of the economy, then attempts to perfect it. This involves attempting to iron out what Marx called the “internal contradictions of capitalism” so as to achieve the seemingly impossible: maximum productivity, full employment, price stability.

    Roche now seems to be coming at the subject from a postmodern persepective. Forget reaching the perfect balance of the three, forget ironing out internal contradictions – focus instead on maximising the overall vitality of productivity above all else, as aiming for ‘perfection’ will only serve to drain the economy of its essential life…

    perhaps

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    Not to mention that there are synergies to be gained–less uncertainty about sales fluctuations stabilizes investment spending, less depreciation in skills (and even higher absolute skill-level) of the involuntarily unemployed adds to national human capital, etc. To only do one because of an erroneous ROI comparison “leaves money on the table” for everyone.

  • Anonymous

    Well, as usual I’m late to the game and I suppose this comment will hardly get read. Worse, I comment only on occasion and really only on this blog, and I don’t have a pretty picture to add by my name.

    But I would like to offer a few thoughts, I will try as hard as possible to distill them.

    1. The economy is clearly one of the greatest drivers of social happiness. In times when it is bad it strains relationships, prevents kids from being born, and causes widespread malcontent and anger. A bad economy possesses the power to divide, and worse. It may well be the most important societal aspect of happiness. Somebody has probably studied that and handed the world a great quote along those lines.

    2. MMT is clearly correct, and in all hoensty not a very hard sell to the layperson (who is, by the way, who needs to be sold. All congress is are a bunch of laypeople with extremely large microphones). Show them sectoral balances on a chart and explain that deficit spending is where money comes from and for someone to have it (them) that means someone else has to have un-had it (that being the deficit). Its a very small leap from there to explain that the US doesn’t borrow to spend, can spend to infinity, and so forth.

    You guys are our only hope. Billions of people suffer, we all suffer, if you guys lose the debate raging right now. Or at least suffer relative to the lives they could have had.

    3. The Austrians/debt hawks/etc are clearly winning the war for the publics eye. CLEARLY. deficit hawks and anti-government sentiments and “government debt is killing us” and “we’re going broke” are clearly winning. I offer that this is because they speak in radical, pep-rally, rally-the-troops, drama-queen ways and they make LOUD and DRAMATIC points in panic-speech. Friends, Romans, Countrymen stuff. However absent any substance it is, people listen.

    MMT remains largely content to remain an academic entity, talk in inaccessible ways, and…

    4. MMT, with Bill Mitchells recent post insisting that the JG is a core component of it, is risking pulling a “Charles Darwin”. “On the Origin of Species” has a couple of absolutely epic points, sweeping in their simplicity, inarguable in their f actuality, that by themselves could be of enormous value to mankind. Simply observing that if some members of a species possess a trait that causes them to have more offspring than members without that trait, over time, causes that trait to become more prevelant over time (and the presentation of a simple formula showing how overwhelmingly powerful this is over millenia) could rennovate psychology, sociology AND MORE. Skipping an elaboration of that, due to my promise of brevity, … it also contained the idea that humankind evolved from monkeys.

    And here’s the point: that’s the only part anybody noticed. Its the only part anybody ever talked about. ENORMOUS SWATHS of the population become angry if you mention evolution, vast masses would debate its reality. This despite the fact that you can prove it in a lab in just a few weeks (and I have personally seen such proof in my freshman biology lab in 1993).

    Nearly the entirety of the potentially huge value of the FACT that evolution occurs at all times in all living things is polluted and convoluted and distorted in Hollywood movies and debated, and hated… because the guy didn’t present his ideas one at a time.

    The entire value lies nearly wasted, the entire point is nearly missed. Assume god, Garden of Eden, Adam, Eve, it makes no difference, evolution is NOT the theory that people come from monkeys, its the INARGUABLE FACT that those members of any population who reproduce the most have their traits become more common over time. And that process has had vastly long enough in humans to define us greatly EVEN ASSUMING Genesis to the letter. Humans are evolving right now (in the direction of which ones have the most kids) and the ramifications for society are endless (and predictable, we have birth statistics). But that doesn’t matter, its a wildly misunderstood and wildly controversial subject, and its all because of the way the world learned about it.

    One step at a time, slowly, most important and inarguable parts first, and the world could have bettered itself for Darwins revelation.

    To summarize, I think the MMT guys are as close to save-the-day spidermans as the world has right now. But I think you are making these mistakes:

    1. You are remaining to academic in your presentations, you aren’t simplifying this enough to let people who have many worries – kids, wives, husbands, lovers, food, beer, more beer, cars, TV shows, and more – grasp the key, factual, inarguable points in a relatively short period of time. The Austrians/anarchists/deficit hawks are winning this battle by far, their arguments are pure pep rally stuff, but it sells.

    2. By bundling the whole sum of your thoughts, however perfectly correct they may be, you risk the ability to sell even any of the package. Are these points enough to materially help the world?

    a) the US can’t go broke
    b) sectoral balances means that for the private sector to save and invest the government sector MUST be in deficit
    c) government surpluses will devestate the economy at this time due to them forcing the private sector into deficit
    d) there are no bond vigilantes coming for us

    Are even the first 2 or 3 enough to materially help the world? Are these inarguable facts?

    Adding the JG makes this, probably, an impossible sale to the world because the world will never swallow a-d above AND the JG in one lump. Do us all a favor, and don’t be Darwins. One step at a time,a nd start with the INARGUABLE REALITIES.

    I will six figures to the cause of marketing MMT. I will do this “as an act of conscience”, to quote Mosler. BUT ONLY if you guys consider the fact that you are risking a Darwinistic mistake by pushing the JG before the world at large has even somewhat grasped the factual, inarguables.

    It would, in my humble internet opinion, be a great mistake to not head the warning I quickly, sloppily, and with many type-o’s above have offered.

    One step at a time, folks. Teach the world and then LET THEM START THINKING IT WAS THEIR IDEA TO BEGIN WITH. People are far more loyal to ideas they think THEY invented.

    Hire a Manhattan PR firm, I know a couple.

    But this isn’t a foot-stomping competition where its ok to lose. This is one of the most important things that will happen in my lifetime. You can’t sell the JG and the whole bundle all at once to the world at large.

    But I think you can sell them a-d above.

    Just my view, and just FWIW. But I’m dead serious about donating time and six figures (or more if it starts to get somewhere), and the condition I stated above.

  • Anonymous

    I’m breaking the lessons of marketing I learned, always the hard way, over a lifetime as an entrepreneur. I blathered on long and boring, instead of just pep-rallying it up. Here is the pep rally.

    IN THE POST ABOVE I OFFERED TO DONATE SIX FIGURES TO THE CAUSE OF MARKETING MMT AND I GAVE A CONDITION FOR THAT DONATION. THAT CONDITION ISN’T PERSONAL GLORY. GO READ IT.

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    The only legitimate ROI comparison here is the employed buffer stock vs. the unemployed buffer stock. Those are the only things involved in any of the discussions here that are mutually exclusive. And by that or virtually any other metric, the employed buffer stock far surpasses the unemployed buffer stock. By your own logic here of invoking ROI, to be against the employed buffer stock–and thus by definition to be in favor of the unemployed buffer stock–is illogical.

  • Walt

    There are a lot of poor workers in any economy. Some are unemployed. Some are employed currently.

    Talk about malinvestment and misaligned incentive programs. What would you pay in the guaranteed job programs? Lets say its something minor like $12/hr = thats $25K a year.

    What would happen to everyone on minimum wage? They’d quit and go join the JG program – better pay. Then what do you do to fill the minimum wage jobs?

    What do you then say to people who are “good workers” who are in the private market working their tail off at a $12 job? When someone who is a total idiot can make $12 an hour at a JG job? The worker in a JC job cant be fired due to MMT – we need him working to keep the ‘theory’ going. So he/she can act in any manner he/she see fit. Do drugs? You have a job. Come in 3 hrs a day? That’s ok – the theory says you need to have a job and are guaranteed one.

    What if the jobs are ‘easy’ – you’d get a horde of people quitting legitimate jobs, even at $1-3/hr higher and going to ‘easy work’ jobs that the govt creates

    There are so many issues with this, I have not even scratched the surface – these are the ones that are created with 3 minutes of thought.

  • Walt

    Further, if every country in the globe did this, and went to their own currency the inflation issues would be enormous. Every country with millions or tens of millions or in a few cases hundreds of millions of people “making stuff” for each other or “doing services” for each other that are not needed in the economy. They get excess wages, which in theory they buy excess goods and services, but at some point they are “full” of excess services and goods – how many cars can these people buy? how many TVs? How many haircuts can they absorb? How many nail salon appointments? Imagine the whole world, each with their own currency, each employing the MMT theory of full employment. You’d have excess everywhere.

    But I’m sure it works well in an ivory tower textbook.

  • Phil

    From the wikipedia entry on ‘full employment’:

    The United States is, as a statutory matter, committed to full employment (defined as 3% unemployment for persons 20 and older, 4% for person aged 16 and over), the government is empowered to effect this goal, and a job is a right.[5] The relevant legislation is the Employment Act (1946), initially “Full Employment Act”, later amended in the Full Employment and Balanced Growth Act (1978). The 1946 act was passed in the aftermath of World War II, when it was feared that demobilization would result in a depression, as it had following World War I in the Depression of 1920–21, while the 1978 act was passed in following the 1973–75 recession and in the midst of continuing high inflation.

    The law states that full employment is one of four economic goals, in concert with growth in production, price stability, and balance of trade and budget, and that the US shall rely primarily on private enterprise to achieve these goals. Specifically, the act is committed to an unemployment rate of no more than 3% for persons aged 20 or over and not more than 4% for persons aged 16 or over (from 1983 onwards), and the Act expressly allows (but does not require) the government to create a “reservoir of public employment” to effect this level of employment. These jobs are required to be in the lower ranges of skill and pay so as to not draw the workforce away from the private sector.

    However, since the passage of this act in 1978, the US has never achieved this level of employment, nor has such a reservoir of public employment been created.

  • Phil

    Perhaps you should actually read some of the MMT literature before imagining to yourself that you can make informed comments.

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

    “The JG is a net gain”. How could you possibly say that with such confidence? There is simply no way you can prove that to be true over many business cycles or generations. It’s like Hugo saying the JG comes “for free”. I mean, these are shockingly naive comments. No offense, but life is not some equation. It is not a model where you plug-in variables. There is no way you can say the JG is a net social gain in the long-run. It could have hugely negative impacts on our psyche if nothing else. This alone is enough to put king size holes in the JG argument.

  • Anonymous

    I have a bad habit of spending like 90 seconds typing things and then later regretting the type-o’s. Fortunately, this is usually relegated to work related emails.

    I am dead serious, though, about being thrilled by the possibility of being able to help what I view as one of the most important things happening in the world around me with a donation of money. I would be enormously proud to help the cause. But I fear the mistake being made by focusing MMT on the JG is enormous.

    I will also set up a charitable foundation (although, I confess, I have never done such a thing) to accept donations to the cause of marketing MMT (and that’s what needs to happen, in my view, these relatively simple and very powerful ideas need to be marketed) if that would be of any help.

    But I beg, truly, the leaders of the MMT movement to focus on really helping people and spreading understanding, and I think the world can only digest this stuff bit by bit, and you will lose the audience you need if you try to sell them the whole 9 course meal at once.

    Anyway, if anybody is interested, I can email Cullen with my contact info about starting the foundation and donating some cash, building some websites (one commenter here some time back mentioned that the world needs a “savings clock). Provided he agrees to keep it confidential, here in the real world I have businesses to run and cannot risk association with what has at least some potential to become a politicized cause.

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

    “No need to ration”. Again, how can you say this with such confidence? Can you prove that UE serves no rataional purpose in society? Just saying it doesn’t need to exist doesn’t prove anything. Of course I know we can eliminate it. The onus is on you to prove that that’s a good thing. I am not even close to sold.

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

    On a related note … here’s from a recent King’s College obituary of Wynne Godley:

    “Wynne rather relished his reputation as the ‘Cassandra of the Fens’. He famously made a double prediction: that under current policies of the first Thatcher government unemployment would inevitably rise to three million, but – the second prediction – that this would not in fact happen, on the grounds that, since in post-war Britain three million unemployed had to be an electoral suicide note, the policies would have to be changed. He was right with the first prediction, and – misreading the not-for-turning dispositions of the Iron Lady – wrong with the second. The actual outcomes appalled him. For Wynne the fundamental economic responsibility of a government was to ensure ‘full employment’. In pursuit of that aim he was uninhibited as Keynes himself and perhaps rather close in his motivation. He believed it was essential to use fiscal levers to stimulate demand, and was even prepared – though under very strict conditions – to countenance temporary import controls to protect and strengthen economic activity. His ideas were controversial and, like the man himself, often stood at an odd angle to the contemporary world, but the moral imagination which informed them was large and generous.”

    http://www.kings.cam.ac.uk/files/about/annual-report-2011.pdf

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

    “the employed buffer stock far surpasses the unemployed buffer stock.”. Again. You speak in absolutes. But there is not even one ounce of proof to back such claims. There was no unemployment in neanderthal days. By your logic, that was a superior way to live. Clearly, that’s beyond absurd.

  • son

    Im mostly a reader here and as many stumbled on mtt and was drawn to to descriptive aspects of it. I am a cpa and at first i dismissed mtt as it completely turned things upside down from i was tought in business school. However i was intrigued because it is in fact inarguable.

    I think i understand the bufferstock and the JG now (after a year of reading various websites on mtt) but i wouldn’t have bothered exploring mtt if it wasn’t for the descriptive aspect.

  • Phil

    The JG concept is already embedded with US law.

    http://en.wikipedia.org/wiki/Full_employment#United_States

  • beowulf

    I guess why supply-side economics didn’t go anywhere in DC until after Art Laffer won his Nobel Prize.
    :o)

  • Wolfepaq

    Good observations Tom – I agree… but when I think like that, I always end up conspiritorial. Why on earth is everything so screwed up when it doesn’t need to be?

  • Hugo Heden

    > “I mean, these are shockingly naive comments. No offense, but life is not some equation. It is not a model where you plug-in variables.”

