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

Yesterday’s story on the evolution of MMT sparked a raging debate as to the merits of the job guarantee that some MMT proponents have claimed is central to MMT itself.  Before we begin, I should note that Warren has been very clear that the JG is not central to MMT.  He said:

“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, 
 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.”

Warren is very clear that he chooses the employment buffer stock.  This is also consistent with his writing in Soft Currency Economics where he says the JG is an “option” available to a country like the USA in which the currency issuer is sovereign and has endless supply of the currency in a FX rate system.  So that much is clear.  It’s not about having one buffer stock that is “central” to MMT.  It’s about using the buffer stock that we believe to be most beneficial.  Warren says it’s the employment buffer stock, but that doesn’t mean there aren’t other options that could potentially work….This really emphasizes the descriptive and prescriptive components of MMT.  Clearly, its descriptive components are factual and the way we use this understanding of the modern monetary system is up for debate.

Anyhow, Warren and I had a nice exchange and we agree far more than recent debate has likely implied.  We’re just sort of on a different page about how we should meet our goals.  I haven’t presented my position all that well and I am up against 20 years of academic work so it’s entirely my fault that I have published comments in public without having been more thorough and clear in my position.  Obviously, it’s created a lot of confusion.  Anyhow, here’s what I wrote to Warren:

Cullen: “Hi Warren.  My thinking is multifaceted, but along those lines.  I’m a risk manager.  My goal is not to shoot down the JG idea, but to evaluate potential long-term risks.

First, I completely understand the buffer stock argument and the currency supplier point.  But let me elaborate where my thinking is coming from….To me, prosperity is not just about giving people a job.  It’s about increasing real living standards by giving people more time.  The way that humans achieve this is through innovation, increasing productivity, etc.  To me, this is like the fountain of youth.  We live many more lifetimes than our ancestors did.  And not because because governments spend a lot of money (although they can certainly help).  These massive increases in living standards come from increases in innovation and productivity (which are MOSTLY pvt sector and profit driven).  So my thinking is rather basic.  Why obsess over FE (I am referring to low unemployment here) when the real goal is full productivity (which is a vague concept I know)?

My point is not against FE.  FE and FP would hopefully be two sides of the same coin.  My point is that perhaps it’s the wrong goal to have.  We know we can have prosperity with UE.  We don’t, however, know if the latter is possible (FE & long-term multi-generational prosperity).This doesn’t mean it’s not an ambitious or worthwhile goal and the lack of real life instances doesn’t mean it’s impossible, but it certainly makes it hard to prove.  This is the realm of the theoretical in MMT and it makes the case very hard for people to believe.  That doesn’t justify closed minded thinking (which I can certainly be guilty of), but it is not an unjustified position to maintain given that empirical evidence for a permanent prosperous JG is weak when looking at historical terms.

My position is equally theoretical of course since I am working under the idea that maximizing productivity is some holy grail that will lead to better living standards at X rate vs a potentially lower rate of Y under the JG.  Of course, I am working under the idea that the JG has the potential to have negative impacts through psychology, resource allocation, distribution of wealth, but those are hard to prove of course and I know the onus is on me to develop my thoughts here.  Don’t get me wrong, I fully appreciate the strength in your argument and I know I have not developed these thoughts enough, but I am just posing what I view as risks in the long-run.

In the end, currency sovereignty is about maintaining the balance in the economy between the currency issuer and the currency users.  But we mustn’t forget that demand for the currency is multifaceted here (I think we differ here as well).  It’s not just based on the issuers ability to tax.  After all, there must be productivity available to tax and programs that eat into that over time have been proven to create increasingly unstable economic environments.  I am not saying that’s necessarily the endgame for the JG, but I am simply trying to consider the potential risks.

I hope that clarifies where I am coming from. ”


My take is JG leads to superior productivity gains, but it’s not ‘proven’
If I thought JG would lead to lower productivity, I’d be saying so and pointing out that real cost of a JG
Cullen: This is the real crux of the argument.  If you can prove this then the JG is a no brainer.  I can’t seem to come to agree with the idea that the upsides outweigh the downsides….

Think about the way the market sets the spread between the JG and what the private sector pays, and as for resource allocation, the ‘cost’ of the JG is the difference in consumption between unemployed and JG workers.  and in fact unemployed may actually consume more real resources, as they have more idle time for real resource consumption, which includes throwing rocks through windows, beating their wife and kids, breaking into houses, begging drinks, etc. etc.  The gains from jg vs unemployment on that ‘social side’ alone are probably worth it in terms of real resources.  And with the JG pool maybe 30% smaller than an unemployed buffer stock for the same price stability the real cost is that much lower as well.

Cullen: The devil is in the details.  These are really broad concepts that are nearly impossible to prove.  I am not denying that they could work, but since we know what CAN work (maximizing productivity with some low level of unemployment), why would we not focus on that?   That’s sort of my simplistic approach here….”

So a lot of this comes down to potential downsides of employing workers in the JG (some excellent questions were asked here) versus leaving them unemployed.  One of the big problems with the JG is that it has never been done in any mass scale that has resulted in prosperity over any multi-generational period.  So, it’s very hard to prove that the JG can work because it has never worked in the past.  What we know has worked is having an unemployment buffer stock.  We know for a fact that human beings can achieve enormous prosperity despite unemployed people.  This doesn’t make this the optimal position and it doesn’t mean we shouldn’t strive for full employment, but what if the approach of plugging in the unemployment hole via government workers is the wrong approach?  That’s all I am trying to convey here.  What if there is an optimal way to leverage the government’s currency supplier powers that doesn’t involve unproven and potential downside risks?   I am not claiming to have all the answers here and I certainly haven’t done the academic work that is required to back my stance, but I think the question is more than a legitimate one.

Perhaps most important though is the point that Edward Harrison makes today with regards to the JG.  This conversation is a total non-starter.  We might as well be arguing how we’re going to get to Mars tomorrow on the back of government spending.  If MMT is ever going to be taken seriously then it has to evolve within the scope of our reality.  This doesn’t mean it might not evolve to the point of having a government job guarantee, but a big part of gaining traction within the world of economics is establishing realistic policy proposals.

I often joke around about the Crusoe Island of the Austrians – that mythical island where people live prosperously without any government.  And that’s a happy story, but it’s totally unrealistic since it entirely misses the societal concept of the evolution of governments and the role they play within human life.  This idea of the JG is not much different and equally preposterous to most economic and political commentators.  That doesn’t mean it can’t happen, but I just happen to believe that my proposal to ignore the JG for now and focus on the operational aspects and the fact that WE KNOW we can achieve prosperity with a certain level of unemployment AND government spending, is far more palatable and will gain much more attraction over time than extremist ideas involving the potential quintupling of the government workforce.   For now, we don’t know if the employment buffer stock can work since there is no evidence of this being done over any sustained period leading to proven multi-generational prosperity.  That’s not merely a hurdle.   It’s a huge wall blocking MMT’s evolution.  If we’re to take the next steps we need to stop arguing about how to get to Mars and instead focus on how we can get to Washington….



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

Cullen Roche

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

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  1. Effective aggregate demand is increased by productivity. Not by putting money in people’s pockets. Why is this concept so hard to understand?

  2. “For now, we don’t know if the employment buffer stock can work since there is no evidence of this being done over any sustained period leading to proven multi-generational prosperity. ”

    However you do know that the unemployment buffer *doesn’t* work and caused great suffering to a great many people. As in millions and millions of them. Entire cities worth of real people suffering real hardship – because they were trained by the school system to find value in work and then the economic system fails to give them work. That is pretty close to the definition of torture.

    And since it is a structural failure it is only correct that you compensate these people fully for the failure of the system. They can after all do nothing about it in aggregate.

    Or if you aren’t prepared to do that then at least provide them with the cyanide to kill themselves quickly rather than go for the slow early death of poverty – which admittedly is a little quicker in the US than anywhere else due to the lack of any rational health care system.

    These are real people you are talking about here. Suggesting that you can’t help people out of their suffering and give them meaning in the world because it is a political non-starter says an awful lot about the state of the politics.

  3. No money = no spending = no demand signalling mechanism = no production.

    At all times there must be sufficient spending in the system. The endogenous nature of money means that that is not a given.

  4. 1. Please stop misrepresenting my position. It’s getting really old hearing people claim the I am playing some political card here. I am in favor of much larger govt intervention on the fiscal side here. I have been VERY clear about this over the course of several years. This whole argument that I am somehow not in favor of helping more people out is sheer bunk. You discredit yourself when you prove that you are willing to criticize someone’s argument that you aren’t even remotely familiar with.

    2. You call the state of the economy “great suffering” because we are in this unusual rut in economic history. I don’t doubt that that’s true RIGHT NOW. But if you back out and take a much larger 30,000 foot view you can easily call the last 100 years the greatest period of prosperity in human history despite enormous unemployment (not that I am in favor of UE per se). Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010. You call that a “great suffering”? We need to maintain some perspective here….

