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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Comments

  1. 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?

    • 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?

      • 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….

        • 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.

          • 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.

        • 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?

          • 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.

              • 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”.

        • 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.

          • 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)….

            • “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.

              • 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.

              • 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.

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

            • 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?

              • 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

                • 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.”

  2. 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.

  3. 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?

  4. 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.

    • 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.

  5. 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.”

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

  7. 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).

  8. 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.

  9. 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.

  10. “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!

  11. 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.

  12. 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.

  13. 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.

  14. 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).

    • 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.

  15. 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.

    • “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.

      • 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.

    • 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.

  16. 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.

    • 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….

      • 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.

        • 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….

          • 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

  17. 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.

  18. 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.

  19. 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.

  20. 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

    • 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.

  21. 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

  22. 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.

  23. 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.