    Your comments are bordering on insults. Please keep it civil. In my opinion you’ve been “shockingly” dense for a while here — no point in actually spelling that out though? Where does that lead? Realize that we’re just probably thinking a bit too differently to grasp each others arguments right now.

    How come your thinking is about “life”, and mine is about “equations” and “variables”? Not sure those you want to leave in unemployment would agree. As I’ve repeatedly said here –

    Mass unemployment results in huge permanent losses every day in foregone output and income. Add to that the depreciation of human capital, increasing family breakdowns, child abuse, crime, medical costs, skill loss, psychological harm, ill health, reduced life expectancy, loss of motivation, racial and gender inequality and loss of social values and responsibility. The personal, family and community losses are enormous and persist across generations.

    This is the system you want to preserve — because you’re thinking in terms of “life”? And I’m the one thinking in models and equations? Oh dear.

    I’m done here for today.

  • Hugo Heden

    You prefer the mass unemployment program that we’re having today. Seems pretty clear cut. Unemployment it’s beneficial for the human psyche? This is becoming a travesty.

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

    I am simply sticking to the facts here. You called a govt labor program “free”. You actually, factually wrote that. Not me. Do you really think there is no downside to a program where the US govt would potentially hire the equivalent of several Wal-Marts. There are no downsides to that? It’s “free”? No social problems could arise? No long-term productivity concerns? Nothing?

    It is certainly not my intent to insult anyone, but “naive” is a pretty accurate description there. Call it what you will. I just find it hard to swallow the idea that really smart people are passing this off as some sort of free lunch and then criticizing me for questioning that idea….

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

    Today’s an unusual environment. Clearly, depression or borderline depression is a travesty. And anyone who has read my work knows that I am not satisfied with what the govt is currently doing. So no, I have never said I prefer the mass unemployment of today.

  • jonf

    I certainly am not in favor of paying someone to stand out on I-95 with a rake in the rain. But unemployment is a scourge. It destroys lives and families and their dreams along with it. We seem to have entered a time when unemployment is persistent and increasing. The numbers are in the twenty million plus range for the unemployed and underemployed. We also have fifty million living in poverty and an equal with poor or now health care. So the potential GDP lost is very large. Will productivity handle that?

    Mitchell will tell you that due to the thing they call NAIRU we now spend more time worrying about inflation than we do enmployment – - and that might be the right thing to do. So the JG is proposed as the price anchor when the fed steps in to control the inevitable inflation deriving from increased employment. When is the last time we had unemployment of 3% to 4%? It keeps getting higher. We may have entered the range of 8% or above.

    John Carney, on the other hand, worries about crony capitalism, oh hell corruption by any other name, that emerges with stimulus spending on things like construction, etc.

    So, I don’t know. The JG seems very hard to make it work (pun by accident). Mitchell has a 300 page report on the JG. Maybe worthwhile reading before you throw it away. It seems pretty dense to me. But this needs to be debated in some detail before we all stand in separate corners with the guns out.

  • Hugo Heden

    You should be looking at it like this: “What are the costs of my beloved mass unemployment program compared to full employment — is mass unemployment for free or are there costs involved?”

    But of course, then you do the “ah, it’s psychologically beneficial to be unemployed, so we should just stick with it — cool — I know what life’s about, the others are just on about their equations”. Oh god.

    What is the “costs” of a JG program compared to your mass unemployment program? Depends on how you measure them obviously. I wrote “pretty much for free” (didn’t I?) as a rough estimate. You’re clearly upset. Could be a net cost of 1% of GDP (a number I’ve seen from Wray) — or a net gain (as suggested by STF) — probably depending on what social costs you want to include in the calculation etc. I don’t know. Apparently you do.

  • FDO15

    Cullen’s one of the most cordial and respectful writers on the web. This comment section isn’t top notch because he insults everyone. You, on the other hand, called someone a “dickweed” above and the author of this site “dense”. Look in the mirror buddy.

  • JKH

    Thanks for that, Ramanan.

    An extraordinary piece in its entirety

    “The other strand of his work was on macroeconomic theory. His book Monetary Economics (2007, written with Marc Lavoie) is the principal legacy. In a long and often difficult work he argues for the importance of internal accounting consistency and completeness. Every financial flow must come from somewhere, and go to somewhere, and over time these flows must translate into matching changes in stocks of physical and financial assets.”

    Now, can you just imagine how the economics profession might progress if you could just drill that into the skulls of the Chicago school alone?

    (Also the central generic contribution of the MMT descriptive component, in my view.)

    But:

    “A keen gambler, he introduced roulette as an entertainment after the Summer Supper Party.”

    Oops.

    Some risk limits required there.

    :)

  • Hugo Heden

    As responses to “delusional” and “shockingly naive”? Agreed, not the kindest of responses.

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

    I’m not upset at all. I am frustrated by your lack of evidence proving very strong assertions and absolute comments. I am simply questioning the validity of pre-established beliefs. You and the core MMTers have already established your belief that the JG is the end all. I am simply raising some concerns and the answers are not very good so far. If you can’t fully defend your position then don’t bother resorting to calling people all sorts of names (which, contrary to your personal opinion, you’ve done several times in the comments here – one of a handful of people throwing insults I might add). It just makes your argument look that much weaker.

    I never claimed to have all the answers. I very clearly stated in the original post that the JG might not be the best approach. But you have come back firing your ideology at me as though you have the holy grail of economics in your back pocket. Sorry, but I don’t buy it and you certainly haven’t done a good job of selling me or anyone reading here on it….So yeah, I am frustrated. Frustrated at your weak response and lack of general civility in debate.

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

    Look, I am sorry for the strong comments. No harm intended. But please stop diverting the conversation from your inability to create a strong argument.

  • Tom Hickey

    Very nicely stated, Anon, and a very noble offer, indeed. I completely agree with the argument about marketing this in a way that will work. It’s also absolutely necessary to have the professional literature to cite in order to prove points and that has already been developed.

    Now it is a PR game, and there are factions in our society that have learned how to play that game very well. This is the actual opponents that have to meet on the battlefield of popular ideas. See, for example, Thomas Frank’s The Tea Party’s “utopian market populism” at Salon.com. Moreover, the current debate is being driven by a PR structure created beginning in the Sixties to advance the conservative agenda through the think tanks that are now the go-to places for the mainstream media.

    Key politicians do listen to the academy that has to be figured into the equation also. Keynesianism worked politically during the Great Depression even in the face of great opposition because the influence of J. M. Keynes. Otherwise, it would have been a blip on the screen. And FDR’s fortuitous selection of Marinner Eccles as Fed chair that made the difference for the US. FDR’s Treasury secretary (after 1934), Henry Morgenthau, was an orthodox economist that opposed Keynes, whereas Eccles was a demand side guy who understood fiscal. Obama has not been that fortunate. The problem is that there is no one close to MMT that is in line for a position of prominence in either party at the moment. That’s a problem, too.

  • FDO15

    The praxeology point is powerful. We can’t quantify the good that comes from unemployment, but any good athlete will tell you that it’s not winning that makes you great, but learning how to deal with losing. The same concept can be applied here. The psychological downside from building a society with a JG is enormous.

  • Wolfepaq

    The problem is Human Nature. There are Homeless that are there by choice… they are not drunks or in-between jobs. Some people will refuse a JG.

    Also, many who could be economically viable will choose a JG as the path of least resistance and as it has been stated- what doesn’t kill us makes us stronger.

    Humans need the struggle.

    That fact does not obfuscate our Moral obligation to help our fellow man.

    These are two different debates.

    SDG

  • Tom Hickey

    Hey, maybe we need to set up our own prize and hype the hell out it. :)

  • http://www.moslereconomics.com warren mosler

    Cullen- yes, there were no unemployed neanderthals.
    unemployment is a monetary phenomena:

    Full Employment AND Price Stability

    “… one wants to explain the empirical fact that involuntary unemployment is only associated with money-using contractual economies. In other words, real economies that do not use money and money labor contracts to organize production (e.g., feudalism, slave economies, South Sea Islanders discovered by Margaret Meed, etc) may possess important nonlinearities and even an uncertain future — but there is never an important involuntary unemployment problem. Slaves are always fully employed as well as are serfs in feudalism…….Finally it should be noted that herds of animals, schools of fish, etc organize together to solve the economic problems of What? How? For Whom? Without using money, contracts or markets, these animals still face complex nonlinear problems in their search for food and interaction with other herds. Yet animals never suffer from involuntary unemployment!.

    Professor Paul Davidson
    University of Tennessee

    Also, as a point of logic, while I hear you saying there is a need for unemployment, what I’m saying is that even for the reasons you give a jg serves public purpose better than an unemployed buffer stock.

    The trick is keeping aggregate demand sufficiently high so that the jg pool is sufficiently low.

    Best,
    Warren

  • beowulf

    OK, lot of moving parts here.
    1. Full employment target was set in the Full Employment & Balanced Growth Act of 1978 (also know as Humphrey-Hawkins Act), “16 and older” scale is the U3 rate that’s the headline unemployment number every month, if BLS still reports “20 and older”, I’ve never seen it. For what its worth, Humphrey-Hawkins also sets “not more than 3%” as the inflation target.

    2. The “reservoir of jobs” is more of a suggestion than any sort of mandate. Quite intentionally, Congress required the President to come back and ask for further legislation to appropriate funds.

    3. The original post-war legislation, the proposed “Full Employment Act of 1945″ had contained the automatic appropriation for a job guarantee, it was removed by the time the final bill (which also created the President’s Council of Economic Advisers”) was enacted as the Employment Act of 1946.

    4. 1946 Act was watered down at the behest of the conservative Keynesians as exemplified by the Committee for Economic Development (led by former NY Fed chairman Beardsley Ruml and Boston Fed president Ralph Flanders, elected later that year as a GOP US senator from VT). From then on there was a schism between liberal Keynesians who wanted to fill output gap with jobs programs and social spending versus conservative Keynesians who wanted to fill output with tax cuts and military spending.

    5. The essence of MMT is that the govt holds the currency monopoly which makes the budget deficit irrelevant so long as we’re short of full employment (0 output and 0 trade deficit) Or as Wynne Godley put it:
    Carl Christ, of Johns Hopkins University, had the brilliant insight that should an economy ever reach stationary equilibrium, all stock variables as well as all flow variables would be constant; and that if all stock variables, including government debt, were constant, government receipts would have to equal government payments… There is an obvious shortcoming to the original Christ formula in that it applies only to a closed economy. This defect is easily remedied by adding exports to government expenditure (injections) and imports to taxes (leakages).”
    http://findarticles.com/p/articles/mi_m1093/is_n1_v41/ai_20485331/

    6. The (liberal Keynesian) job guarantee would adjust “flow variables” on expenditure side, the (conservative Keynesian) automatic payroll tax holiday would adjust them on the tax side (in either case, the full employment goal becomes closer by accounting for trade deficit by either revenue-neutral tariffs or a cap and trade regime).

  • Tom Hickey

    “Human nature” is what exactly? That’s kind of like saying, Oh, it’s there karma. Philosophers have been arguing about this for thousands of years, and now psychologists and sociologists are investigating it empirically. The fact is that there are swaths of people chronically in poverty, ignorance, and disease around the world, even in supposedly highly developed countries like the US. This is not only a huge social problem, it is an economic one. That’s huge resources going to waste because they are not being developed. Macro is about aggregates. The data are indicative of extreme inefficiency, and also a failure of effective political management based on human rights and providing for the general welfare.

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

    Warren,

    We could have all sorts of debates on that comment. Money is just a social construct. I’d argue that (social) animals most certainly use money. They just maintain full employment or they maintain full death. :-) It is this battle to survive that keeps the animal kingdom at that level of full competition and “full employment” as the concept would apply to it. Eliminate the need to survive thanks to exogenous full employment and you’re eliminating something that helps maintain stability in nature.

    I would reword your other comment though. The trick is getting aggregate demand sufficiently high so that there’s no need for us to have debates about JG pools. I’d love to be convinced that I am wrong. Perhaps I am just stubborn due to personal experience. If so, apologies.

    Cullen

  • Hugo Heden

    > “I’m not upset at all. I am frustrated by your lack of evidence proving very strong assertions and absolute comments. I am simply questioning the validity of pre-established beliefs. You and the core MMTers have already established your belief that the JG is the end all. I am simply raising some concerns and the answers are not very good so far.”

    Fair enough. Concerns should definitely be raised. I have tried to answer as best I can — and will definitely need to read up further!

    Also, as I’ve said earlier today — really looking forward to your future thoughts in this field. (Hope that much is clear!)

    > “If you can’t fully defend your position then don’t bother resorting to calling people all sorts of names (which, contrary to your personal opinion, you’ve done several times in the comments here – one of a handful of people throwing insults I might add). It just makes your argument look that much weaker.”

    I guess it does. Did honestly not mean to be rude.. other than in a few instances — responded to “are you delusional” and “shockingly naive” which was over the line in my opinion. If you think my responses were worse off than the initial name calling, then we’ll just have to disagree.

    > “I never claimed to have all the answers. I very clearly stated in the original post that the JG might not be the best approach.”

    Fair enough!

    > “But you have come back firing your ideology at me as though you have the holy grail of economics in your back pocket.”

    Right, though to me it’s “economic theory” rather than “ideology”. But the line are blurry I guess. And agreed — it’s not just about those factual descriptions that MMT is otherwise good at.

    I honestly think this is not so much about ideology as about differences in understanding of MMT as economic theory. To me, I’m the one who is apolitical and you’re the one who takes an ideological stance — again, this is from my point of view — because all that JG business comes out *logically* from MMT (given that you think the social costs of unemployment are high).

    But I do look forward you your future writings on the subject — will keep an open mind.

    Didn’t really mean to “come back firing” though — just trying to explain how I’m understanding the MMT “theory”, and understand how others think. I think it may all have come out as too aggressive though — in the aggregate?

    > “Sorry, but I don’t buy it and you certainly haven’t done a good job of selling me or anyone reading here on it….

    Not sure.. apparently not in your case. We’re clearly not really reaching each others modes of thinking here this time. But has it really be so bad so that nobody would have taken any interest? Put a lot of effort in this longish comment — http://pragcap.com/the-evolution-of-mmt/comment-page-1#comment-94411 … (but then I got the “shockingly naive” comment which I think was unnecessary.)