    3. If you’re going to take a hard line political stance here then please understand my argument first (which has been in favor of many liberal policies in recent years). No one is raining on the liberal agenda here….

  5. You’re confusing money with value. Spending more money into the economy doesn’t give it more value. I know the MMT position that some money must be spent, but don’t tell us that spending money gives it value.

  6. Cullen
    You and Bill are at completely different ends of the Earth on this.
    If you were within his reach and said “We know unemployment works” he would probably lay you out.
    So I guess I’ve found my answer because in truth I don’t think there is any MMT, whatever that turns out to be, without Bill.
    Good luck

  7. Well, considering I’ve boxed at the heavyweight level before….I doubt that. :-)

    I understand Bill’s drawing a line in the sand here. But MMT is bigger than any single person. If we don’t realize that then we might all be better off punching each other in the face.

  8. The thing is, their (the developers) MMT is about more than the truth which seems to be all you want so why not just take the truth and proclaim it?
    Why do you need to call it MMT ?

  9. Call me post-MMT as some have. Label me whatever you want if it makes certain people feel better about their ownership of certain ideas. This is about understanding the monetary system and using that to apply it to making the world a better place. It’s not about Bill Mitchell or any individual MMTer. If you want to call my flavor of state money theory something other than MMT then do it. Warren has been pretty clear that “we’re all MMT” regardless….

  10. Because it’s not true. As Keynes said, if you pay unemployed people to dig and fill holes you will increase demand and thence output. Are you smarter than Keynes?

  11. I have no idea if the JG can work. But I am more than certain that unemployment must be addressed. I have personally seen what it does to people’s lives. So all the arguments about how much better off they are compared to a hundred years ago are somewhat meaningless.

    Since there is not likely to be any JG in the near term, then I think we need added stimulus, to include a payroll tax holiday. Going forward the JG needs to be looked into in more detail. Or we need to know how to deal with the dreaded NAIRU so that unemployment is not deemed normal at over say 5%.

    MMT seems to have a vitality that can help us. But it will remain in the shadows unless someone can show that it is relevant to people’s lives and to the public purpose.

  12. So now digging holes and filling them up is “productive”? According to who? Do you pay people to do that in your yard? Does anyone honestly find that productive? Maybe in the crazed world of socialist economics.

  13. The point about it being palatable is important. MMT’s been around for a long time now and its core components are almost common sense. So why hasn’t it gained much traction? Because the key component in the policy is a no-go in most political regions. The JG is not going to work. Ever. There, I said it.

  14. JG is not going to work, it doesn’t work. Look at american unions, they are your JG-lite. I am quite liberal leaning and even I hate american unions. They are disgusting, corrupt and self-serving.
    We need to figure out an employement soltuion within the capitalist framework to keep the competition alive. We can sponsor public works and public training programs. We can take an example of Germany and create apprenticeship programs for trade professions, instead of putting people into debt whole for even more uselss education that doesn’t give them any real skills.
    It is really where the crux of the issue is – education is too far divorced from the workplace, they need to be very close for people to transfer seemlessly. US workforce is getting less competetive by the day because of it. I see it in IT every day. We outsrouced all easy/ entry level jobs to India, so young people in the US canot get trained in IT. Because of it in 10 years there will be hardly any IT experts left in the US, with exception of such IT powerhouses as Google, which invest in their people.
    Again, there is no political will to push a program like this. They’d rather discuss gay marriage, I know, it affects us all so much.

  15. How has unemployment not worked? That one stat alone is crazy. The world has produced 23% of all output over the last 2000 years in just the last 10 years. That’s the definition of “not working”? Aren’t we trying to fix something that is clearly working pretty damn well? Cullen noted yesterday that Neanderthals didn’t have unemployment. Let’s go live with them right? Surely, life as a pre-human was better in relative terms back then, right?

  16. I think if you look back over the last 40 years, it would be fair to say that it’s been a period of enormous prosperity for a tiny minority, the majority of people are materially more prosperous (due to debt-fuelled consumption) but their living standards are probably not much improved, and the living standards of a large minority have stood still or deteriorated. I don’t see how one could claim enormous prosperity in a nation in which a significant number of people die each year purely because they can’t afford health insurance.

    For me, a prosperous nation would be one where a minimum standard of living was guaranteed. There might be a better way to achieve this than a JG, but without that guaranteed minimum standard, I don’t seem how any society could claim prosperity.

  17. Change of topic, …
    re:”Call that the mmt insight if you wish. so it comes down to ‘pick one’- gold …”
    Was thinking about this … why just pick one? Given that there are currently no restrictions on private Fx, gold, wheat holdings etc. Does the presence of real assets and Fx (and leakage to these assets) invalidates any MMT (prescriptive) macro policy (e.g. JG)?

  18. P.S. NASA has been seriously talking about going to Mars since the dawn of the space program. With the recent cut backs, they`re probably banking and hoping on a bit of prescriptive MMT.

  19. Cullen,

    You agree with the buffer stock policy but you disagree with what it should be.

    You agree that in extreme times of a depression jg may be a good thing but currently we are not even in a recession so today a jg isn’t needed.

    You think unemployment is necessary as a physiological tool and everyone agrees that unemployment will never be zero.

    I don’t see much of a disagreement.

    I think the buffer stock policy is central to understanding MMT. I think we should talk about what type of buffer stock policies should be used in different situations. I also think people should be less worried about perception then facts. I remember not to long ago when people thought that the debt is an issue worth worrying about but now that story has no legs.

  20. Say you have 20% unemployment. These unemployed have no purchasing power. Shops, garages, restaurants have laid people off because these people are not coming through the door. You employ half of the 20% unemployed to dig and fill holes. They are released from poverty. Hallelujah! They go out pretty quick and spend in those shops, garages and restaurants. These shops, garages and restaurants then employ the remaining 10% unemployed to service these new customers. Now you have 0% unemployment, and you have increased total productive output of the economy, assuming you regard shops, garages and restaurants as productive. And yet you achieved all this by the state employing people in entirely unproductive hole digging. Of course, if you wanted, you could achieve better results by employing people in more productive things than hole digging – then, as a society, you’d be even better off.

    Keynes was hardly a socialist. He saw his ideas as rescuing capitalism.

  21. @Cullen, this reminds me so much of the exchange I had with you regarding MMT when I first started here:

    “This is the real crux of the argument. If you can prove this then the JG is a no brainer. I can’t seem to come to agree with the idea that the upsides outweigh the downsides….”

    Only I was asking you to prove that govt spending (as opposed to JG) would create value over the cost (ie govt expenditure multiplier >1), and until you did prove that, I would not come aboard.

    You said I need to look at it as ‘govt deficit’, not as ‘govt spending’, and that it may help for me to substitute ‘tax cuts’ for ‘spending’ so as to achieve said deficit…. and then it clicked.

    Seems Warren is asking you to substitute in much the same way – so as you have no preconceived notions holding you back or distracting. I’m with you, JG I cannot back – at least at the moment.

  22. I think that FP is an excellent target, and that the best way to achieve FP is with a free market economy not a government-driected economy. I think that the government should be doing what it can to reduce production and energy costs, reduce regulation, foster research and development, increase trade, and support manufacturing, capital formation, and production within the country.

  23. Who died and made Bill Mitchell God? Mitchell’s major contribution to MMT is this phony jobs guarantee that is the equivalent of a rocket scientist having the idea of landing on Pluto. Cool idea, but no one gives a shit because it’s unrealistic and inapplicable to our world.

  24. I am really interested to see where Cullen goes with the idea of FP. If it gains economic and political traction it could blow the door off the MMT ideas.

  25. Cullen, you are standing on the shoulders of giants. If you believe they are incorrect, that is fine, but then come up with your own theoretical framework and label it any way you want. You are kind of freeloading on the MMT popularity at this point.
    That is why some are upset. I think.
    With or without JS the current level of unemployment is a tragedy. Framing unemployment as positive character building exercise is cruel at least.

  26. Hi Cullen, speaking as a UK peasant, I don’t agree with you on the JG, but I really appreciate the clarity of your writing.

  27. There is no lack of minimum wage jobs available right now for anyone who is ready and willing to work. Just check out the “help wanted” signs outside your local Starbucks, McDonalds, etc.

  28. “So a lot of this comes down to potential downsides of employing workers in the JG (some excellent questions were asked here) versus leaving them unemployed.”

    Cullen, that comes off as a very biased framework for objectively evaluating a plan. There will be potential upsides and downsides within each model, and the end analysis should be done on a net basis, not just a comparison of the downsides to each plan. You can ultimately decide to weight the downsides more heavily than the upsides on say the JG, but you can’t put aside analysis of the upsides.

    On that note, I would appreciate more clarity on what you consider to be ‘nearly impossible to prove.’ Is it the entire concept as a whole and/or individually the potential pros and/or the cons?

    For example, considering the following potential pro independently (and putting the downsides aside), I don’t think it’s fair to say the social gains Warren is talking about (which btw entail significant economic costs in terms of healthcare, counseling, jailtime, etc) that would amount from increased employment are “nearly impossible to prove.” That is such non-specific label so as to be nearly useless. You might as well apply that comment to any economic or social policy option ever considered, anything outside of a natural science experiment, even the fiscal stimulus we all support. If one is a bit more nuanced, it would be readily realized that research on the social/economic gains from employment is a pillar of public policy research and a pretty well-established idea universally. So I think “nearly impossible to prove” is a bit of a cop-out and not very helpful for assigning a ‘probability’ from a risk mgmt perspective. In relative terms, this concept is not that foreign or controversial and should be recognized as such.

    On the other hand, I think it would be more reasonable to use the ‘nearly impossible to prove’ label in context of a discussion regarding the psychological ramifications of the availability of a JG (moral hazard). In your mind, perhaps this moral hazard might be so concerning that you think it deserves a large negative score because evidence against it is so hard to come by.

    But it’s helpful to separate each component out and recognize individual merits, rather than mishmashing things together and applying a generic label of ‘nearly impossible to prove.’

  29. So that’s it? There were no costs to digging all those holes and giving people money? They didn’t drive up the cost of food and gasoline or anything else? They didn’t reduce the living standards of other people by adding nothing to society, but making everyone more expensive for everyone else?

    Boy, you guys have a warped view of reality.

  30. Thanks Paul. We’re bound to disagree on some things right? If anything I think it shows the strengths of the core aspects of MMT. Ie, it’s politically workable on much larger levels….

  31. Cullen, I did not say that living standards haven’t improved over the last 40 years, rather that they haven’t moved significantly for a large minority. There is no doubt that many people today will be less prosperous than their parents, even with equal life chances and skills.

    It’s certainly true that real wages haven’t kept up with productivity growth over the last 40 years (as they had been in the period following WWII). This divergence between wage growth and productivity growth is only growing. Hence the enormous prosperity for the tiny minority.

    I guess my basic position in this debate is that I am in favour of a JG, but am interested in hearing alternatives that would achieve similar (or superior) outcomes. I don’t think an alternative that leaves a significant minority on the scrap heap can be said to be preferable though, even if overall output was greater.

  32. I should have added that I still think you are an MMTer(ist) whether you are in favour of a JG or not.

  33. I can tell you. Nowhere.
    Proof: Google “full productivity”
    Did you come up with anything of meaning?
    Now Cullen can coin another term like Full Productivity Theory and in theory develop it, but as of now there is no such thing.

  34. I have enough faith in people to believe that if Cullen can walk up to MMT, stare it’s operational descriptions in the eye then accept them because they match reality in spite of objections to policy elements like the JG… other people can do it too.

    It’s not as though if we woke up tomorrow in a world where everyone was on the same reality-based page that all political and philosophical debates would go away. They’d still be there, just framed by reality instead of monetary fiction.

    People who maintain allegiance to fiction because reality would force them to debate their ideological opponents on the merits of policy are probably a lost cause anyway.

  35. Who do you think helped create the MMT popularity? This website does a million page views every month for the last two years. That’s larger than every single MMT blog out there (maybe even combined). I am the #1 econ writer at Seeking Alpha where they do 10’s of millions of page views. I am also a regular at Business Insider which is one of the largest financial websites in the USA. My reach here is enormous. My primer is by far the most widely read of the primers and ranks in the top 25 at SSRN. I have been cited by Paul Krugman on several occasions and he said my position was the most “readable”. I know for a fact that major journalists like John Carney and Joe Weisenthal learned MMT from me and my primer. I cite Warren and the others in my work tirelessly.

    I have not forgotten who I learned all of this from. And I have gone enormous lengths to ensure that they get the credit. I have personally told Scott Fullwiler that he deserves a Nobel and that I would help in any way I can to make sure he gets the recognition he deserves for his academic work. I am not in this to win awards or get credit. But I do get a little tired of hearing people say that I have not helped enormously in spreading its popularity. And now since I appear to disagree on a point that Warren says is totally optional then some people claim I am being disingenuous or freeloading. Fine, kick me out of the club. Call me a Post-MMT or whatever you want.

    Personally, I think it’s sad that this has all become so personal to so many people. We are trying to give this great gift to the world and all some people can think about is themselves.

  36. Perhaps I’ve missed some discussion over the holidays, we currently have deficit spending on unemployment benefits providing net financial assets to muddle along now that asset price inflation no longer works.

    Scott S. and Nick R., the modern monetarists, propose having the Fed purchase S&P500 futures to provide net financial assets to reach full employment.

    MMT propose a JG to provide net financial assets to reach full employment.

    My own version of post-MMT, involves breaking the bank monopoly. Citizens would gain access to the Fed window, enabling a citizen to get a loan at the current Fed rate using a Treasury Security as collateral. This ‘minor’ change alters the distribution of net financial assets created by government debt payments away from banks. No, not too popular to MMT or non MMT banking crowd.

    Post-MMT, Cullen style, suggests what exactly in regards to increasing net financial assets to the real economy? Increasing unemployment benefits (your choice for buffer) until everyone is fully employed, productivity is maximized, or something else?

  37. I have to remind everyone, as I did in the last post on this, that we live in a democracy. Do you know what a democracy is? It is government by the majority. 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. If you don’t like our government or country then you have the right to leave and go live in countries that believe in socialist ideals. But that’s clearly not the American way. I don’t know if one is for sure better than the other, but I know where we are and I know what kind of government we chose to establish this great country on.

  38. There is no doubt that you are a huge MMT advocate. No question there.
    The discussion is that you have to justify the differences in your opinion with the MMT founders with actual data and research.
    Of course you are entitled to your opinion, but sometimes you state it is a fact with theoretical or practical facts to back it up.
    Again it is not about who is right or wrong.

  39. BTW, I agree from a strategic/political perspective, pushing the JG right now doesn’t make much sense. However, that shouldn’t affect a separate intellectual conversation about its merits.

    Additionally, while I think implementation of the JG deserves much analysis, your description of a JG as quintupling the govt workforce to downplay its practicality is a bit misleading. A JG would involve local employment, with govt funding; that gives a different picture than the federal govt directly employing and managing that many more people, as your Walmart analogy suggests. Secondly, looking at a JG from a cost perspective, it wouldn’t be that much more expensive than deficits most other presidents have run during normal times. I think that gives a less biased summary, your concerns regarding moral hazard notwithstanding.

  40. If it doesn’t make sense now then when will it make more sense? You think the government can be convinced to spend more on employment when we’re near full employment? If anything, you’d think this idea would be more attractive right now, but Obama can’t even pass a balanced employment plan. The idea of adding a massive government employment program that triples or more the size of the work force is a joke. Actually, I can’t believe I am even wasting my time reading all of this since the whole conversation is so pointless. We’re just arguing over egos and who gets credit for what theory. Note to all – no one’s getting credit for anything relating to the job guarantee because the idea is not workable.

  41. Dimm,

    SS said “I am really interested to see where Cullen goes with the idea of FP”

    You say “I can tell you. Nowhere.” directly contradicting SS.

    Then you seem to agree with him “Now Cullen can coin another term like Full Productivity Theory and in theory develop it.”

    You are confusing.


  42. And you state broad generalizations about Cullen as though he has an obligation to listen to you. I know you’re not a native English speaker, but you need to realize you come across as very condescending. It’s incredibly off-putting.

  43. What a stupid conversation. There will be no JG in the USA. Get over it. Why don’t you MMT smarties actually come up with some other stuff that might be useful and then use this energy to push those ideas forward.

  44. Sorry, but as a private citizen, if you have a treasury security as collateral, why would you ever get a loan on that treasury instead of just selling it? Both are “money good”.

  45. FDO15,

    We live in a vaguely-democratically elected Republic. But I digress-

    I mostly agree with what you say here, but what you have said and a JG/FP program are not mutually exclusive.

    I hope to one day have a choice between electing a president that advocates a FP program or a JG program. If that’s the major choice we face, we will be light years better off as a country.


  46. Your comment doesn’t even make any logical sense as a response to mine. I said I agree politically this makes no sense CURRENTLY. But how can you be so bold so as to suggest that there is no chance of it ever happening for the rest of eternity? People like you said the same thing when slavery existed, when women couldn’t vote, etc etc. Believe it or not, massive policy changes have occurred in the past. If we eventually enter a world where mainstream economic consensus moves towards MMT, then a JG becomes much more realistic. Maybe that’s 20, 50, 100 years from now. I don’t know. I don’t even have an official opinion on whether or not the JG makes sense, but I do know how ignorant and pointless your comment is.