    > “So yeah, I am frustrated. Frustrated at your weak response and lack of general civility in debate.”

    Fair enough — and ditto. (But let’s try to not build up more frustration now.)

    I guess debate is frustrating when heating up a bit, and communication and understanding does not happen. And the lack of general civility — in my opinion “you started it” (as they say out there in the play ground). Should probably just have let it go, though it ain’t always easy to just swallow. And you probably think I was the one who started with the rudeness — anything else would be pretty surprising — that’s usually how it goes.

    Keep up the good work. Wouldn’t want to drain too much energy off of you. Perhaps also see it as an opportunity to sharpen your arguments for the future?

  • Hugo Heden

    Ok, sorry about that.

  • plain jane

    I don’t know why a JG would necessarily have to be a *pleasant* experience. It could be pretty austere. Early morning formations, drab uniforms, lunches that always taste faintly like bleach. ;)

  • http://www.moslereconomics.com warren mosler

    Cullen,

    First, the $8/hr jg wage I’ve proposed is about the same or even less than most current unemployment benefits, plus you have to sell your time to get it. So I assume you are against unemployment benefits. Otherwise, you would agree an opportunity to work for the jg wage isn’t a more attractive proposition for the employed person fearing job loss than unemployment. That is, a JG wage equal to or less than unemployment comp. doesn’t introduce the kind of moral hazard that concerns you?

    Second, even in the case of no unemployment benefits, the difference remains that with jg one has to sell his time to get paid. And, via market forces, the financial distance a worker falls when he loses his job will be the same distance he advances when he took that private sector job vs JG in the first place. So if there is any kind of symmetry the loss is as much a deterrent as the gain was a benefit. In other words, the market determination of the spread between JG and private sector employment ensures and will adjust to continue to ensure the fall is a strong enough negative to keep people serious about keeping their job. And the existence of a shovel ready jg pool will keep employers confident that they can replace as necessary by paying the ‘spread’ as well. That is, this is about a market solution for the right two way incentive.

    And the fear factor goes both ways for workers. They may not fear the fall as much as if there was no JG, but at the same time there are shovel ready JG workers nipping at their heals for their job.

    Third, it’s also just as important for business to be able to hire when it wants to so expand without driving up wages as it is to keep those working from slacking off as per your concerns, and the JG does just that.

    For real world data, check out the early years of the Jefes program in Argentina.

    Best,
    warren

  • beowulf

    I’m just a simple country lawyer. Never studied economics at any level.
    Of course, most PhD economists would have to agree that’s irrelevant since as a rational agent I have perfect knowledge of all economic principles.

    To suggest otherwise would make the argument that neoclassical economics is nothing more than mathematical astrology.
    :o)

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

    Hugo, I enjoy the debate. I am not here discussing this stuff because I have all the answers. If I did I’d be out fishing all day and not here searching for the answers to things that I find important. We’re all in this quest for answers together. And there is no more important quest. I am sorry if you found my comments insulting. I just see these very absolute and certain comments from some MMTers that are totally unproven.

    Anyhow, I have enjoyed your contributions to the site. MMTers as a whole are better thinks than most neoclassical economists so it’s nice to see so many out there. It’s a daunting topic we’re trying to conquer here so let’s keep our goals in mind and try not to get side tracked for reasons that are unimportant. It’s never my intent to insult or derail the conversation although I have certainly been guilty of that in the past. Anyhow, thanks again and happy new year. I should probably get out of here and try to do something useful with my life considering I’ve been staring at a computer screen for about 12 hours straight now on a holiday…. :-)

  • But What Do I Know?

    I was cornered the other day at an in-law gathering by the guy who fancies himself a bit of a Socratic cum political theorist. He asked me what I thought about Greece in order to give himself a soapbox to ramble on about how they were socialists and that was really their problem (he’s living off my sister-in-law, but that’s not important right now). My 14 year-old son, who sitting next to me (and has listened to me talk about MMT) stopped him in his tracks by saying, “Their real problem is that they’re currency users and not currency issuers.” I could have hugged the boy right there. . .

  • Dan

    “It is full productivity. Full productivity will lead to FE and PS (or at least an economic environment in which people are indifferent to their fluctuations).”

    This debate sounds a lot like the efficiency-equity trade-off (the size of the pie versus its distribution). Innovation (or full productivity, whatever you want to call it) will likely result in more fluctuations in prices than a buffer stock, but we may ultimately be better off as a society with less stability. Technology and innovation often affects returns to labor (e.g. increased returns to high skilled relative to low skilled labor, displaced workers, etc.). In turn, this affects wages and can also affect the government’s decision of where it sets its price. The buffer stock may make wages more equitable and ensure FE/price stability, but could alter incentives and expectations in ways that alter productivity and innovation.

  • Hugo Heden

    > “I should probably get out of here and try to do something useful with my life considering I’ve been staring at a computer screen for about 12 hours straight now on a holiday…. :-)”

    And over here bed time is looong over-due. Happy new year, and thanks for today, Cullen :-)

  • skayne

    Proving unemployment is somehow beneficial is up to you to prove since you made the claim Cullen. While that statement certainly has no empirical evidence for you to cite to back it up, it is clearly an ideological statement, which has been the truth of your stance against the JG from the beginning.

    Bill Mitchell and the other JG proponents have written extensively about what it would entail, and you haven’t taken the time to refute it with your own research. Your claim that you’re against the JG on empirical grounds and not ideological preference doesn’t hold much water since your objection to a JG came before any such undertaking.

    Guys like Bill Mitchell and Randy Wray are up front about their political preferences. They don’t try to hide or sugar-coat anything, which you were doing until a few posts ago when you finally admitted you prefer a buffer stock of unemployed. It was dishonest to claim anything before this debate was started.

  • Dan Kervick

    Following up on one of Cullen’s comments, I have also experienced unemployment. It was the worst period in my life. My response to it was that is something no one in a decent society should have to go through, ever. And so a lot of my focus politically is on figuring out what we have to do to make sure that people who want to work and are able to work are not robbed of the opportunity to work, and never have to experience what I experienced.

    I also know what it’s like to fear for one’s job. Like many people in this economy, I went through a period when large numbers of my fellow employees were laid off – some in extremely humiliating ways, such as having to reapply and re-interview for their old jobs before being canned. I went to work for months and months on end not knowing if that day would be my last – or the last day for some of my best friends at my company. It’s no way to live. It’s draining and, I believe, literally kills people.

    The insecurity does have a certain initial stimulatory effect, as people initially become more productive, pick up slack and take on larger workloads to prove their value. There is a short-lived kick in the pants that provides a productivity boost. But much of that stimulus proves unsustainable in the longer run: Company morale suffers. Teamwork and esprit de corps are damaged. Paranoia and secrecy increase, which inhibit innovation and the flow and sharing of information inside the company. Stagnation sets in. People spend as much time fighting turf battles against internal competitors as they do fighting external competitors. And people ultimately resent working for other people who regard them as just so many disposable widgets or machines, and that diminishes the personal investment and pride people feel in the success of the company. Over the long run, in my estimation based on my own limited experience, insecurity and extreme competition – which are a characteristic of much of the US corporate landscape – are damaging to productivity. The slave galley economy doesn’t work.

    I also don’t buy the lionization of the private sector that always comes up in these debates. There are important things to be done that the private sector just cannot do or routinely fails to do. The public sector has to carry the ball in such cases. This whole idea that every government job is filled by some worthless slacker who is only in the government because they can’t hack it in the private sector is a slur, and just dead wrong. Even now, with millions of people unemployed, we are stupidly failing to do countless things that need to be done because of our ideological aversion to assigning the task to public sector enterprise and investment.

    I agree productivity and progress are very important. But I don’t think there should be any mystery about the fact that the US economy doubled in size during WWII, and that burst of economic productivity laid the foundations for a sustained era of prosperity that lasted for decades. It turns out that a society achieves the most when there is some degree of energetic national mobilization to accomplish a national-scale project. I don’t think we need a war to get something like this again. We just need some leadership, and we need the stakeholders in private sector power monopolies to get out of the way and let America go to work the way it did in WWII. Private sector entrepreneurship is very important, but it is grossly overrated as an all-purpose solution to the general economic challenge of the allocation and organization of labor and resources. We need some element of long-term planning, organization and national-scale pooling and investment of capital resources.

    American society is rich in the aggregate, but is now failing dramatically – compared to other developed peer countries – in many of the categories that are typically associated with prosperity and social success. In my view the ruggedly individualistic and combative and anti-social ethos of contemporary American society is to blame. I don’t think we can any longer say that the American formula is a model for the world. America is richer than many other countries due to its sheer size, but is clearly outperformed by several other developed countries on a per capita basis – all of which have a more developed system for shared obligations, social support and mutual reliance. We should learn from those countries.

    I believe most people – not all, but most – have a desire to contribute to society or humanity, and be part of something larger than themselves. Being a working person carries a special status in society. Unemployment, on the other hand, robs people of the dignity of being full-fledged members of the society. We can end unemployment as we know it, and we should figure out the best way of doing so.

  • Wolfepaq

    What about Anon’s offer to donate 6 figures to start a foundation to market your brand of MMT?

  • JWG

    At the turn of the 20th century “work or starve” was the socioeconomic dynamic that drove capitalist America. The socialist movement was extremely influential in humanizing this dynamic, and what we wound up with were the income stabilizers and social programs we have today. The JG is a step too far in this process, because it ignores human nature and the essential component of capitalism, which is the risk-reward equation. In addition, employment is so heavily regulated in the US that a JG is guaranteed to be an administrative nightmare that will become heavily politicized and entrenched. Only those isolated from business realities could imagine that a JG would be anything other than a very wasteful boondoggle that winds up employing many more bureaucrats while doing little to help the working class.

  • http://playingtheponzi.wordpress.com Playing the Ponzi

    Seems to me that the old U.S.S.R. had a “Jobs Guarantee” that missed the point of Productivity entirely. Drive empty trucks to fill up empty stores with imaginary items. I’m confident we could guarantee equally unproductive jobs.

  • jown

    “doesn’t mean I’d implement or recommend a JG … There are better options in my opinion … ” (Roche)

    Can’t wait to hear more about the better options!

    If you’re going to stick with an MMT theoretical “framework,” “buff”er-stock it out, and “go for the Gold” (NB: Warren’s post above) I went ahead and started you off, based off of Bill Mitchell’s 12/28/11 post:

    “However, with some lateral thinking you can easily see that what the [Gold] Floor Price Scheme generated was “full employment” for [Gold]! If the Government fixed the price that it was prepared to pay and then was willing to buy all the [Gold] up to that price then you have an equivalent scheme.”

    (obviously substituted “Gold” for “Wool”)

    Looking forward to hearing more about your opinion on this! This represents a good opportunity to do so, as in the post’s title “Evolution,” and now to your “future” of MMT.

    Thanks Cullen!

  • Greg

    Cullen

    “Well, this is where we differ. You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today.”

    Obviously you didnt need a JG job. You had some savings OR you took a lower paying job and worked your way back up. Thats great…. more power to ya. Lots of people today would love that opportunity to just take a paying position doing something. Unfortunately they arent out there.

    “Very little, aside from great parenting and education, was handed to me in life. My psychological development through having to earn things has been a building block that no govt program can ever provide. Ever.”

    Handed to you? No, but plenty of policeman, firemen, hospital workers, road maintenance people, electric line maintenace people and other invisible workers have made your life as productive as it is. And they havent asked for million dollar bonuses nor golden parachutes. Anyway , good parenting and education are a VERY valuable part of life.

    How many people today are not the parents they could be simply because they dont have a job. Its hard to care properly for someone else when you cant care properly for yourself.

    ” The arguments that the JG would not substantially impact the way our society uses resources, competes, thinks, etc is beyond wrong and doesn’t come close to passing simple logic.”

    The only proper way to evaluate that is relative to NOW. Mass unemployment. Yes its difficult to measure but until you measure the JG against the mass unemployment of today you cant calculae cost properly.

    As I said in another comment, this whole conversation is taking place in what can only be described properly (when unemployment is the metric) as Great Depression II. Without many of the reforms from the 30s (SS, UI,and FDIC guarantees) we would see a lot more destitution. Obviously in this employment environment a JG looks daunting, but I believe that if all MMT prescriptions were followed, we would never have the need for a huge JG pool. Its only in this “outlier” environment that the proposal looks overly large.

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

    We’re getting sidetracked from my key point….Let’s stop arguing whether UE benefits are good or bad or whether achieving FE is the right policy choice. Instead, let’s ask ourselves how we would achieve full productivity if we had any options at our disposal. Would we hire a whole bunch of people to perform odd jobs (Randy’s jobs in his book include companion, public school assistant, safety monitor, highway cleanup, library assistants, etc). Would that be your optimal choice Greg? You’re supreme dictator for a day. Is that what you would do?

  • skayne

    As I said before, you made the totally unfounded statement that unemployment is benficial to the economy. You haven’t cited anything to prove your utterly ridiculous point. The proponents of the JG have done substantial work on backing up their theory on the JG. Your assertions don’t come close.

    The absurd statement is talking about the glory of 235 years of prosperity that includes slavery the repeated booms and busts of the 19th century, the Gilded Age and the Great Depression. Wonderful prosperity for who?

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

    You’re quick to dismiss the case of the USA, which is fine. But in doing so, I assume you can cite a few cases where unemployment was completely eliminated and prosperity ran rampant, right? Or are you just making the old Crusoe Island argument that the Austrians have fallen in love with? Mythical worlds that don’t exist and have never existed, but sound great to a certain political group so they plaster their ideal all over the internet? Yeah, that sounds about right now doesn’t it. Interestingly, the big govt ideal of the MMT JG is the near opposite of the mythical Crusoe Island beliefs of the Austrians. The truth, as always, lies inbetween, and I am there trying to find it. If you prefer to be on the fringes of politics then be my guest searching for mythical worlds that will never exist and have never existed….It’s a waste of time.

  • PG

    Cullen Roche, you wrote:

    “Well, this is where we differ. You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones dinner. Very little, aside from great parenting and education, was handed to me in life. My psychological development through having to earn things has been a building block that no govt program can ever provide. Ever.”

    Congratulations for your sincerity. Humans *always* argue about ethical social choices (aka political choices) on the grounds of personal experience and the own ethical choices that genes, experience and conscience determine. But not everybody makes clear their own experience.

    Can I, respectfully, propose an account of a personal experience, of someone called X that I know, from which different ethical choices can plausibly emerge? Or perhaps equivalent ethical choices? Using your own word framing?

    In general one sees no need for an illness that does not kill one immediately but puts one at the brink of death being triggered in a matter of weeks. X does. X thinks it serves an incredibly important psychological component to his strong relationships in society. X has the illness and fears for his life every day as he knows that tomorrow his death process can begin. This continuous experience shapes who X is and what X has become. X thinks the experience is invaluable. If X could get remission of the illness X would not be half the man he is today. Maybe it’s just personal experience speaking here, but X knows what it means to live *one day more*. Very little, aside from strength of character, was handed to X in life. The psychological development of X through having to earn every day of his life through strong determination to live and palliative healthcare has been a building block that no govt program can ever provide. Ever.

    Right. Except that X would be dead long ago if it were not for the research programs funded for several govts that made the palliative healthcare possible.

    And except for the question. Let us assume that tomorrow a lab will discover a cure for X illness. Should the lab publish the discovery and cure X and some other millions, inhibiting them from personal growth – irrespectively of who could or could not actually grow? Or should the lab maintain the cure hidden?

    Difficult questions that link to another question placed by Anonymous above. Why is it that people find a cure for an illness ethically good in principle, but a palliative treatment for unwilling unemployment is ethically dubious?

    Will it be because no one is immune to a lethal disease? But unwilling unemployment is something that one is immune to or one can deal with – at least in an individual perspective, if not in a social or systemic perspective?

    Will humans deserve economic prosperity while the majority ethically thinks this way?

    What is the qualitative difference between the hunter-gathering stage of social development and the actual one if the actual one includes hunting and killing for dinner with somehow more sophisticated technological weapons?

    Don’t misinterpret me: with these posts of yours you are pushing the discussion on MMT and beyond to crucial questions.

  • http://playingtheponzi.wordpress.com Playing the Ponzi

    “Why is it that people find a cure for an illness ethically good in principle, but a palliative treatment for unwilling unemployment is ethically dubious?”

    PG, do you believe the treatments for “unwilling unemployment” would actually provide anything resembling cure? If not, that’s why. If so, why do think so… or where has a JG been used effectively on a large scale over an extended period of time. I can think of catastrophic failures (U.S.S.R.), but not any ringing success stories. Personally, I have a very hard time believing that guaranteed work can equal productive work… and I suspect over time it would actually drag down the productivity of the “healthy” economy through a weakened incentive for survival, potential competitive imbalances that might arise from state-run (or sponsored) “guaranteed work” operations, and altered social perspective on the nature and/or importance of productive employment. I fear we could start the slow slide (as if we already haven’t) towards a “provide-for-me, please” bow to Statism… Another nail in the coffin of the “rugged individualism” that was the hallmark of the country’s formative years.

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    I explained how I can say that. There are all sorts of studies on the benefits of employment to the economy overall vs. unemployment–have you even looked? And I’m not talking about the benefits to the employed–I’m talking about the benefits to the others. You haven’t addressed any of that, only suggested that I’m being “shockingly naive” and asked me not to take offense while making all sorts of extremely abstract assertions that sound increasingly ideological.

  • http://www.rogueeconomistrants.blogspot.com rogue

    Stephanie, I agree that 100% employment is a noble goal. But isn’t it a better goal to just get enough people employed to get the economy working again? Going for 100% at all times puts the economy at risk of becoming dependent on the JG for good. It takes over private sector resilience, since ensuring everybody has a JG job offer ensures that nobody takes a private sector job unless it’s for a premium above the JG wage. This prices out many small businesses for labour, and probably most startups.

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    Sorry. You’re wrong. Numerous studies both empirical and theoretical. You’re being ideological because you just don’t like the JG. Why don’t you just say it?

  • LVG

    The JG is the ultimate endgame of the USA where we devolve into a society looking for someone else to solve all of our problems. There is a difference between productive work and provided work. But we’re losing sight of what that means as more and more Americans go to the government with hat in hand.

    I personally hope Cullen wins the JG debate so that this idea never comes close to becoming policy.

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    I really don’t care much if you’re sold anymore. I don’t think any evidence would work. Sorry. One good thing to come of this, though, is I have a better idea where to go next with research on this issue, so thank you for that.

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

    If I’m wrong then show me all of these cases of FE and long-term prosperity? That’s right, there are zero….

  • skayne

    You’re quick to dismiss things like the Great Depression, which is fine.

    At the beginning of this “debate” YOU claimed that your objections to a JG were apolitical, while criticizing Bill Mitchell for his political leanings. The point I’m trying to make is that you would have presented the research you had done in refuting the claims he makes in his research. A substantial undertaking to be sure, but one that would have been undertaken beforehand if your own objections to a JG were anything but ideological.

    I’m not looking for mythical fantasy worlds, simply for the best possible world. A myth would be your assertion that a JG program would produce lazy good-for nothings that aspire to no more in life than a minimum wage government job. Much more likely is that just settling for a minimum wage JG job would carry the same stigma as being unemployed.

    If you want an example of countries who do it right, the best mix possible that has been shown is a mixed economy model, with the Scandinavian countries having by far the most productive and prosperous societies per capita.

  • akphidelt

    JG is something that should be considered after people learn MMT. You can’t get the JG by anyone unless they understand MMT. Going in with this end game will get you no where as bringing up a Jobs Guarantee program by the Government is political suicide. Regardless of what side you are on, people would not be favorable to this level of Government involvement.

    If people learned MMT and learned why JG would be a good program than at least you can start reaching a middle ground where people stop trying to balance the budget or calling for the Govt to stop spending money. Maybe people will learn that the national debt is nothing like their own debt. Maybe we can get a consensus that the Govt does in fact provide us with our money, which certainly conservatives would not enjoy to learn.

    But the JG is so far out of the spectrum of political reality that including it in MMT will be an automatic turnoff to anyone who just wants to learn how the system works.

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

    No reason to make things personal Scott. We’re just exploring ideas here.

  • http://www.moslereconomics.com warren mosler

    I optimize total real output of goods and services over my time frame.

    Australia had full employment when the rail road pretty much took anyone who wanted to work, and in the US when the military did much of the same.

    By what channel do you see productivity of the work force higher due to unemployment? And even if that was the case, that productivity would have to be high enough for the added output of new private sector workers possible with a jg to somehow reduce the output of the rest of the labor force that would have been working.

    the reason we haven’t had full employment has been fear of inflation as unemployment gets ‘too low’

    with a jg being a more liquid buffer stock, it can provide a price anchor with a smaller jg pool than unemployment with unemployment as the price anchor.

    Agreed, there isn’t much evidence that being able to support more aggregate demand and more workers in the private sector via a jg pool needing to be smaller than an unemployed pool would result in more real output. But seems the burden of proof is on someone saying more people working in the private sector will produce less real output due to productivity losses? Especially when there are additional reasons to try a jg vs unemployed- better price anchor, reduced social stresses and reduced real social costs, etc. etc?

    Or are you suggesting that an economy fully employed with maybe 3% in the jg pool
    could be substantially less prosperous than otherwise and therefore that risk isn’t worth taking?

    If so, you’re entitled to your opinion and we move on,
    both recognizing we could be wrong, as jg is uncharted waters and there could be unknown risks to productivity large enough to undo the positive effects of more people working in the private sector producing real goods and services on demand, and the remaining, smaller jg buffer stock employed as well, vs an otherwise larger pool of unemployed producing no output and with known negative externalities that we know is capable of prosperity for the majority.

    And we’re both still MMT. No escape from that!!!

    ;)

  • Dan Kervick

    LVG, all work is provided by someone else. Except for a few hermits, even those people who are “self-employed” provide their labor services for a price to someone willing to pay the price. The question is just how much of a role public sector enterprises should play alongside private sector enterprises.

  • jown

    Wait … Cullen … is your proposal then a buffer stock of “productivity?” Just targeting “productivity?”

    So we give money to some more of these Bill Gates “types” and hang around and wait and see if they are going to invest, innovate efficiently, and hire people? But it doesn’t matter if they hire as long as we get to full productivity and sustain aggregate demand?

    Is this like a more supply-side, trickle-down idea then?

    (I’m assuming these Bill Gates “types” are not robots or aliens; I hope this is correct)

    Yeah, you gotta “flesh that out.”

    Cool, thanks.

  • jonf

    Dan,

    I’m happy you jumped in here. Unemployment steals people’s souls and their families’ along with them. Sorry to moralize, but it is true. To put something ahead of it simply strikes me as foolish and wrong. I am not sure if the JG is the right path or just government spending. But we simply cannot allow the unemployment we have witnessed these past three years to continue. And it is nothing particularly new. It has been with us off and on and with increasingly more severe episodes. Nothing else semms to work so having followed this discussion till now, my simple solution is to give everyone a job. It surely has a marginal ROI higher than sitting at home.

    While we are about productivity has anyone seriously done anything about oil or finding an alternate fuel source other than Solyndra?

  • Dan F

    Ok, 2 cents from a guy who is a casual reader.

    I like the JG because I am of the opinion that it will help stabilize the economy better than the current system we have. This is only a layman’s opinion from what I have read from various forums.

    The issue I have with Cullen’s disagreement stems from my belief that Cullen incorrectly lumps all unemployed into a single mold. Not to be condescending or insulting but it sounds to me like Cullen believes that people that are unemployed are so because of either they are incapable of being productive or create value.

    I see it differently.

    I personally believe that the vast majority of people today that claim unemployment benefits are unemployed because they were displaced.

    As an example; J&J ran their Fort Washington PA plant into the ground, the FDA forced the plant to shut down and recall products. J&J’s response was to close the plant and 1200 people lost their jobs. 1200 productive and capable people.

    There are literately hundreds of examples where employees did exactly what they were asked and in many cases went beyond what was expected. In my company people took unpaid leave to save jobs. That same year the CEO cashed in $30m in options.

    The median household income in 2009 was ~50k. The average weekly unemployment benefit is ~350 per week or ~18k per year.

    I have worked as a productive and capable employee for 35 years. If I get “displaced” I will most likely lose everything I have worked for. Unemployment benefits would be useless. The only employment I would most likely find would be at 50% of what I currently make. I am too old to be desirable or re-trained, and currently employers are actively looking not to hire experience.

    So as people debate whether or not a JG is a core aspect of MMT employers continue to close (outsource, offshore, M&A) plants/offices/businesses and rendering otherwise productive capable people unemployable.

    I naively believe that unemployment effects everyone. Although clearly some can overcome those effects through their personal wealth.

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

    UE rates in Scandinavia:

    Sweden: 7.5%
    Denmark: 7.7%
    Norway: 3.5%

    That’s your great example of full employment? You’re making a lot of very strong claims based on very weak evidence.

  • jonf

    Dan F,

    I like your comment. It goes to the people laid off. Once the guy with the pink slip appears you discover what it is like to get a job in an eocnomy with twenty million of your friends looking for work. Priductivity doesn’t matter much, even as you may have worked your ass off. You now are down to $9 an hour and medicaid, maybe. If we are really a wealthy nation, that can’t be. The problem is endemic to capitalism. Has got to change.

  • jonf

    Playing the Ponzi,

    Think the JG killed the USSR? What about corruption?

  • skayne

    I never said those countries have achieved full employment. I said their countries are more prosperous than ours, and their model is far better, which is pretty apparent as all 3 of the countries you listed have lower unemployment than ours.

    But once again you ignore my fundamental point. You cite no research, your own or any other’s, in your objection to a JG. Those who do advocate the JG have done extensive research that’s widely available. It’s you who make the wild claims against a JG without providing any real tangible evidence for why they are wrong.

    My objection to you is that without providing your evidence to the contrary, you prove your initial criticism’s of Bill Mitchell were clearly ideological. After all your blustering, you finally admitted you prefer a buffer stock of unemployed. You didn’t refute the research they’ve done on the subject, but you finally admitted your biased opinion. Which I wouldn’t have had as a much a problem with that you hadn’t tried to hide you bias.

  • jonf

    If you want to get a JG I think at least three things need to happen:

    1. You need a spokesperson who can talk to the politicos. Otherwise, no one is going to listen. It will be just another hairbrained idea dreamed up by some liberal. Just ask Ron Paul.

    2. You need to have examples of the things you will do and how many each of them will hire. And it needs to be clear about whether that competes with the private sector. Just saying it is a price anchor and trust me, it works, won’t work.

    3. You need to have a plan about the cost and time to implement it and the who, what and wherefor.

    It will not do, to say oh they did that in — name the country here. Or read this. Maybe saying it is like the WPA will help but that was how many years ago?

    If you want a productivity program you have the same problem.

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

    Sorry, but you’re just blatantly misrepresenting what I said. The day I wrote the piece that caused all the B Mitchell fuss was the same day I said very explicitly that I was not in favor of targeting UE. It’s not my fault that you didn’t read all of my comments there. http://pragcap.com/the-fundamental-difference-between-austrians-and-mmters/comment-page-1#comment-94089

  • http://neweconomicperspectives.blogspot.com Scott Fullwiler

    Sorry. Not my intention. I felt you were getting personal with statements like “shockingly naive,” but I should have avoided escalation.

    At any rate, let me just say that I agree with your post here–MMT is a “big tent” and there can be different policy views that are consistent with the MMT understanding of how the world works. And I haven’t yet encountered a policy proposal of yours that I have significant disagreement with–I just want to add a JG to them because I think it would be a net gain, and you don’t. That’s fine for now–we can work on seeing how far we can take that. Perhaps we’ll never agree on that point, but we do agree on 90-95% or more and we (or I) shouldn’t under emphasize that.

    You’ve also done as much as anyone to promote MMT in the blogosphere; your concerns/views are always important and legitimate in my view, even in the rare instance that I disagree with them.