  47. try this
    if your goal is to maximize private sector employment, what i’m saying is you can get a lot more private sector employment with a jg buffer stock then an unemployed buffer stock, simply because an unemployed, less liquid buffer stock has to be larger than a more shovel ready jg buffer stock for price stability.

    and i presume you agree that the amount of private sector employment you can get from fiscal adjustment is limited by the ‘monetary inflation’ that comes from allowing the buffer stock to get too small?

    also, with a jg, fewer need be employed cleaning up after the unemployed’s destructive behavior, meaning they can be employed in more productive private sector employment.

    and what, specifically, do you see as the negatives of, say, a 3% jg pool vs, say, a 5% pool of unemployed at ‘full employment’? Seeems that extra 2% working productively in the private sector, responding to price signals/aggregate demand, is worth quite a bit from any angle?

  48. I do not care much about your comments and you do not care much about mine. Instead of having this conversation again and again I suggest not to respond to each others posts. Cheers

  49. Well, the 20% who were unemployed are now employed. Assuming that the 10% in the public sector hole digging enterprise are unproductive and the 10 % in the private sector are averagely productive, the you have increased output by 10/80

    Well that is it. You originally said that you could not increase demand simply by putting money in people’s pockets and I explained how you could. In my example, putting money into people’s pockets to do unproductive work caused productive output in the economy as a whole to increase by 10/80ths. I admit this is counterintuitive, nevertheless it is the case. Of course if the government put money into people’s pockets to do productive work, the economy’s output would increase by 1/4 in this example.

    Obviously I am not suggesting that the government deliberately employ people unproductively. I am just pointing out that even if many of the jobs were unproductive, the total productive output of society as a whole would still increase due to the increase in demand.

  50. LVG – You are just a troll. And wrong to boot.

    I don’t know why Cullen lets you stay.

    Increasing demand increases output. It does not increase inflation. Or lower living standards or other such nonsense you spew.

  51. You’re not looking at the individual perspective. It’s not about increasing output. It’s about increasing living standards. This is the point Cullen is trying to make. Digging holes and filling them up doesn’t generate real productivity. But it does cause the price of everything to go up as those workers bid on food and gas and other goods and services. Output rises, but so does the price of goods and services. Productivity, on the other hand, did not rise. We are creating just as much goods and services as we were before because we haven’t increased efficiency or productivity per se. The capitalists might go out and hire more people to meet the added demand, but that doesn’t mean the hole diggers didn’t come at a substantial cost already by pushing prices higher. We know inflation is the real concern in MMT, but we don’t seem to understand the difference between inflation and living standards. As someone noted below, this is a country by the majority. It’s not a socialist country. It’s not about creating something for everyone. It’s about creating something for the majority. The JG is focused on creating something for everyone. That’s against the ideals of America. Truth be told.

  52. Human ingenuity is a far more valuable resource than human labour. If you look at say the Dahravi slumb in Mumbai, you can see the enormous resourcefulness and ingenuity of those people. Imagine if that same ingenuity were able to florish from mass financial freedom (such as from a citizens’ dividend) throughout a developed country with all of the advantages we have to put behind it. The JG (or unemployment benefit) stamps on human ingenuity (the most valuable of all resources) leaving behind a worthless box tick for the employment statistics.

  53. Is it true that every employed person is productive and every unemployed person is unproductive?

  54. Saying that the JG system would only leave 2% of the population employed under the JG seems a bit wistfull to me. It seems just as likely that a slide would occur with a larger and larger proportion of the population falling under the JG.

  55. LVG, you always remind me of Isaac Asimov’s “my ignorance is as good as your knowledge”
    I can see you arguing with the Pope:”You do not understand anything about Catholicism!”

  56. Oh, so now the relationship between demand and output is linear? You’re just rewriting the economics book here with this BS. Do you need me to post some data on oil, the most important input in our economy? Or do you think that all of that added demand has led to increased output with no price impact or impact on our living standards? This is basic economics. But hey, let’s hire 10 millions Americans to dig holes and then we can see how quickly $200 oil drives the economy into a rut. Great idea by Americas newest group of central planners!

  57. Dimm,

    You may dislike Pierce’s read of your comments, and his response. BUT I have to agree with him that your comments can come across as unnecessarily abrasive and combative. I don’t think you intend them that way and I, like Pierce, feel there may be a bit of a language barrier and I’m just trying to help.

    Best regards

  58. We already have a JG system, as someone has pointed out. It is a JG system of digging holes and filling them up again.

    A JG system that increases productivity or improves standards of living would appear to be more beneficial.

    Why should a JG system be less productive than the current system…..

  59. Only an idiot would argue with a man who believes in fairy tales. Speaking of fairy tales, why don’t we hire everyone in the USA to dig holes so they can make my gasoline more expensive? That’s a great idea because I want to live a shittier life so some poor schmuck in Idaho can drive my living standards down just so he can feel better about his life digging holes! Thanks MMTers!

  60. I never said it was linear. You are saying it is nonexistent by trolling the idea. Economists do say there is a multiplier though. Unlike your idea of increasing demand equals less prosperity.

    Who says oil is the most important?

    Our economy is less dependent on oil now than it was in the 1970s per output. Else we would be seeing more stagflation than we are now.

  61. Warren, Randy, Pavlina, Mat
    Can you please bring this farce to an end then we can move on?
    or is there still a debate to be had about Bill Mitchell vs Cullen Roche?

  62. why would it, though? Say a JG program involves fairly set hours, humble work, low hourly pay, etc… who wouldn’t walk away from it for better opportunities elsewhere the minute they could? Nobody said a JG program had to be luxurious.

    I envision it really as not being unlike enlisting in the military when there is nowhere else to go… except without prospect of promotion. If you have private sector options that don’t require you to get up at 6AM every day and pick up trash in the parks, you would take them!

    If you are 18 it’s not so awful, but if you’re fifty and still wearing JG Drab and whitewashing the toilet huts at your city park, you start to ask yourself, “where have I gone wrong…?”

  63. Implementation is the biggest hudrle facing MMT. JG could be a major sticking point in the political arena. Keep it simple, implementation will probably be piecemeal, get the most important points through first.

  64. LVG, take it easy. No need to increase an already personal atmosphere. If people can’t remain civil here I’ll turn off the comments on this thread. It’s getting ridiculous with the personal attacks.

  65. Andy,

    This isn’t about Cullen Roche vs. anyone. It’s not about individual ideas. It’s about exploring broader concepts to see if we can’t use MMT to actually make the world a better place. You don’t seem to understand a very simple point. MMT based on the JG, though noble, is going nowhere. We might as well build a cure for cancer and bury it in the ground in Nevada. The sooner you come around to this point the sooner we can get on with actually trying to make the world a better place. It might evolve to a point where the JG becomes politically palatable, but let’s be realistic here. It’s hard enough getting people on board with the descriptive aspects. Could we cure cancer later? Maybe. But let’s focus on curing the flu first. Like it or not, we have to take baby steps with this….

    And if you need to kick me out of the MMT club to make yourself feel better about certain individual ideas regarding MMT implementation then feel free. Call me post-MMT. Call me a state theorist. Call me the devil. It doesn’t matter.

  66. Is the definition of JG mean you become a government employee? Is that the only definition?

    To me, anyone who receives government benefits is a government employee.

  67. THANK YOU.

    I can’t get the MBA sitting next to me to stop talking about gold and this converstaion is taking place? We should concentrate on spreading and fully developing the descriptive aspects of MMT and allow the normal systems of debate & government hash out the implementations of prescriptive policy once the majority are aware of the former.

    Crickey this is been a frustrating few days.

    Concentrate on the baby, please, not the bathwater.

  68. So, an extra $200 billion in spending thanks to the hole diggers will increase living standards? That’s your position? Yeah, for who? The hole diggers? Of course it will. That’s what welfare programs do. They make some groups better off and they make the rest of us worse off. Do the math from your equation. It’s pretty simple. Same productivity, more money, more transactions, more velocity = higher prices = lower broad living standards.

  69. As a side note, it seems to me that a cost-benefit analysis of the JG hasn’t really been performed despite all the research around it. It seems if it did exist the core MMTers would be able to respond to Cullen’s concerns with a link to one of their studies saying “here are all the potential pros and cons, including Cullen’s concerns, our estimated costs associated with each, weighted by probability/risk, and here is the net outcome.” This is not an insult or criticism, particularly given the limited number of MMT researchers, but just an observation. Seems to be a reasonable study to do however, perhaps along the lines of one of Fullwiler’s recent responses to Cullen…

  70. LGV, you have so posted in the wrong place.

    In my simple example the average standard of living in the economy would increase, since more output would be shared amongst the same population. How this increase would be shared out is a political matter, and depends on your stomach for poverty and inequality.

    I am going to finish now as I am sorry that our exchanges are generating more heat than light.

  71. Pierce: ” why would you ever get a loan on that treasury instead of just selling it? Both are “money good”.”

    The ‘magic’ of leverage, without haircut, implies infinite leverage. No need for haircut given collateral is ‘risk free’.

    Citizen buys $10,000 tsy paying 2%.
    Leverage 50x at Fed with 0% fed funds.
    Real return 100%.
    Leverage 100x
    Real return 200%

  72. Output only goes up if you count the ditch digging as output. Otherwise, the ditch diggers get paid, buy more stuff, drive up prices, living standards decline, capitalist hire more people with their increased revenues and the game goes on. What you’re missing the linkage in the chain of events there where the initial payment to the ditch digger adds money to the system that is not offset equally by productivity and causes EVERYONE to have to pay higher prices for the same amount of work they were previously doing. It might be offset by output, but output is not necessarily an increase in our living standards. Ultimately, it’s all about productivity and paying people to dig holes is a great way to spread wealth and a horrible way to increase overall living standards.

  73. The demand from those hole diggers triggers productivity in the economy. Can you not read? I said this. paul has said this. You are linear in your thinking.

    PS – Cleaning up trash is productive.

  74. You are correct. Old people and kids are lowering our living standards. They don’t work and are unproductive to boot.

  75. Should add, this is a redistribution of access, it just happens to take profits from banks.

    There is no economic justification to design a financial system with an upward bias built in. Citizen access to the Fed removes the bias.

  76. If we didn’t pay for their education, health care and pensions our living standards would be higher.

  77. Ok, wait? We get to ‘call’ you anything? Because it doesn’t matter?

    Here’s the best part though: Unbeknownst to me, you have just uncovered the Kyptonite to my one superpower. As I sit here drawing a blank for the last five mins, the ONLY thing I can come up with is jerky-butt.

    You’ve destroyed me.

    I shall return once I recharge.

  78. No, the new money the ditch diggers has causes output and prices to go up. This new money makes revenues higher for capitalists, but also gives them greater pricing power. It might generate investment as the capitalists spend some of this higher revenue into the economy, but that doesn’t mean our living standards are necessarily rising because the capitalists would have to offset the decline in living standards that results from the rise in prices. Does that happen? Only if the capitalists end up being MORE productive than the negative impact their price increases cause on their consumers. More likely, all of this spending on unproductive work just turns into a stagnant living standard with a mirage of prosperity built around government spending.

  79. ” This conversation is a total non-starter.  We might as well be arguing how we’re going to get to Mars tomorrow on the back of government spending.  If MMT is ever going to be taken seriously then it has to evolve within the scope of our reality.  This doesn’t mean it might not evolve to the point of having a government job guarantee, but a big part of gaining traction within the world of economics is establishing realistic policy proposals.”

    I really think it depends on whom you talk to. When I talk to progressives, they find the ELR to be the most intuitive and appealing part of MMT. If the goal is to convince Wall Street, then obviously you are not going to find a very sympathetic audience. But if you are trying to start a grass roots movement with an MMT basis, leading with the job guarantee makes sense.

  80. If we didn’t pay for old people to live on medicare and medicaid then they’d have to fend for themselves in the private healthcare market and everyone would keep more money which would give them a higher living standard so they could spend money as they choose and not as the government chooses for them. If we didn’t pay for kids to go to public schools then they’d also have to rely on the market forces. In this case, you’d also get to keep more of what you earn. But we choose as a society to invest in our young people and to pay for the elderly. Those are inflationary things that reduce our potential living standards. But the offset is worth it because as human beings we should take care of people who can’t take care of themselves.

    This is where we should draw the line though. The rest of us should not sacrifice a higher living standard just so an able bodied person can go dig ditches every day. I am sorry, but that person is a net drag on our living standards. If the government could actually put him to work building things that increase living standards and actually increase productivity then fine. But I have read Randall Wray’s book listing the ELR jobs and they’re a god damn joke.

  81. As a point of logic, why does the JG/ELR require MMT?

    Why not fund it with Krugman deficit financing?

  82. A practical problem with the JG is will private employers buy itÉ

    Employers say:
    – there`s a shortage or computer science grads
    – lack of skilled trades
    – etc.

    In my experience, what they are really saying is:
    – boost the number of comp sci grads so I have a better chance at getting the top 20% for the Valley; if not I can at least use the next 30% for some low level tester jobs until they`re 40 and too expensive, then I`ll have them train their replacement in India. (Trust me, I know a lot of people who thought comp sci would be the ticket …)
    – I only want to hire cheap illegal back breakers or super hard working mid west farmer kids with incredible work ethic (nebraska, minnesota etc.)

    Don`t trust the private sector to just think the JG is a nice pool filled with spring salmon; they won`t. They`ll still pick the cute Princeton lit major as a sales rep for Lululemon.

  83. Cullen, Warren, & Neil make some excellent points. Focusing on production is good because increasing production increases supply of godos/services, which reduces inflation & offsets the increased supply of money –conservatives fear inflation but once you get them to realize that inflation is offset by the increased production, they calm down.

    Gov can do stimulus programs or JG by having people
    1) build/install wind turbines,solar cells, etc to increase energy supply, reducing energy costs & thus inflation/costs of living –Oil/energy prices cause inflation, NOT federal deficits -evidence/facts here: http://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation

    2) research into energy & science (gov funded & hired people to develop antibiotics (Alexander Fleming was a UK gov doctor working at a gov hospital/univeristy when he discovored penicillin but it languished on the shelf unused for 11+ yrs because UK back then was in austerity mode –it took the massive deficit spending of WW2 of the US gov to fund it’s development)

    Gov funding also invented radar at Naval Research Laboratory as well as nuclear energy for the 1st 30 yrs(it now makes up 20% of US energy & 80% of France).

    2) train as nurses/build hospitals to increase medical service supply, reducing medical costs

    3) Eisenhower doubled medical schools & the WW2 GI Bill gave free university educations/paid for all US military & gave no-money down,gov gauranteed low interest 30-yr fixed rate mortgages to every soldier (16 million of them!), but only 1 per person so no house flipping or speculators buying multiple homes. This sparked a boom in massive increase in jobs skills w/ millions more engineers, scientists, medical because before that, only about 5% of the US had a college education

    People who got trained by the GI Bill on gov dime were founders of Intel, Hewlett-Packard, Sun, etc

    Stimulus programs/JG should pay people as they learn new productive job skills –in Asia, 80% of China/Japanese major in science/engineering/medical!

    –a quick way to explain MMT to recruit more voters:

    “gov has to step in as hirer/spender of last resort when there’s deficient aggregate demand (aka reduction in spending because all spending is income for someone else & other businesses.

    Reduced spending causes businesses to reduce production & layoff workers. Private bank lending/credit (aka as money creation) is about 50% of the US economy so when banks reduce lending/credit (aka money creation), it results in reduced spending. T

    hus, gov has to step in as spender & hirer of last resort to make up for the reduced money creation by banks.

    Unlike private banks that are capital constrained & the private sector that is revenue-constrained, the fed gov/central bank can create money perpetually forever, limited only by inflation if production does not keep up.”

    There’s more data/empirical evidence at http://rodgermmitchell.wordpress.com/2009/09/07/introduction/ & http://rodgermmitchell.wordpress.com/2011/07/09/why-bank-lending-leads-to-recessions-a-counter-intuitive-finding

  84. “If you have private sector options that don’t require you to get up at 6AM every day and pick up trash in the parks, you would take them!”

    I almost hate to post here not having read through all of the JG literature, but one hang-up regarding those devilish details would be the benefits involved with JG workers. For example, would they receive Federal health insurance and retirement benefits such as a pension? Would they be able to unionize and change their day-to-day employment to week-to-week and then month-to-month and then permanent? Or continually increase the hourly wage, or negotiate it to be a salary?

    After all, there’s an infinite amount of money, so we can afford that, right?

    Would the JG worker benefits be significantly superior to those offered by lower-skilled private sector employment that they might otherwise seek? Regarding minimum wages or wage floors – the US govt literally has an infinite supply of dollars to spend but McDonald’s and Wal-Mart (contrary to popular opinion), do not.

  85. Bill Mitchell’s MMT requires the JG because that’s Bill Mitchell’s greatest contribution. He brags about coming up with the idea long ago as if he discovered the theory of relativity or something. It sounds to me like a spread the wealth scheme and since he’s admitted to having socialist beliefs it’s not surprising that he would be in favor of this sort of program.

    Mosler’s MMT clearly doesn’t need the JG as he keeps saying. Interestingly, I think that this is where the line is drawn. It’s not between Cullen and Bill. It’s very clearly between Bill and Warren. Warren agrees that the JG is a superior buffer stock, but he doesn’t say it is a core piece of MMT as Bill says.