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

    I need to be more careful in my responses. Obviously, implying that you are “naive” is pretty naive! Anyhow, this is an important talk. It’s leading to many good discussions that will be rehashed time and time again as MMT gains more traction. If I’m wrong then you’ll be better armed. :-) And yes, let’s be clear about that one major point. We agree on 95%+ of all things we discuss so let’s not let a minor disagreement overshadow that….

    Cullen

  • Tom Hickey

    Cullen, I’m sorry but this betrays a romanticized and ideologically biased view of US history that doesn’t fit facts. Read Howard Zinn’s A People’s History of the United States, for starters.

  • Tom Hickey

    Comes down to defining prosperity in terms of GDP irrespective of distribution, or in terms of distributed prosperity. Again, a normative issue exogenous to economics that differentiates left and right.

    I have always said that MMT with a JG is essentially “Keynesian” (left). This really seems to be what the debate comes down to. The debate actually began with John Carney’s suggestion of a meeting point between Austrians and MMT’ers and the sticking point for him was the JG. Like Edward Harrison and other Austrians that have seen the light on the monetary aspect of MMT, John balks at the MMT macro theory.

  • Tom Hickey

    I don’t think that there is any winning this debate. What is emerging is two approaches to MMT for normative reasons, unless Cullen can convince the MMT economists that he has a different macro solution that works at least as well as theirs. They seem quite confident that this not likely. But there are always surprises. However, I think this will just boil down to a fundamental different in norms, which seem to be where it is headed.

  • JanV

    The biggest problem with the JG that MMTers are nonchalant about is the effect of demand pull inflation not being offset by productive work. If we hire 3 million new workers then that’s substantial new additional demand without contributing productive work. Unlike temporary UE benefits this program is program so it’s a constant spending program without any substantive productive economic contribution. It’s another form of welfare. Does our govt really need to spend so much money promoting unproductive behavior? I say we don’t but we choose to.

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

    Have we not achieved enormous things in a short history? I am not implying that it has always been roses, but we are unmatched in terms of wealth, innovation and productivity in historical terms. If you want to just focus on the post war era then the argument doesn’t change much. We’ve achieved huge prosperity with a substantial number of unemployed people throughout history….There is, however, very weak evidence of societies with true FE achieving anything closely resembling this sort of prosperity….

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Cullen, How do you know which one will have a higher ROI?

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Cullen, I appreciate this comment:

    You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones dinner. Very little, aside from great parenting and education, was handed to me in life. My psychological development through having to earn things has been a building block that no govt program can ever provide. Ever.

    But I think it’s personal and anecdotal and full of counter-factuals, that you can’t know are true. Your blog is a very good one, and I’ve appreciated a lot of your posts and papers. But you have no systematic thinking behind the above opinion. It’s just unwarranted speculation. There’s no science behind it.

    And yet based on your speculation, and on your subjective interpretation of your personal experience, you want to oppose a program that you know will work to create full employment, thus subjecting millions of people to unemployment who don’t have to have that kind of experience.

    Forgive me, but I think your notion that people need the threat of unemployment for its motivational value is very dubious pop psychology and also economic theory. I can’t understand why you think you have enough expertise in understanding human motivation and psychology to be able to recommend with a straight face that we shouldn’t have a JG because it will be better for people if they have the fear of unemployment. I don’t object to your holding that opinion, only to your seeming view that we should consider it in formulating MMT-informed policies.

    Please come back later with a scientifically-based case for your conjecture. I’d be happy to consider it carefully. But right now I’m afraid I consider it the kind of unmitigated nonsense that is worthy of someone like Rick Santelli, but certainly unworthy of a thinker like you.

  • Dan Kervick

    Cullen, that only shows that it is possible for an economy to thrive with unemployment, not that unemployment is conducive to thriving. We’ve thrived in the USA with lung cancer as well. That doesn’t show lung cancer has contributed to our success.

  • innertrader

    Forget JG, for that matter forget MMT! Why anyone would make this so difficult is beyond a simple minded individual like myself. The solution to our financial problems are so easy and so obvious that it’s puzzling how it has escaped so many for so long.
    ENACT THE FAIRTAX! Anything you tax, you discourage and you discourage it by the amount that it is taxed. With this being obvious, why in the world do we tax “income” in the USA? The shear cost of this tax is astounding. The accountants, the tax planners, tax collectors, enforcers, courts, jails, tax attorneys, investment tax advisors, funds that have left the USA due to income tax, people that have left the USA due to income tax, the payoffs to our congressmen, the lobbyists, the extortion by the federal agencies, the jobs that have left the USA… the list goes on and on and the cost goes on and on. It’s a form of insanity to keep doing the same thing and expect a different result.
    All we have to do is enact the FairTax and absolutely everything changes! All those industries and companies that devote their whole lives to “income” taxes would have to go do something productive instead of being a leach upon the productive individuals and companies of the USA. Unless we have a JG!
    READ THE FAIRTAX BILL, it’s not that long or complicated!
    That will take care of the taxes, now the spending has to be addressed. That’s simple too, elect Ron Paul!

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Hi Scott,

    Warren specified more buffer stock choices in his comments, but it comes down to the same thing; it really seems to be a choice between an employed buffer stock and an unemployed one.

    Over at heteconomist, however, PeterC is proposing a Job Guarantee supplemented with an income guarantee for those who don’t want to accept either a private sector role or a JG role. I wonder what you think of his proposal?

    Dan Kervick offered a good comment on his proposal here: http://heteconomist.com/?p=3435&cpage=1#comment-38739

    And I disagreed here:

    http://heteconomist.com/?p=3435&cpage=1#comment-39260

    But the whole discussion over there is a very deep one. I’d like to have the benefit of your comments on it.

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

    :)

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    “No offense, but life is not some equation. It is not a model where you plug-in variables. There is no way you can say the JG is a net social gain in the long-run. It could have hugely negative impacts on our psyche if nothing else.”

    I couldn’t agree more with this one. But it’s a double-edged sword for you.

    Scott can say that the JG would be a gain in the short run, and we all know that prolonged periods of unemployment have huge negative impacts on our household economies, families, psyches, and our children and grandchildren right now. But you don’t really KNOW that a JG will have long-term negative effects of any kind? How can anyone know when economic projections of any considerable length at all are highly problematic? So, I think Scott has the better of this one. We know the evil we’re trying to eliminate, and we know we can eliminate that one. There may be side effects and Black Swans. We should try to anticipate them as best we can; but we shouldn’t be relying on some serious thinking to do that and not on some personal interpretations of one’s own experience.

  • J Kra

    Modern Monetary Operations.

    I like that. It fits nicely with the often used phrase “…the operational realities of our monetary system…”

    I’m casting my vote for Modern Monetary Operations (MMO) to be the new phrase to refer to, and only to, the descriptive aspects of MMT.

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Rogue, I think that on its face zero unemployment (2-3% for mobility) is on its face a better outcome than just getting the economy going again. As for:

    “. . . Going for 100% at all times puts the economy at risk of becoming dependent on the JG for good.”

    MMT says that a capitalist economy must have a buffer stock of some kind at all times so it will be dependent on some buffer stock “for good.” The only question is which one. Warren, Bill, Randy, Stephanie, Scott, and many of the rest of us think that the JG provides the a buffer stock of employed people and that this is better than any other buffer stock suggested thus far.

    “It takes over private sector resilience, since ensuring everybody has a JG job offer ensures that nobody takes a private sector job unless it’s for a premium above the JG wage. This prices out many small businesses for labour, and probably most startups.”

    What basis do you have for this statement? Why should the JG lower the resilience of the private sector? Why shouldn’t it increase the resilience of the private sector since it buffers the impact of economic downturns. So, what exactly do you mean by resilience? How do you define it? How do you measure it? And while we’re at it what is this private sector whose resilience would be reduced?

  • SS

    Good discussion. The idea of the JG is powerful and makes sense, but I think the opponents raise several important points that are not being very thoroughly answered. Anyone want to take a crack here?

    1. Can such a huge government program be administered without massive waste and corruption?
    2. What would be the effect on broad living standards? Is this just a form of welfare or a “spread the wealth” program?
    3. What are the psychological effects over time?
    4. Are there enough productive jobs to justify the potential rise in prices that could occur from demand pull inflation (oil, gas, food, etc)?
    5. And Cullen’s main point – is full employment everything it’s cracked up to be? What if our true goal as a society should be full productivity which can ultimately lead to full employment?

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Phil, This comment is at much too high a level of abstraction, and your constructions of modernism and post-modernism, strike me as somewhat incomplete. But more importantly, who said anything about perfection. MMt economists are trying to achieve full employment with price stability. That’s nice, but even if it’s accomplished beyond what we’re able to do now, no one’s said it’s perfection. The “perfection” thing is just a “straw man.”

  • John

    I believe the main point that had bewildered most people is how to “provide” people with money effectively and efficiently. All the talks about JG, JIG, BIG, ELR and so forth, still boils down to money.

    Money drives economy and people goes to great length to accumulate money. Some people start a business whilst others chose the path of wage earner.

    Now the question remains, how do we want the people to get their hand on the money?

    From my perspective, inflation should not be our main concern. The reason being is that since 1971, there had been trillions of dollars or pounds, yens, wons and etc created and sloshing around the globe and yet we have not a global hyperinflation.

    To me JG, JIG, BIG, ELR and so forth are just another method to get the people off the couch and start accumulating money.

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Anon, Have you read:

    http://www.moslereconomics.com/?p=8662/

    I think it’s pretty plain speaking.

    Try it!

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    How come the lawmakers don’t obey the law????

  • LVG

    I’ll take a swing.

    1. The JG would more than triple the US government workforce in all likelihood. There are currently 30 million americans out of work. Let’s be conservative and say that the JG would employ 5 million of them in normal times at a rate of unemployment that would near the historical level of “full employment”. That’s probably 100 billion in extra spending each year given Warren’s estimates of $8/hr and some frictional costs of administering the program. Will it be prone to corruption? I doubt it. But tripling the government workforce is a moot point in this country. It’s more than dream. So when we put the figures into context the whole discussion becomes even more imaginary than moving to Mars.

    2. The program would be a boon to the poor since its a minimum wage program. The effect would not be without cost though. I would imagine we’d see some increase in prices as the extra demand and money would give producers pricing power. In the case of supply constrained commodities like oil it could add to significant pressures.

    3. I doubt the psychological effects would be that big. Again, these are low wage workers. They’re not Harvard grads planning on being unemployed forever.

    4. Are there enough productive jobs? This is a potential back breaker for the programs implementation. Cullen says Randy cited the following jobs: companion, public school assistant, safety monitor, highway cleanup, library assistants. I don’t know about you, but what’s the merit in having people pick-up garbage on the highways all day? And are there 5 million of these kinds of jobs? There is the potential for productive to be substantially outstripped by the inflationary effect. That leads to a decline in everyone’s living standards since the 95% are paying for the 5% to live a better life.

    5. I am not sure I see Cullen’s point here. Care to elaborate? Full employment is full productivity, right?

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    “In just 235 years we have created the greatest wealth explosion in human history. So yes, there’s ample evidence proving that human beings can experience enormous prosperity with unemployment. That’s factual evidence. 235 years of evidence.”

    Wealth for whom? The unemployed aren’t experiencing prosperity and wealth. It’s the crooks, the fraudsters, the banksters, and the financial manipulators who are doing that? Sure human beings can experience enormous prosperity with unemployment, just not the same human beings.

    Also, don’t you think there’s a correlation between low unemployment and wealth creation over time. You’re not really claiming that high unemployment is fueling wealth creation for the whole economy are you?

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    See Cullen, someone else has had a different experience than you’ve had. Tells different stories and gives a different interpretation. So, who’s right. Whose experience and interpretation should we base policy on? And on what basis? If we want to seriously contend that an employed buffer stock is not the best alternative because an unemployed buffer stock provides motivation then I think we need some good theory and some evidence. Otherwise it’s just the confidence fairy all over again.

  • Trixie

    Cullen,

    Unemployment is not a concern of yours, you’ve been consistent it that regard since you never address it. The only time I’ve heard you mention unemployment as an issue was when Obama implemented health care reform during a period of 9% unemployment. Then unemployment mattered. Otherwise, not at all. You are a “young economist” when it’s convenient and how it shouldn’t be discouraged; otherwise you want nothing to do with that title. You’ve referred to Bill Mitchell in the past (a few weeks ago) as a colleague, though not kindred spirits, and someone you speak with regularly. Lately, it’s “I don’t even speak to Bill Mitchell at all”. You claim the JG “displeases” you because Americans are proud and independent and created the greatest wealth know to mankind without regard to unemployment. Yet you want the government to subsidize “innovators”. A program I am all for, but if you can’t see how your arguments against JG should be applied to “innovators”, then I don’t know what to tell you. Not everyone can be an entrepreneur and “eat what they kill”. Wage earners are needed, whether you want to “kill and eat” them or not. Personally, I am not a big fan of cannibalism.

    Veterans have a much higher unemployment rate than the rest of the population:

    http://www.businessweek.com/finance/occupy-wall-street/archives/2011/11/the_vets_job_crisis_is_worse_than_you_think.html

    Do you consider these people having a negative ROI on society as well? Just “collateral damage” in our effort to become “ultra-productive”? The fact that more veterans commit suicide than are killed in battle?

    http://publicintelligence.net/veteran-suicide-rate-higher-than-afghan-war-casualties/

    You want to portray yourself as apolitical and rising above the fray. You are not, and suggesting otherwise is beyond disingenuous.

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

    I shouldn’t have even bothered with the anecdotal. Lesson learned. It totally distracted from my main point which was not to say that we don’t need full employment, but that we should seek full productivity (and hence FE). The personal experience doesn’t prove anything….

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Again Cullen prosperity for whom? It’s easy to recommend that FE is not the way to get prosperity if you think there’s no chance you’ll be unemployed. But if you are unemployed, you’ll have a different opinion, I think.

    If you want to use an unemployed stock then I don’t think it’s fair and just to saddle the unemployed with that cost. At least have the Government provide a decent living through a BIG so that those who use it can do the things they find valuable. Whoops, I guess fairness would interfere with profits and the accumulation of wealth, so I guess we have to forget about that justice and fairness thing.

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

    My general thinking is that it’s not necessarily unemployment that matters over time. It’s productivity. So let’s reach full productivity and the rest is water under the bridge. Instead, we obsess with inputs in economic models that may or may not lead to prosperity. Of course the govt could hire everyone to fill out paperwork tomorrow. But does that create sustainable generations of Americans doing great things and living better lives than the people who preceded them? Or does it lead to all sorts of unintended consequences that essentially water down the quality of our overall output over many generations? I am not certain and I don’t claim to have shot holes in the theories of those who precede me (contrary to some opinions here), but I acknowledge the risks and I don’t feel that the questions have been sufficiently answered and in fact question whether they even can be….

    You’ve covered a lot of my other concerns in there and I think you’re potentially downplaying the psychological issue. To me, these risks have not been sufficiently answered to justify the supreme confidence that many express in this program….And until then, we have to work under a buffer stock of unemployed….

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

    I think you’re taking my point to an extreme level and your “contradictions” are all taken out of context. I am merely asking people to consider the question. Does productivity matter less than full employment? I say we should really be focusing on full productivity. I have never said I am not in favor of every American having a job. But I am not in favor of every American having a job where they push papers behind a govt desk. I am not trying to be insensitive. I am simply trying to convey my thinking and things as I see them. It’s not my intent to be disingenuous so apologies if you see it as such.

  • LVG

    Its funny. MMTers claim to understand money so well, but they don’t understand living standards very well. Should the 90% who work really be willing to living potentially reduced living standards so 10% can work? Some people say it’s a moral issue, but I don’t see it as my moral responsibility to ensure that 10% of the country lives a better life so that I can live a worse life. But everyone just glosses over this point because they just look at the wage/inflation impact and conclude – inflation didn’t go up! Yeah, but that doesn’t mean the JG didn’t impact broad living standards through other channels.

  • J Kra

    I agree with Anonymous and Son. I posted this yesterday…

    “…so long as the majority of people in the United States think we’re going broke and can’t afford this or that, the prescriptive policy proposals will constantly hit the brick wall of “we can’t afford it” …and that’s being generous in supposing the proposals even penetrate to the point of consideration. Many of the proposals coming from MMT and its relatives must sound like outright lunacy to someone who is thoroughly brainwashed with neoclassical economics.”

    It’s the descriptive aspects of MMT that have to enter mainstream conciousness first. And as with Son, it’s the descriptive parts that attracted me and kept me reading the various MMT blogs. So to all of you that are influential and looking to direct this movement, hammer home the descriptive aspects of MMT over and over and over again. Direct it toward the megaphones (Krugman, et al). The potential (prescriptive) public policy options will naturally flow into the debate as a result.

  • Jonthan Krajack

    To Cullen (as well as the others opposing the JG),

    I think there is a point that has been raised many times that you haven’t adequately addressed. I apologize in advance if I missed any appropriate response…

    Why couldn’t we do both? Couldn’t we do the initiatives that you (and others of course) think would lead to maximized productivity, and at the same time do the JG?

    Eliminate FICA, invest in infrastructure (roads, bridges, etc.. both “concrete” and digital), invest in unlimited renewable energies (imagine near free energy as an input cost to all businesses, homes, forms of transportation, etc), make all education Pre-K through post-grad free (paid for through deficit spending), and so on…

    There are so many things we could do to maximize productivity. And nearly all of them would contribute to lower unemployment. But since the private sector rarely (never?) fully employs everyone willing and able, couldn’t we subsequently do the JG as well? The funding could be block grants to the states. The States could then divide up the grants per capita by county, and then all management issues would be determined locally?

    Sure, some people at certain times may be “digging ditches” to get by. But with all the other ways we are investing in maximized productivity (e.g. free education!)… don’t you think in all likelihood the amount of the workforce that would choose to stay in the JG would actually be insignificant? Do you really think millions of people would choose to live that life, when they could go to school (including vocational schools) to study and do something that they find meaningful and interesting to them?

    My sense is your objection to the JG is lacking the necessary imagination to see that it could be complementary to all the things you’d like to see done to increase and/or maximize productivity?

    Thoughts?

  • AWK

    As an AI scientist/entrepreneur, the JG argument interests me because it and its more fundamental buffer stock theory reflects the fact that under capitalism, productivity need not be fully coupled to employment. In the future, as AI makes capital the workers of tomorrow with ever increasing productivity, eventually there simply won’t be enough jobs for every human. Evidence suggests this process may already have begun.

    In this future, I can’t see how the JG will create much truly worthwhile or needed work and such work would likely to be mind-numbing or demoralizing to the individual. I find, even in the present climate, that the basic low wage JG proposed by the likes of Mitchell would find resistance not just from conservatives but from the legions of former middle management used to working for many times $8-$9/hr. Yet, without income, there won’t be sufficient aggregate demand to support anything.

    In the end, I think any JG would have to morph into something that provides a guaranteed floor income to everybody, whether you work or not, perhaps like Friedman’s negative income tax. I think in the future, we will begin to see demand like a natural resource that must be nurtured and preserved. Perhaps we will view capital as being like a natural resource as well. In Alaska, everyone gets a check from oil royalties (derived from a de facto tax on oil producers). Perhaps we will view our national capital as a resource like oil in the future, especially as it increasingly finds itself self-sustaining and multiplicative in power. Otherwise, we will be faced with most of the wealth concentrated in far fewer hands than we have today and few consumers left to sustain that wealth either.

    My main point of this thinking outside the box was not to convince anybody or a robot future but rather to encourage others her to think about the deeper implications that could enable us to extrapolate “backwards” to see how an effective buffer-stock can evolve.

  • Trixie

    No, I am not taking this to extreme levels. There isn’t competition between the public and private sector, it’s between the the public sector and the military. The current ELR right now is the military. Which works out well for you. Have you ever been? While the ONLY thing you’ve received in your life is “great parenting and an education”? We should all be so fortunate.

  • Phil

    In the absence of a JG it makes no sense to deny the unemployed a basic subsistence income, if they are willing to meet certain conditions.

    In non-irrational countries unemployment benefits don’t simply end after an arbitrary period of time. Instead, those who recieve them have to meet certain criteria or face having them cut. They have to search and apply for jobs, and after a period of time they must accept any offers of employment regardless of their skills and qualifications.

    If a JG-type program were to work, it would have to impose similar conditions.
    People would only be accepted on to the program following an interview and assessment. Those who left previous employment voluntarily for no good reason would not be eligible. Once part of the JG, people would still be required to search and apply for non-JG employment, and after a period of time to accept any offers of non-JG employment regardless of their skills and qualifications.
    Combinations of work and training could also be offered to eligible people.

    Those who failed to comply with the conditions, who failed to work to an acceptable standard, or who otherwise abused the system would be excluded from the JG program (for a period of time and pending reassessment). They would lose the JG income and would return to the unemployment subsistence income. Those who failed to comply with the conditions attached to this lower income would find it cut even further, to the point of being excluded completely (at which point the state can simply say: we’ve tried as best we can to help you but you have refused our help and so must take responsibility for your actions). Following a period ‘out in the cold’, so to speak, they could begin the process of reapplying for the unemployment income, then the JG etc.

    The point is that “Job Guarantee” shouldn’t mean a guaranteed job regardless of your behaviour, but the guaranteed option of employment if you are willing to meet the criteria.

    This is completely consistent with US law (in fact it is even demanded by US law):

    “(The Full Employment and Balanced Growth Act) Amends the Employment Act of 1946 to declare and establish as a national goal the fulfillment of the right to full opportunities for useful paid employment at fair rates of compensation of all individuals able, willing, and seeking to work.”

  • Phil

    Regarding inflation, Mitchell has stated that there would probably be a “one-off” increase, which would then stabilise to a a new normal level.

  • Phil

    The The Full Employment and Balanced Growth Act also:

    “… Establishes an order of four priorities for job creation: (1) conventional private jobs; (2) private employment through Federal assistance to priority programs; (3) conventional public employment programs; and (4) last-resort reservoirs of public and private nonprofit employment projects.

    This suggests that a JG program could be be partly enacted through private nonprofit employers (probably in many cases subsidised by government).

  • http://www.moslereconomics.com warren mosler

    let me add that the way the labor force participation rate increases during a boom, often to record highs, indicates to me motivation won’t be lost with a jg safety net/buffer stock vs unemployment as a buffer stock. During booms million of people take jobs who apparently don’t need the money, as they weren’t even looking for jobs and weren’t counted as part of the labor force or unemployed until the economy boomed. There is obviously more to motivation to work other than subsistence.

    It’s the same argument today about unemployment comp causing unemployment. At the micro level anecdotal evidence is easy to find, but at the macro level that argument does’t make sense as anything but a kind of fallacy of composition.

  • Ben

    Cullen, I find this idea of full productivity very interesting. Looking forward to reading more about this in the coming months. It raises three immediate questions for me though:

    1. In a world with finite resources, the more productivity increases, the less man hours are required to produce maximum output. This implies one of two things. Either unemployment increases, in which case we need an income guarantee, or each person can be employed but needs to work less hours. The second is obviously an attractive possibility, but this would require a big redistribution from profits to labour would it not? How could this be achieved?

    2. How is productivity to be measured. You don’t think picking up trash or planting trees is productive work, but if by that work, the wellbeing of the people living in the area is increased (through an improved living environment), then does it matter if the work is productive in the narrowest sense?

    3. Over what timescale do you see full productivity being achieved? It seems to me to be a long term project, while a JG could be up and running within months. What is the policy towards the unemployed in the meantime?

  • Dan Kervick

    Cullen, my only point in my previous comment was that in order to argue that the existence of some level of unemployment is a net positive benefit to the economy, you need to do more than show that there are successful economies like the United States economy that have always had unemployment. That’s because there are many things that have always been present in the United States since its inception, but which almost everyone would admit are net negatives.

    I think you also need to do more than show that there are some instances in which unemployment has produced positive benefits. We can certainly see, by analogy, that lung cancer has sometimes produced positive benefits – it has induced some researchers and doctors to do a lot of very useful work in the health care sector; it has led some of its victims to reform their lifestyle and live healthier lives; it has caused some people to have a greater appreciation of each moment that they are alive; it has brought some families closer together. But I don’t think there are many people who would argue that we therefore shouldn’t try to cure and eradicate lung cancer.

    By the same token, you might be able to point to cases where being unemployed, or the fear of being unemployed, has made people harder workers and better people. But I think it still remains open for a critic to argue that, despite the existence of those kinds of localized positive effects, unemployment is a kind of social and economic disease we should attempt to cure.

    Maybe the JG is the way to go to get a cure; maybe it isn’t. But that’s a different question than whether we should try to cure it at all.

  • Dan Kervick

    LVG, do you think it’s better to ask 90% to work so that the other 10% can be on the dole? I would think that the full employment economy would be an easier political sell in the country than the current system.

  • http://www.rogueeconomistrants.blogspot.com rogue

    Having a JG with an open mandate to employ 100% of workers at all times adds to worker demand. This cuts both ways. When private sector is already demanding them, the JG distorts the wage price upwards. Those who have an existing job (the JG) will use it to parlay a larger entry wage in the private sector. In short, a JG will ensure that no private sector will be able to get workers at the minimum wage level, but at minimum plus a negotiated premium (depending on how desperate for workers each business is). During a boom, a JG ensures that ALL workers are working at ABOVE minimum wage, and ALL businesses have cost structures HIGHER than what it would be without a JG. If minimum wage is already set at a livable standard, during a boom, ALL workers earn a premium above that level. Continuing it will make it more costly to hire the people back into the private sector, and will increase the success hurdles, most especially for small and new businesses. This might entrench the large corporations even more, stifling adaptation and resilience. As I said to Cullen above, while the JG should help people survive loss of their regular jobs, it should not completely shield them from the difficult decisions of making the necessary adjustments and learning new skills, so that they can rejoin the regular economy, wherever its growth is going to be.

  • Dan Kervick

    There is no such thing as “full productivity”. Productivity can go up or down, but I don’t see how any sense can be made of the notion of productivity being “full”.

    One can speak of full employment, because there is a quantifiable finite ceiling at any time on the number of employed people in the country.

  • Dan Kervick

    I thought it would be apropos to provide a link to this TED talk by Richard Wilkinson on the costs of inequality:

    http://www.ted.com/talks/richard_wilkinson.html

  • Phil

    I think however that in order for the JG to work as a fluid buffer stock which retains the psychological incentives to productivity apparently created by the fear of unemployment, it has to be built around strict rules which reward or sanction behaviour appropriately, and ultimately push people into non-JG employment even if they are not entirely enthusiastic about the prospect. There are many unattractive jobs that have to be be done by someone, and the JG shouldn’t become a means for people to avoid them if they are the only non-JG jobs available to them.

    The JG should act as an additional step up which helps people to be more successful at finding employment, but it shouldn’t become an optional alternative to non-JG employment in the long run. There should always be a cut- off point (after a certain period), at which people are either forced out of the JG into non-JG work, or put back onto the lower basic unemployment allowance (if they refuse to accept the non-JG job offer). If they continue to refuse reasonable job offers they would then face losing any type of financial support altogether. (I say reasonable because in certain cases a job offer may be unreasonable for people with children or other significant issues). At that point they would genuinely face becoming destitute and having to depend solely on charity, until they were eligible for future reassessment.

    In short the direction of the JG should always be either towards non-JG employment, or else (as a sanction for genuinely bad choices) back to the ‘dumpster’ of unemployment. Even with a subsistence income (which is only civilised, so long as it is conditional), unemployment outside of the JG would still remain enough of a deterrent to keep people (a) working hard within the JG, and (b) striving to find better non-JG employment whilst in the JG.

    This kind of gradated system would retain the basic ‘harsh reality’ that Cullen indicates is necessary to drive people to achieve, without putting masses of people who are willing and able to work in wasteful unemployment. Instead it would put them to productive use, whilst also making them more employable (and thus helping to further reduce overall unemployment and increase overall productivity).

    The main doubt I have is whether the “one-off” inflation or hike in prices wouldn’t affect overall competitiveness and productivity to the extent that unemployment would significantly increase. Whether this would simply offset the gains promised by the JG or lead to an overall loss is questionable.