  86. “This isn’t about Cullen Roche vs. anyone”

    Don’t worry Cullen, I have your back. While everyone else has been jibber-jabbing, I’ve been quietly securing the trademark rights to Modern Monetary Theory.

    Just kidding. Since its not a good or service offered for sale to the public, its not trademarkable. :o)

  87. I think Warren is just proposing a $8/hr wage. Not sure if that then includes a government healthcare program or whatever. It’s a bureaucratic nightmare no matter what. At current levels of unemployment we’re talking about hundreds and hundreds of billions of dollars so people can line the street picking up trash.

    This conversation is so bad that it actually turns me off of MMT.

  88. I don’t know how many of you have read this Bill Mitchell blog post about Norway vs Australia.


    It is one of his shorter ones.

    Private sector jobs are burger flipper ones while public sector jobs are more professional.

    Norway has increased public sector jobs as part of their workforce while Australia has decreased. Norway has had lower unemployment rates for 30 years plus than Australia.

  89. When wealth was (is) being redistributed upwards no one on the right complained but talk about redistributing it down and you’re a baby raper or a socialist at best. Much of that wealth went to the top because of flaws we have in our system that have nothing to do with capitalism. I’m on board with some help for the lower rungs but politicizing such a vital concept is too dangerous IMO. Somebody once said always take the high road- it offers a better field of fire!

  90. My understanding is that, come the MMT revolution, (wink) we will not be talking about double-digit unemployment anymore anyway. Taxes will be lowered or spending will be increased until there is enough demand to keep most people working, so a JG is just about dealing with those people who fall thru the cracks.

    And we already have to deal with those folks one way or another, a veritable hodgepodge of state and federal programs already exist to keep us more or less afloat.

    (I’m probably a lot broker than your average pragcap reader, so for me a JG makes a fair bit of sense. Right now I’m staying at home with my four small children (0 income, 0 social security credit) while my husband works fulltime. A JG gig that provided childcare would bring enough income into my household to stop us from qualifying for WIC, for one thing… and possibly help make me more employable at a respectable private-sector job later in life.)

  91. Im just curious how it is you think that hiring 8% of the population to do………. anyhting, at a wage of say 360$/week, is going to drive oil prices to 200$/barrel which is essentially 2.5 times the current price. If the 8% simply consumed at the same level the rest of us currently do it would only increase consumption by 8%. How does an 8% increase in consumption lead to 150% price increase. Thats some funny math.

  92. The cost increases wouldn’t just stop there. They’d be much broader. Oil is just one example of what the ditch diggers are spending money on. The broader point that no MMTer has yet countered, is why should I have to pay more for goods and services and live a worst standard of living, just so 8% of the population can live a better life? Democracy is about the majority. Not the bottom 8% and not even the bottom 49%. If you want to go live in a socialist country then go do it. But don’t turn America into one.

  93. I don’t think there is a game changer here.

    Mosler was clear from the beginning: the price anchor is always some kind of buffer stock. There is only a question which one. And Mosler is still clear that JG is simply the best, period. Your ideology can make you feel revulsion and make you go for a less efficient one, but technically JG is the most efficient.

  94. I certainly can’t see this as a misrepresentation of your views, it is the counter-argument to what you quote to Warren. (Cyanide aside that is)

    Sure lifting living standards comes through innovation and the US military has given us many which is public spending. However the private unemployed may have an innovative idea as well but they usually can’t get anywhere without funding or know-how and the usual way to gain these things is through employment. Sure you get the odd successes like a computer company whose founder just passed away but in aggregate? (rhetorical)

    You have previously stated your previous unemployment situation which made you who you are today and go on to suggest that works for others as well. This strikes me as a fallacy of composition. This brings me to the point of dispute between you and Neil, and Neil may mean what you say but you are the one that has isolated it to the current state of the economy.

    I’m more inclined to agree with Neil and that is because I do not isolate the JG to just the current state of the global economy but the state of the economy before and after that which will still have unemployment and I’ve been unemployed in booms and busts for long periods (adding my anecdote as you take a wider view as well) which has nothing to do whether society is prosperous or not. You’re not prosperous if you’re unemployed.

    So a JG buffer stock will be needed to lift them (unemployed) up as well.

    And I say this from one of the most economically sound nations of the moment as measured by today’s politics – relatively low unemployment and debt.

    If the devil is in the detail and you consider yourself a risk manager, what’s your buffer stock?

    As far as I can tell, the JG is sound in theory for reasons outlined. Now lets examine the alternative buffer stock proposed.

    If its about taking a political step that’s acceptable to congress for the moment before getting to a JG as the ultimate goal – that’s fine but don’t make that political step the goal – recognise it as just a step. The old ladder of one small goal at a time to reach the big goal.

  95. SO what your saying LVG is that we live in a zero sum world. Where the only way a person can get something is to take it form someone else eh? Is that your position? There is no way to make everyone better off. At least when the govt is involved.

    If that is your position that s fine, its wrong but its fine.

  96. Of course, Norway has oil(!) and 40% part time employment with their 30% public employment and low unemployment.

  97. ” The rest of us should not sacrifice a higher living standard just so an able bodied person can go dig ditches every day. I am sorry, but that person is a net drag on our living standards.”

    To say “net” you would have to calculate what a drag they are as an unemployed person vs a JG employed person. You are just throwing out terms like net with absolutely none of the work to figure if it is so. You just say it is so. Typical

  98. Dan, you’re 100% right about the financial types never wanting a JG. There isn’t any amount of evidence that Mitchell, Wray, etc. could come up with to convince them.

    But if MMT’s descriptive aspects were explained with the JG becoming the ultimate goal was brought to the general public, it would be extemely popular. Some people need to be convinced who have visibility in the mainstream media, but MMT would far better served going directly to the grassroots.

  99. FDO15,
    I’m almost there with you about being turned off. THAT’S what this debate is about. I’ve often feared whether MMT would be shot down by being ignored, OR because of some technicality.

    I feel like we’ve been fighting a war against a relentless enemy(decades of false economics), and now that we’re just about to be able to go to the negotiation table with them, our generals are asking for too much from the enemy… and so I sit in the trench and roll my eyes knowing that we’re gonna be stuck for quite a long while…

  100. My thinking is that productivity growth is a bit messy. Some measures show constant upticks:


    I’m more Galbraithian than that. I think Big Corporations and Big Government drive productivity through really substantial invention. Which is more important? Probably Big Government — in particular Big Military. In my liberal dreamworld Big Military would be replaced with Big Space Program (even though I don’t think it would really go anywhere, it’s just better than building guns).

    This is where I think there’s a real threat: in R&D. If the privatisation of science and R&D continues I think we’re going to see a wind down in really good additions to our lives — despite what a graph might tell us.

    So, I’m on the Big Government side. Preferably geared away from Big Military.

  101. P.S. I don’t think MMT or neoclassical theory has much to say about this. (Certainly not Austrian theory — apart from Schumpeter they’re hopelessly naive in that they equate the invention of the internet with a faster car wash).

    It’s the institutionalists you want on this. Veblen. Galbraith. Ha-Joo Chang.

  102. most mininum wage jobs in the US are part-time 10-20 hrs per week = $80-$160 per week = $320-$640 per month.. it’s not survivable

    Gov stimulus jobs like FDR’s WPA, CCC, etc paid the equivalent of $15/hr, typical for entry level construction

    The JG would pay $8/hr (or higher, depending on local mininum wage) for 35-40 hrs per week = $1,280 per month (or $2,560 per couple) for job-training or building/installing hospitals/wind turbines, etc to increase energy supply & lower energy costs, or

    renovating/tearing down slums & rebuilding, etc to increase property values, etc –Singapore does that, hires hundreds of thousands of their people to build executive apartment 2-5 bedroom homes & replace any slums… those homes are sold back to the population at just $20k-$80k so that 80% of Singaporeans own their own homes,just 1 per person to prevent house flippers/speculators/bubbles

    It doesn’t have to be either/or.. it’s fine to start w/ massive gov stimulus projects at increasing production of needed things (energy, medical,etc) & have

  103. By that logic we can throw another 10-20% of the labor force onto the unemployment line so the other 70% see lower costs of living. I can’t tell if the concept of demand relative to productive capacity is beyond your grasp or you just prefer being obtuse, but it’s sure as hell entertaining to to read all that angry drivel you spew out. Please, keep it up.

  104. Someone peed in your cornflakes, did they? Better taking your self-loathing out on a blog than beating your dog, I guess.

  105. That’s a position that has never been proven. You can’t just say the employment buffer stock is the best when it has NEVER been proven. You might THINK it will be the best, but that’s the very definition of ideology. You are making broad conclusions based on beliefs and not facts. I am concluding that the unemployed buffer stock has proven time and time again that it can work. If you can provide evidence showing that an employment buffer stock can work over a multi-generational period then please off the evidence. But it doesn’t exist. So please, before calling people an ideologue, be a bit more careful. You are professing your faith onto other people. I am working from a real historical factual basis.