  • Dismayed

    “During booms million of people take jobs who apparently don’t need the money, as they weren’t even looking for jobs and weren’t counted as part of the labor force or unemployed until the economy boomed. There is obviously more to motivation to work other than subsistence.”

    I agree with Warren. Some of us actually like to work!

  • Phil

    The carrot is better than the stick, but you still need the stick in the case of those who abuse the generosity of the state and refuse to take responsibilty for their lives. In this case the stick is simply the gradual withdrawal of support to those who refuse to keep their end of the bargain. Of course special consideration and support should be always be given to vulnerable people, those with mental illnesses, disabilities etc, as well as to those with children, but that’s a different issue.

  • Phil

    I’m also assuming a system, as in the UK, where even if you have zero income you’re still eligible for medical care, high school education, and emergency food and shelter (if you’re registered). The latter is usually coordinated with or provided by charities, who also offer other basic services. No one should ever have to starve or freeze, but there probably needs to be the basic threat that, if you don’t agree to help yourself in return for being helped, you could end up in a pretty miserable situation.

  • Malmo

    Very interesting discussion, BUT you–Cullen and others– really must lose the old Soviet buzzword, “productivity” as applied to human beings. Wouldn’t hurt some of you to read Bertrand Russell, Jacques Ellul and others to help you understand the poison contained in an obtuse workerist mentality.

  • Phil

    The three most productive countries in the world, according to the OECD, are 1.Luxemburg, 2. Norway, 3.Netherlands (measured by GDP per hour worked).

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

    As if the the concepts of fe and ps arent equally vague in modern macro?

  • http://playingtheponzi.com Playing the Ponzi

    Jon,
    I’m not suggesting JG killed the USSR. The USSR had a slew of (very deep-seated)problems that well beyond Communism or JG. I just know my father made many business trips there as the the walls were first coming down and was always astonished at how everyone was “employed” and no one was doing anything productive. Driving empty trucks to empty stores and back again, as he described it. The point being that a guaranteed job can actually be a detriment to society if it’s unproductive. And it’s awfully hard for government to guarantee a job that will actually be productive (in part because it’s difficult for bureaucracies to efficiently allocate capital, and in part because an unmotivated work force can turn a potentially productive job into an unproductive job, imho).

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

    Oh calm down. Im in favor of major govt spending programs and many out there act as though I’ve pissed all over the liberal agenda….

  • Dan Kervick

    Granted, they can be defined in different ways. But all of those ways are subject to the constraint that there is a strict finite upper limit at any time on the number of people that can be employed. Thus there is a capacity to be filled.

    But there is no way to define a level of productivity that sets an upper bound on the amount of output people can generate in a unit amount of time. That always changes as technology develops.

    We can define a capacity for production – given some current level of employable resources available and some current level of productivity of those resources. But we can’t define in some prior way a level of productivity that we could call “full productivity”.

  • Chad Starliper

    Stephanie,

    I think you nearly made Cullen’s point: The Job Guarantee is a policy goal, but not a description of the how the monetary system operates. In that sense, policy choices and economic theory/descriptions are not the same. One is, I suppose, free to intertwine the two, but that seems to a pathway to confusion more than solution. First, there needs to be a quality discussion about how the system works — which is what I think MMT really does. After that, people are free to debate the best policy offshoots. Best not conflate the two.

    For this reason I have often been worried that the basis of MMT will be confused with some of the policy goals advocated by its strongest adherents. This is confusing to most people, and is why “investigators of MMT” sometimes cry foul that it is nothing more than central planning re-branded. Do you see this point? Because if you bundle the objective/descriptive aspects with the subjective/ prescriptive aspects, then you make the argument about economic preferences and “what is the role of government” and “what makes people happy” and “we are morally bound to offer help to others through government” etc. Intelligent can and will differ on such points, and thus, having nothing to do with the way the system functions.

  • stone

    innertrader, you’re suggesting moving all of the tax burden to being a sales tax. I think that that would be a disaster. The reason why our economy is becoming ever more distorted is because as the government deficit spends, those deficits get harvested as corporate profits, trading profits etc that then get deployed into harvesting government deficits ever more efficiently (ie harvesting the deficits before the deficits have been able to create much employment). The only type of tax that can solve that vicious spiral IMO is a flat % asset tax (on cash, bonds, stocks, land, commodities, collectables etc).
    Only when the private sector becomes aligned to harvesting profits that have come form the spending of previous private sector profits (rather than from government deficits or increasing private sector debt) will we get a sane economy. For that to happen, private sector profits will need to filter through to people who don’t already have more money than they know what to do with. Moving the tax burden to being an asset tax seems to me the only way that that could be acheived.

  • Paul Krueger

    I wonder if the difference between JG and what Cullen is trying to get at can be characterized as a difference between the government acting as employer and the government acting as investor for the benefit of our economic future. Either type of spending would support aggregate demand, but investment may provide additional benefits, especially to the degree that JG employment is for anything with a small value to society. I’m imagining investment in things like education, training, and research. Investment in infrastructure is certainly warranted too, but I think that’s much harder (and perhaps impossible) to do with buffer stock employees. The secondary effects derived when invested money is re-spent should be an increase in GDP and reduced unemployment which are similar to the secondary effects of JG spending.

    I’m guessing that what Cullen is after is an investment program first, that may result in the reduction or outright elimination of the need for a JG. Of course you have to be ready to say what happens when people become as educated and trained as they can be and there are still no private sector jobs available to them.

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

    Yes! Let’s evaluate the spending into the economy based not on its ability to fill the employment gap (which may or may not lead to prosperity), but based on the productivity gap which we KNOW will lead to prosperity (since economies have certainly experienced prosperity WITH unemployment)….

  • Ben

    “Yes! Let’s evaluate the spending into the economy based not on its ability to fill the employment gap (which may or may not lead to prosperity), but based on the productivity gap which we KNOW will lead to prosperity (since economies have certainly experienced prosperity WITH unemployment)….”

    This brings us back to the question of prosperity for whom? Not those who are left unemployed unless there is a basic income or JG.

  • FDO15

    We live in a democracy. One of the key components of the democracy is that the entire population does not get what it wants. Instead, the majority get what they want. Our country was not founded on the idea of giving something to everyone. It was founded on the idea of providing the most good for the majority.

  • FDO15

    Can I just point out what a lot of people here seem to be forgetting. This country is a democracy. That does not mean we are out to provide benefits for everyone. A democracy works by providing for the majority. That’s how it works. Call it tyranny by the majority if you will, but don’t imply that we all have some moral obligation to provide for every person under the sun. Read the constitution if you’re confused about this. Nowhere in it is does it say that the government has the responsibility to provide something for everyone.

  • Paul Krueger

    I’m not actually against some form of JG. I think it’s altogether too likely that increasing future productivity will mean too few middle-class jobs to go around. But neither do I think that a minimal wage job is something that will be satisfactory to most out-of-work middle-class people. It all comes back to a question of what role the government should play in creating quality jobs. We need to get creative about that using the MMT understanding that the government is able to spend money to stimulate the economy without undo concern about the absolute value of the debt. I imagine renewed effort for space exploration, for development of alternative energy sources, and other large scale research efforts that have provided both new technology and new jobs in the past. I could also imagine the government participating in micro-loan efforts or partnering with private venture capitalists both to stimulate private investment and to encourage those with great ideas to create small businesses. MMT frees us to think more creatively about how to use government initiatives.

  • Paul Krueger

    … obviously I should have said “undue” concern, not “undo”. And I even proofread it twice.

  • stone

    What really matters isn’t productivity at all. Do we really need to get the consumerist treadmill spinning faster? What really matters is that people get what they want in balance with spending time as they want to spend time. The only way to ensure that is to ensure that financial power is distributed as widely as possible and isn’t blocked by statist restrictions. If everyone was paid a citizen’s dividend and the only tax was a flat % asset tax that matched government spending $ for $, then we would get an economy by the people for the people of the people. Instead we get a government directed economy and as Randle Wray said, we have government by Goldman Sachs of Goldman Sachs for Goldman Sachs. They simply do not care one way or another what happens to the bulk of the population.

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

    People act as though the “consumerist treadmill” is something that is turned on and people are forced onto. No, we choose that level of consumption because we are incredibly wealthy as a society. Do we consume more than our wealth? At times, yes. But we shouldn’t throw the consumer under the bus just because we don’t like the idea of consuming things (for whatever reason that might be). As you noted, it is time that matters and people today happen to enjoy spending their time consuming things to a large degree. Others enjoy investing and producing. They’re two sides of the same coin.

    And a big part of increasing productivity involves reducing money manager capitalism. I’ve been very clear about that….

  • stone

    Cullen, doesn’t having an ever greater government debt (ie private stock of wealth) require ever more money management? The fuel for money manager capitalism is government deficits.

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

    I disagree. I think the fuel for money manager capitalism is demand for financial services. If people were smarter about Wall Street the demand would be reduced. Instead, we rely heavily on people to manage our money, hold our hand at the bank, etc etc. I saw it all when I worked in the belly of the beast. If people had any idea how much money is wasted on financial services they’d barf all over themselves. We’re a country of enormous wealth and that wealth is seeking a place to be protected. So, we hire people we think are qualified to protect that wealth. But that’s not always the case….

    Education is the best defense here….we can regulate some of the Wall Street risks away, but we can’t reduce the size of Wall St unless we reduce the demand for services….

  • stone

    Cullen, I thought that the bulk of Goldman Sachs profits were from proprietary trading. That is not financial services, that is using Goldman’s own money as a tool to harvest more money. Non-government sector wealth (ie government debt) needs to earn a return. If you have $15T to earn a return from, then that justifies a lot more rocket scientists.

  • stone

    I meant employing rocket scientists as investment bankers :)

  • stone

    The reason why we have unemployment is because money leaks out of the real economy as more savings are accumulated than are drawn down. The bulk of that net saving is actually accumulating stocks of wealth with financial institutions and high net worth individuals. Any attempt to counteract that by more deficits simply makes them more efficient at harvesting the deficits.

  • PG

    OK, I’m the supreme dictator and my goal is to maximize productivity, irrespectively of employment / unemployment.

    First question: what does productivity mean? How does one “measure”, ie, account for productivity, give a number to productivity?

    Intuitive idea is productivity is the ratio of Product to Something. Therefore, Product should be maximized or / and Something should be minimized.

    What is Product? “Real” GDP, ie, a list of every goods and services produced during a year?

    Problem is Product defined this way is not always comparable. Two tonnes of butter and two million shoes are a product greater that one tonne of butter and one million of shoes. But what about two tonnes of butter and one million of shoes versus one tonne of butter and two million of shoes?

    So, I would go for the monetized value of GDP, or paid GDP or GDP for short. There is still a problem as the GDP value depends on prices… But I would go for it as otherwise I could not go at all…

    What is Something?

    A. Total number of people in the country? Then productivity would equal GDP per person.

    B. Total number of workers in the country? Then productivity would equal GDP per worker.

    C. Total number of worked hours in the country? Then productivity would equal GDP per worked hour.

    Say that I would go for C. as it puts out the difficult possibility of “minimizing people” – even for a supreme dictator that is a risky proposition… :-).

    Now, letting aside the difficult question of prices I would have the target

    maximize the ratio GDP/WH (worked hours) therefore maximize GDP or / and minimize WH

    In the aggregate this ratio is a function of the aggregate

    - competence / knowledge of workers
    - commitment of workers
    - productive equipment available to workers
    - availability of natural resources

    Therefore as a first move to maximize productivity I would have the more competent and more committed workers working with the more productive equipment on the more available resources.

    And as a second move I would do nothing, as adding more workers (or worked hours) to the above could only diminish productivity…

    On the other hand if I would be a supreme dictator being allowed a more wide goal I would reason that

    - productivity is an important factor to consider but not the only one
    - level of product, “reasonably fair” distribution of product and minimization of free riding on productive effort are also important factors to consider.

    Therefore, I would set as my goal to maximize a measure over all the four factors above (and possibly some others).

    It is important to understand that productivity is a measure of social productive efficiency. But efficiency cannot be the only criterion to consider in designing a system. If it were, no system would have back-ups or safety subsystems as these diminish efficiency.

    For any system one must find a trade-off between efficiency and resilience. In general boosting efficiency diminishes resilience and vice-versa. Social resilience is as important as social efficiency.

  • Dan F

    Cullen,

    Is there more detailed commentary that you can point to about your ideas on using productivity as a way to improve the economy? I would like to better understand your ideas.

    Secondly, your comments about educating people about the market. I think that is idealistic. With the current structure it is rigged so 90% of the population will never have the same opportunities or access as the 10% that are the major market players.

    Dan

  • PG

    “PG, do you believe the treatments for “unwilling unemployment” would actually provide anything resembling cure?”

    Barely resembling, yes. Being a cure, no. Unemployment is a structural problem of the current socio-economic paradigm and can only be solved by changing it – that does NOT mean going into a USSR-like paradigm, where everybody was an employee of the state.

  • http:thundereyez.blogspot.com Gary Causer

    Name calling is so unbecoming! We are to learn and teach or we will find a new forum. Someone new to the discussion needs a civil answer, don’t you agree?

  • http:thundereyez.blogspot.com Gary Causer

    The point is that MMT postulates that none of this money the government uses will come out of your pocket, your children’s pockets or anyone else. Feel free to read up on Modern Money Theory and join the discussion.

    The real problem is that the government guaranteeing the unemployed jobs comes across as a left-wing fantasy and many of us understand the political realities and your post re-emphasizes that simple fact.

    Do we pay these people more than I get? Why would I work for Walmart and wait on your sorry butt? Does the government ever pick and choose winners and losers?

    Are you and I on the list?

    Jump in the water is fine and friendly.

  • stone

    The general public were just as dumb with their money in the 1960′s as they are now and yet the financial services industry was tiny then (or rather it was an appropriate size as required to serve the real economy). The explosion in “money manager capitalism” is simply because their is so much more money to manage.

  • http://fiatcollapse.blogspot.com Misthos

    I’m going to throw in my two cents here.

    Unemployment is not just due to money. It is also due to efficiencies in production. The modern era is one of using predominately fossil fuels and the technological advances that are possible with this essentially free seed energy.