  106. Sorry, but Neil said this:

    “Suggesting that you can’t help people out of their suffering and give them meaning in the world because it is a political non-starter says an awful lot about the state of the politics.”

    I have never said suggested anything like that at any point over the last few weeks. It’s a flat out misrepresentation of my position. End of story.

  107. You guys must not live in America. If I went out on the street tomorrow and asked 1,000 people if the govt should hire 5MM people tomorrow to help the economy at least 75% of them would kick me in the shin.

  108. The whole point of the job guarantee program is that it is a fixed wage which sets the basic floor price. As Mitchell states in his blog, it would probably require a “one-off” inflation or price hike, after which prices would stabilze at a new normal level. Essentially it’s a one-off wealth tax to institute a more productive society (in theory).

  109. “I know for a fact that major journalists like…. Joe Weisenthal learned MMT from me and my primer.”

    Seriously Cullen? Really? I mean, seriuosly?

    A Huffington Post spin off site may indeed generate a lot of hits, but “major journalist like…. Joe Weisenthal”?

    You are a fantastic economic writer and an all around bright individual, but to confuse a hack writer for a thinly vieled front rag for the DNC as a “major journalist” is just a bit outside your normal modus operandi. Consider the background of that “organization’s” CEO; stellar would you not agree?

    As for the JG, sounds like a backdoor approach to the ideas of the late, great Kingfish himself. Share our wealth my friends.

  110. You might not like his content, but the fact is, the guy works really hard for a hugely successful website. I don’t particularly care for ZeroHedge’s content or approach, but you won’t ever hear me say that the guys writing it aren’t master salesman and writers. The proof as they say, is in the pudding and the pudding generates millions upon millions of page views. http://www.talkingbiznews.com/?p=29797

  111. It would be great to see the math behind this “one off” inflation because aside from the myriad of concerns I’ve expressed, people are going to want you to be able to prove that 20 million extra people paying for goods and services isn’t going to put a serious hole in their current standard of living. But the facts backing this plan are vague at best. Perhaps some more rigorous modeling and data needs to be processed? I’d love to be sold on these points, but it’s not happening yet. And that’s coming from a pretty open minded person….

  112. Warren asked me to post this as his “last word” on the subject:

    My proposals remain

    1. A full FICA suspension to restore aggregate demand
    2. 150 billion revenue for the state govs on a per capita basis to
    get them over the hump
    3. A federally funded $8/hr transition job for anyone willing and
    able to work to assist in the transition from unemployment to private
    sector employment.

    You can omit 3. If you want, but don’t blame me if inflation kicks up
    with unemployment still over 6%!



  113. I’d push back a little on Cullen’s last note. On the streets in my neighborhood, “hell yeah!” would be a more likely response to a government jobs program than a muay Thai leg kick.

    That said, I think this squabble has been a great opportunity for me to get to know more of the nuances of MMT – occasional dust-ups, notwithstanding. I’d love to hear/read more MMTers talking with other MMTers (bloggingheads, style?)

  114. I don’t see JG as a distinctive feature of MMT, although it is a very smart idea for achieving full employment together with price stability.

    I like heteconomist’s JIG even more:


    It is political question, and as such the voters would decide to be or not to be.

    The problem is there isn’t any political party at present, which tries to sell the idea – the voters don’t know such product even exists.

  115. 1. The heat in this discussion shows that this is not an economic debate argued along positive lines, that is, empirics, but one affecting deeply held beliefs, ingrained values, and different norms. That says something about the quality of the debate. I am not pointing a finger at anyone in particular. Jes’ sayin’.

    2. There has been virtually no discussion or reference to the considerable literature on the JG/ELR produced by MMT economists. Why is that? Could it be because people have not read it or are unaware of it? Otherwise, I can find no reason that it would not be cited. It really is rather puzzling.

  116. I have a serious question about the JG. Over the last 70 years the size of the government employment pool has exploded. Why haven’t we seen them transfer into the private work force over time? Why has the ratio of private employees to public employees dropped over the course of the last 70 years? This seems like pretty clear cut evidence that the ratio of the private to public workforce is increasing over time as the government becomes larges. This is a pretty big problem for the JG theorists, no?


  117. Here’s an even bigger issue I have. Wray wrote a good piece outlining the concerns that arise. I don’t think he does a very thorough job of relieving the fears. In particular, these are the jobs he list as possible “work”:

    Possible PSE jobs include:
    Companion for the elderly, bed-ridden, orphans, mentally and physically disabled
    Public school classroom assistant
    Safety monitor for public school grounds, areas surrounding schools, playgrounds, subway stations, street intersections, and shopping centers
    Neighborhood cleanup/Hiway cleanup engineers
    Low income housing restoration engineers
    Day care assistants for children of PSE workers
    Environmental safety monitors
    PSE artist or musician
    Community or cultural historian

    We have to do much better than that if we’re ever going to be taken seriously here. Can you imagine what Bill O’Reilly will say when he sees the job “companion” listed as a credible job in this program? I hate to say it, but these are all fake jobs. In fact, many of them aren’t jobs at all. They’re things you might ask a friend to do for you, do on your own as hobbies and/or just not even bother doing.


  118. Cullen, you might get a very similar response if you went up to a thousand random people and said, “the government should expand the deficit and increase spending to boost aggregate demand.” But isn’t that a claim that very many MMT supporters would endorse, even those who do not support the job guarantee? The fact is that lots of people have trained, ingrained opposition to various proposals because they have misguided beliefs about the nature of deficits, public debt and the monetary system. Learning some MMT sometimes helps to overcome these kneejerk responses.

    But I really do suspect you show a selection bias in your assumptions about what “Americans” believe, because you move in a portion of America that is much more economically conservative and hostile to the public sector than Americans on average.

  119. That really depends Dan. If I asked 1,000 people if they wanted a tax cut 999 of them would say yes. If I asked them if the govt should spend more then the response would be different and negative as you show. They don’t know it, but a tax cut is the same thing as a spending increase. So it depends on how you phrase the question. Unfortunately, I don’t think there’s a way to phrase the question about hiring 5MM workers that can display the same difference in answers….And therein lies the political rub. Americans are anti-govt. This is the key point. Ignoring this is not going to help us develop the theory to a point where any of this becomes politically feasible.

  120. There is a problem with equating productivity increase with employment growth. Greater productivity has resulted in fewer employees required. I live in the farm belt and am constantly reminded of this. Agricultural workers were 90% of the workforce not all that long ago. Now they are about 1%. I personally saw the ending family farming and its replacement with agribusiness. That heavily impacted the agricultural forces. Now most of the agricultural force is migrants workers by day and illegal immigrants by night, since they are the only ones that will do the backbreaking work under terrible conditions at the wage offered. Similarly, global labor is largely fungible, and more jobs are being exported also. Consider the trade deficit as virtual immigration. Moreover, automation and robotics are in the process of replacing even more workers. Some new factories now being constructed in the US have no workers other than those operating the controls. Workers are becoming more and more expendable as productivity increases. The leisure time that increased productivity is making possible is going to the unemployed. Such a deal.

    Federal government employment has declined during the Obama administration (source) while population rose. States and municipalities have been shedding jobs over that period also.

    When Bill Clinton took office, 70.7% of the civilian labor force worked in the private sector. When he left office, 77.6% did. Net change: +6.9%.
    When George W. Bush took office, 77.6% of the civilian labor force worked in the private sector. When he left office, 72.0% did. Net change: -5.6%.
    When Barack Obama took office, 72.0% of the civilian labor force worked int he private sector. At the end of his first year in office, 69.6% did. Now, 71.2% do. Net change since 1/2010: +0.8%.
    When Bill Clinton took office, 14.7% of the civilian labor force worked in the public sector. When he left office, 14.5% did. Net change: -0.2%.
    When George W. Bush took office, 14.5% of the civilian labor force worked in the public sector. When he left office, 14.6% did. Net change: +0.1%.
    When Barack Obama took office, 14.6% of the civilian labor force worked int he public sector. Now, 14.4% do. Net change: -0.2%.

    BTW, US unemployment, underemployment, and no longer participating is in the high teens, and the economy is not adding jobs fast enough to keep up with those entering the workforce.

  121. A question for LVG

    Could a hole digger be considered an artist? Perhaps performance art? Would it then be considered productive? How about the increased standard of living for those who appreciate this creation-of-holes art?

    This JG debate needs some illumination into what would be considered “productive” and on measures of standards of living. I like Cullen’s point about available free time. How about art? Anyone think artists are reducing our standard of living…. I mean they drive up costs of everything and what pray tell comes back for LVG to maintain the lifestyle?