    Without fossil fuels, farming alone would absorb unemployment overnight.

    Pre fossil fuel use, societies that experienced unemployment also had a large percentage of slave labor. Slave labor, like fossil fuels is also essentially free.

    Fossil fuels shortened the work day from sun up to sun down – to 40 hours a week plus weekends.

    I think its time we shortened the work week again. With technological advances (such as robotics) global wage arbitrage, etc… we are not going to hit this ridiculous, arbitrary target we set some time ago:

    95% of the population, working 40 hours a week, for 50 weeks a year.

    How can we as a society be bound to those work hours when we are constantly experiencing productivity efficiencies? Shouldn’t that also translate to more leisure time? That is, instead of looking at the monetary aspect – let’s look at the time aspect.

    Now, I’m also a believer in peak oil… so all of the above that I wrote may become moot one day. That is, the free ride that fossil fuels gave us may be (slowly) coming to an end.

    Just my 2 cents.

    ps – it’s the energy that matters, the monetary system is just a reflection of the energy used. You can have a great monetary system, but without the consumption of essentially free energy, it means nothing. And when I say essentially free energy, I mean this: a barrel of oil costs $100 – the energy from that barrel of oil is the equivalent of 25,000 hours of human labor.

    http://www.theoildrum.com/node/4315

  • http:thundereyez.blogspot.com Gary Causer

    Aren’t all Neanderthals unemployed?

    Anyways, I marvel at the comments being made that unemployment is in so many words, evil.

    last time I was unemployed I went fishing for a week or so then started a new business.

    But as you have pointed out, again by inference, you fear the loss of your job (status). Most people I’ve found who want to solve unemployment are terrified it would happen to them and their overindulgent middle class lifestyle (status) would be terminated.

    But what if a company never laid anyone off? How long before everyone loses their job?

    I guess my point is that there is always a place for creative destruction even if it causes me to re-access my place and start over when it happens to me.

    So, yes I’m convinced that unemployment is vital in a modern society but this is predicated on the politics, is it not?

  • stone

    Misthos, if money wasn’t screwed up then we would be beavering away developing alternative energy systems for when oil inevitably runs out. Instead money is used to ensure that the vast bulk of the 7bn people on Earth can’t afford oil and can’t afford to work on developing alternatives.

  • http://www.moslereconomics.com warren mosler

    and not to forget that the unemployed *are* in the public sector, created by excess taxation, etc, whether the govt knows it or not.

    so going from 5% unemployment to, say, 3% jg reduces the size of the public sector.

    best
    warren

  • http:thundereyez.blogspot.com Gary Causer

    So, are you recommending the government gives your employer enough money to keep you employed so you wouldn’t be inconvenienced?

    What if you lose this job and found something better? You’d never know if your check was guaranteed.

    But don’t we have enough interference from government in the work place now?

    Or am I being to right wing?

  • Greg

    “Nowhere in it (the constitution) does it say that the government has the responsibility to provide something for everyone.”

    If the majority wish for the govt to have that responsibility it will.

  • http:thundereyez.blogspot.com Gary Causer

    AWK… I was really enjoying this left-wing fantasy until you started making some sense.

    If the proponents of MMT find the magic wand to make this new government jobs program come to fruition please give me a call.

    P.s I believe there are a dozen or so multi-billion dollar government guarantee job programs and unemployment has been hovering around 9% for years. Let alone the military hiring the poor and proving to be the only equal opportunity employer in existence.

  • Mario

    First off I’d like to note for the record that Cullen is a great guy and I have nothing but love and respect for him and his work and his site and all that he’s definitely done for MMT and everything.

    These “differences” are really great and in fact help to prove that we’re not brainwashed by anyone progenitor….we are thinking and know wtf we are talking about. These “schisms” may in fact lead to even greater popularity with MMT, as it shows possibilities and options within the MMT framework. Perhaps we can all (ideologically at least) have our cake and eat it too!

    Based on the equations that Sennexx shares of FP = FE + PS or FE = FP + PS (found over at Mike Norman Econ here http://mikenormaneconomics.blogspot.com/2012/01/cullen-roche-on-goals-and-critera.html), it appears that Cullen does value FE, he just sees a different way of achieving it. That is a very different statement than being against an ELR. If FE could be achieved without an ELR, I’m for it. Perhaps an ELR isn’t the best way?

    I seem to think that FP = FE, so that if we truly were “fully productive” we’d also by logical necessary be at Full (or maximum) Employment. Therefore we have never been fully productive since we’ve never had FE. Therefore, we need to do something different in our policies! The question becomes who (sectoral balances-wise) picks up the slack and how do they pick it up?

    If Cullen or anyone else knows of some other way to reach FP (aka FE) then let’s hear it, check it out and see if it works! All I’ve heard is better investment…something that I think we all agree on and have stated numerous times and that could very well work…except what’s the plan? What are the details? And how can we quantify the accomplishment of FE? ELR is a plan that would work (whether it’s the best plan is still up for discussion)…so what is the Investment plan?

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

    Hi Mario,

    Thanks for the great comment. I think you summed up the conversation really nicely. Especially the part about me being a great guy. You are so right about that. Just kidding of course. I have my faults and I don’t, for an instant, pretend that I am not potentially wrong here. Anyone who thinks I feel comfortable disagreeing with Warren Mosler is mad! Anyhow, thanks for bringing the conversation back to its core points and doing so in a reasonable and respectable manner.

    Obviously, I have my work cut out for me going forward assuming I am not convinced of being wrong….

    Best,

    Cullen

  • Greg

    Boy this thread is getting LOOOOONNNGGG! Great job Cullen, there are lots of interesting voices being heard here and I’m learning a lot.

    As far as being supreme dictator for a day (I’d need more than a day but whatever) and trying to optimize the output of my economy it would look something like this. I would ask a few basic questions.

    1) Do we have all the food we need? If not can we buy it easily form somewhere else until we can grow/develop it ourselves

    2)Do we have all the shelter we need? Do we have the raw materials to build them if they arent already built

    3) Do we have enough trained personnel to meet the health care needs of our society? If not do we have enough other people who wish to learn these skills

    4) Probably most important is can we meet the energy consumption needs domestically

    5) How do we teach everyone the life sills they need/wish to learn

    Everything else outside of this is pretty much leisure is it not. Seems to me the private sector best prices and distributes leisure needs but the public sector must take a large role in distribution of staples of life.

    A large part of my productivity metric would be the answer to the question how well are we doing 1-5. Without 1-5 leisure is impossible.

    How much of our current economy is directed towards 1-5 in one way or another? I think an overwhelming share of it.

    Just spitballin’, I think instead of GDP I would look at a leisure index (dont ask how I’d measure it right now) because the higher our leisure index the lower amount of time we have to spend doing 1-5. How much of each day do we spend tending to 1-5?

    Just a start

  • Mario

    I have my faults and I don’t, for an instant, pretend that I am not potentially wrong here.

    yes thankfully we are all included in that one!!!

    Obviously, I have my work cut out for me going forward assuming I am not convinced of being wrong….

    I don’t think it’s so much about right and wrong as it is about effectiveness. As I said we all agree on FP = FE generally speaking. The “kinks” come into the plans with HOW to accomplish that.

    Perhaps you could articulate your plan for achieving FE through investment-initiates in a post or paper or something? It seems that it would have to address what I view as the main difference between “investments” and an ELR which is namely that “buffer stock” concept. Do we have “buffer stock” of investments? And if so what are they and how can we legitimately quantify the change in UE from those investments? I don’t think “trickle-down” is going to cut it at this point. Don’t you? And if you do agree then I think that leads us back to some type of public sector work program or something right?

    Otherwise it’s not investments at all that you’re interested in, it’s just an acceptance of UE, as you have clearly stated. The interesting thing is that since you know how MMT clearly works and how sectoral balances work, you know that UE just won’t go away unless those figures change. And so some level of “pain” in the economy is a part of your worldview. Hey that’s cool with me. Everyone is free to think and feel how they want…and I am all for checking out all possibilities and “risk/rewards.”

  • Phil

    Genius.

    Although the question remains to what extent public sector employment would have to increase in order to oversee and manage a JG program. Bureaucracy is undoubtedly a drain on the productive part of the economy.

  • JWG

    The welfare wage is substantial, if you value all of the in kind benefits, as well as cash benefits, that the federal and state governments provide. Will these benefits be made conditional under a JG? How will that work? Will able bodied men and women be told, “work or starve?” What of those with limited ability to work? Who will decide? Will the JG wage and benefit package exceed that for entry level jobs in the private sector currently available?

    I see the JG as a federal and state bureacratic boondoggle far exceeding existing safety nets and income stabilizers in complexity and cost, with an inevitable entrenched JG bureaucracy absorbing resources meant for the poor and working class. We would be better off with Nixon’s guaranteed income/negative income tax program as proposed in the 1970′s; that at least was socialism at its most cost effective and least bureaucratic. The EITC is its echo today.

  • jown

    Thanks Cullen.

    I like the infrastructure, rail, education, etc.

    Been reading Minsky who points out, quite persuasively, that the fiscal spending – military, research, etc. – actually inflates the aggregate price level and does NOT trickle down. His proposal is then to end welfare and have the fiscal spending “bubble up.” I DO THINK that ending welfare is a precursor to an ELR/JG. Obviously, nothing is being produced but inflation and demoralization with transfer payments.

    “Highway rakers” would be preferable to transfer payments. True? We are at least getting raked highways instead of subsidized consumption (again, inflationary, destabilizing).

    I do think it is disparaging to characterize the JG as being a supply of highway “rakers.” Apologies for disagreeing with you on this. That seems to be kind of a straw man with your analysis of the ELR/JG (maybe I’m wrong).

    As I understand the ELR/JG, at least from Minsky, the idea is resource creation, social investment. The extent to which we can target fiscal spending and get real resource creation (infrastructure, rail, education) the more social stability we will get, the more stable the price level, and the more productive the private sector will be (there will at least be less instability inefficiencies as a result of thin public consumption – yes, controversial).

    For me at least the idea of getting to a “full productivity” position will run up against the same limitations and results as Minsky pointed out in the 60s with the War on Poverty: the spending would not trickle down, even from the middle, would artificially inflate prices and we would still be allowing for the wasted productivity of those living in poverty.

    Minsky does also see the ELR as redistributing income and mitigating poverty; I think these are real scourges that a thoughtful person/economist such as yourself would like to tackle as part of your bigger ideas. I’m just suspect that your ideas will be too much like those of the 60s that failed. (respectfully)

    My understanding of MMT is that it takes us all the way to the buffer, all the way up what do we want to “consume publicly” and allows for the political “functioning” to “proceed.” Unfortunately, politics are stuck.

    Thanks again Cullen. All the best.

    and … MMT doesn’t have economists in Ivory Towers! (I may be misreading you on this) The “models” are the sectors and the buffer, right?! The ELR/JG may be the preferable buffer because of productivity and the fact that MMT doesn’t want to “publicly consume” poverty. We have options.

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Rogue, I see the point of this argument. I just think it’s theoretical, and that we won’t know whether it’s right until we test it with a JG. Basically, the argument is the same as arguments against minimum wage laws. We already know that those arguments aren’t supported by data.

    Our present situation is this: people wanting full time work who don’t have it number 25 million or more. That makes the present policy of an unemployed buffer stock little better than a crime against those who haven’t been able to find work. I just don’t see any justification for this policy. Even if it were the only way to contain inflation; it would be still be inexcusable to make the unfortunates who want but can’t get full time work to pay the full cost of this policy. Even if it were the right policy, the burden of it should be shared by everyone, progressively, so that the people benefiting most from this policy should have to pay the most for its maintenance.

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    “. . . The JG is a step too far in this process, because it ignores human nature and the essential component of capitalism, which is the risk-reward equation.”

    You’ll forgive me if I doubt your implicit claim to understanding human nature. Do you have some special credentials you’d care to present, or even a coherent theory of human nature that doesn’t come from economics, a discipline that’s notorious for largely ignoring the findings of all the other social sciences about “human nature”?

    I’m sorry about that short remark. Maybe it’s reflecting my impatience with the incredible stupidity on display in election campaigns in the United States. But I’ve just about had my fill of BS for the moment, and anytime I see any these days, I’m just very strongly motivated to call out the person delivering it. “Human nature” indeed. It must be 100 years at least since that notion lost its credibility.

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    Well, that’s the problem isn’t it? GDP isn’t a very good way to measure value, so GDP per hour worked isn’t a very good way to measure productivity as Keynes knew well. I can’t see any good way to measure productivity without a good measure of value. But since very few economists are interested or competent at value theory, it’s pretty clear to me that until they become interested in it, they won;t be able to measure productivity, since conceptually productivity is “value produced per hour worked,” where value may well be non-monetary in nature.

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    I couldn’t agree more in principle, but to be consistent you have to factor in the costs, monetary and non-monetary of continuing present policies. Otherwise you’re just exhibiting a conservative bias in your decision making. If new policies have to be justified by careful examination then old policies should be equally subject to criticism and refutation.

  • Wolfepaq

    Human Nature has been discussed for thousands of years, as you pointed out, because it can not and never will be reduced to a formula or definition. Yes, there are incredible inefficiencies and the world is a screwed up place… always has been… even in the hunter – gatherer phase there were leaders and followers and those who got less to eat because of their station in life. The uncertainty principle is real and here every day; but there is one thing I am certain of… a JG will not transform humanity into utopia. Perhaps in the domain of unintended consequences, it will just serve to enshrine a new form of serfdom.

  • http://www.correntewire.com/blog/letsgetitdone Joe Firestone (LetsGetitDone)

    I agree. The preamble does say that Union being formed has a one of its purposes “to provide for the general welfare,” which can reasonably be interpreted as “. . . . a decent standard of living for all Americans.” This doesn’t mean that the Government, as opposed to the private sector ought to provide that; but if the private sector can’t provide that for everyone and the Government can fill that gap with fiscal policy, then I think this is an obligation of the Government. I also think that where the Government is following an active policy of maintaining an unemployed buffer stock rather than an employed one, it at least ought to pay for providing a standard of living to the victims of that policy.