  122. I think Cullen’s wariness about the long term effects of a JG are very justified. We know from history that once unions become involved in the political process, they will make efforts to organize the people employed by the JG, and efforts to push up their wages. Hell, even in the mid 1800s, the golden age of Capitalism. the unions prevailed upon Congress to ban prison labor from construction projects that would compete with ordinary paid labor. We see the result of decades of unionization of State and Local employees in Wisconsin where they have become an elite entitled class that makes more than Private Sector workers do. Do you really think that the Unions would tolerate the Government operating a JG program where every Tom, Dick, and Harry is given a job doing heavy, dirty, backbreaking labor in lieu of getting an unemployment check for the price of that unemployment check? Of course not. In the real world with real politics, a permanent JG can never work as envisioned by MMT theorists.

    A temporary WPA during Depressions is of course a totally different matter, and I think it would be very desirable to have a non-union, EPA-exempt WPA today to reduce unemployment through massive public construction projects. Even this is politically impossible today, as those workers would compete with the Unions, and only a totally Republican Government with a filibuster proof Senate would have any chance of enacting such a law.

  123. MMT or the words themselves are registrable if you affix them to sweatshirts, hats, coffee mugs, giant foam fingers etc. and put them into interstate commerce or have the intent to do so, and do. Am I causing more trouble?

  124. I suppose he’d tell you that it’s not the job of the government to entertain people. If private sector employees want to be entertained then that’s a job for the private sector. We don’t need the government to pay people to entertain us. That’s not their role. The fact that Wray even lists “artist” as a job is a joke.

  125. Everyone seems to be ignoring the fact that the US government has already demanded that something equivalent to the JG be implemented. Back in 1978. Get over it, the law has already been passed, it simply needs to be implemented:

    “(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.”

    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.

  126. And how many of those employees make min. wage? JG is locked in at or below min. wage. No ups.

  127. If the US is truly a democracy then the obligation of all US citizens is to abide by the laws created by their system of democratic representation. Stop discussing the past and get on with building the future.

  128. I would classify the dog and pony show over the debt ceiling as entertainment. How much did we pay those clowns?

    And they didn’t even have seltzer bottles!

  129. Lots of good points here. I too share Cullen’s apprehension. I think the key points that MMTers have to overcome are as follows:

    1. America is a democracy. As such, it’s not natural for them to promote policies that involve social work. Instead, a democracy is a government of the majority. Not a government of everyone for everyone. This makes the entire JG debate very hard to pass and perhaps entirely incompatible with the ideals that the country was founded on.

    2. Can such a huge government program be administered without massive waste and corruption?

    3. What are the jobs these employees would perform and would they be productive? The list that Randy Wray notes in his research will not hold a candle to the Republican furor that such a program would confront. Artist, musician, companion? You have to do much better than that. It’s hard to even take the JG seriously given this list of “jobs”.

    4. What would be the effect on broad living standards? Is this just a form of welfare or a “spread the wealth” program?

    5. What are the psychological effects over time?

    6. Are there enough productive jobs to justify the potential rise in prices that could occur from demand pull inflation (oil, gas, food, etc)?

    7. There is a lack of modeling showing that a JG can be implemented in the first place. As Cullen noted, it has never been done. However, an unemployment buffer has been proven to work to achieve prosperity over long time periods. The employment buffer has never been proven and will require a huge amount of factual data and proof to overcome the uncertainty.

    8. 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?

  130. How about if people were asked, “Should America guarantee all of its citizens a minimally decent standard of living, as long as they are willing to work for it?”

  131. Nice list. Thanks. I think you summarize the major hurdles pretty succinctly. I would only add that 6 appears to be a repeat of 3 and 4.

  132. Dan, the fact is, America remains a country that is hesitant to embrace large govt. Phrasing questions differently doesn’t change that or make these ideas more politically palatable. The only reason the tax question trick works is because it’s small govt….This is an enormously divisive policy along political lines. I am a little surprised that MMTers aren’t more cognizant of their surroundings (at least American MMTers).

    Trust me. I am trying my best to push MMT into the mainstream, but a big part of that involves maintaining realistic perspectives about how our policies can ACTUALLY impact the world. Personally, I see the JG as a huge distraction that takes away from what has the potential to be a really positive economic and human development. I really hate to think what a hardcore conservative would do if they got their hands on the idea of employing people to be artists or companions. It has the potential to set MMT back substantially once it goes mainstream. There’s no conservative talking head or pundit who will look at that list of “jobs” and say “yes, this needs to be done!” Just trying to be realistic here….

  133. Maximize Productivity subject to no binding Employment constraint

    Labor markets clear! (or they don’t, it doesn’t matter)

    Cullen, I am scared that you are not Post MMT and are instead Pre MMT! It just smells like Orthodox / Neoclassical / Neoliberal / “Vulgar” economics. (sorry)

    I will wait and reserve judgment until you lay your ideas out more. You’re bright, I look forward to hearing you out here.

    Thank you.

    oh … and the closest we’ve seen to a JG in REAL LIFE is the New Deal institutions and the War Socialism of the 40s. That social investment, that resource creation by every “highway raker” we could find laid the foundation for the “Golden Age” of capitalism, the most tranquil expansion of a modern market economy we have seen. When these were taken away we “financialized” our economy. The proof of the stability and the possibility of a JG working lie in the “regulated capitalism” period of the Capital-Labor Accord of the 40s and the prosperity it created until the mid 60s.

    That was NOT private sector action. The private sector “consumed” that by ’66.

    The evidence is there. We need more of it quickly. Or we can just pay down debt for the next 20 years. You are right though: how to get to Washington.

    If, however, we allow unemployment and social incoherence to breed and fester we can pay “highway rakers” to clean up dirty bomb fallout in major metropolitan cities. On second thought though we might not want to call narrow innovative productivity gains the mother of economic stability.

    Minsky pushed government paper during WWII. Look where that got us (well, we haven’t listened, so nowhere).

    Thanks again Cullen.

  134. 1. America is a Democratic Republic. To the degree that it’s a Democracy, I’m sure we could come to some useful agreement as to whether it’s better to have an unemployed buffer stock or an employed one.

    2. Good point. We need to recognize the waste and corruption in unemployment too.

    3. Seems to be a point of debate. I lean towards the productive side, but we also have bought things like pet rocks, beanie babies and Chevette diesel hatchbacks and financial products, to name a few. We’re trying to provide a floor for demand. “Productive” can be determined along the way and will change as society changes. Mammals tend to make things up as they go along. All kinds of stuff.

    4. It provides a floor for demand and that gives biz something to depend on too.

    5. Generally stabilizing up and down the line.

    6. Prices may adjust and this would tend to stabilize over time. See 5 above.

    7. Stable prosperity? Your proof?

    8. Productivity is a subjective goal and the definition of that goal may change as society changes.

  135. What is neoclassical in my approach exactly? I mean, readers have to be more careful in their name calling here. I could easily call the JG a socialist program and incite all sorts of emotion and historical context that blasts king size holes in this sort of thinking, but I am not doing that because I don’t associate the JG with socialism. Likewise, there is almost nothing in my work that is neoclassical. You might make extreme claims for the purpose of appeasing your own personal agenda and conclusions, but please don’t project false perceptions on me just because you don’t agree with my conclusions about the JG.

    I appreciate the comments, but the implications from some readers are beyond absurd. I reject a part of the MMT bible here and all of the sudden I am a heretic who gets called names. It’s absurd. The responses from some people on both sides of this conversation has been really disgusting.

    Sorry to unleash this on you because your comment doesn’t deserve it, but I am truly disappointed in how closed minded so many MMTers are. This conversation really exposed how extremely far left many of the MMT followers actually are….In a lot of ways, we are poisoned and distracted by the same right wing ideology that detracts from Austrian econ. I wish people would be more cognizant of this in the future as it’s extremely unattractive, unbalanced and cultish.

  136. i in no way meant it like that.

    so sorry.

    i don’t have a dagger.

    again, sorry.

    it’s just the “Maximize Productivity subject to no binding Employment constraint” sounds neoclassical (and I know I wrote that and not you).


  137. It wasnt directed at you. Im just disappointed to see how this conversation unfolded and heres its conclusion….oh well, i need to just move on. Sorry, it wasnt directed at you….

  138. @ jswede…. Good stuff. Nice post…good stuff CR…I’m loving what your doing here.

    JG… As Long as I can get a Car guarantee and a second vacation home guarantee also. I don’t know anyone who sets out to get a guarantee job from uncle sam when they come into this world. If that’s your aim…..you deserve what you ask for.

    Pathetic….selling your fellow man short. Got no confidence in your fellow man you think they need to fill up ditches. You don’t know the heart of a man if you think that’s what they want.

  139. @ LVG well said!

    The heart of a man doesn’t want a JG. You think a man comes into this world wanting a JG from the govt.?
    Youre setting the bar low. I believe men want more while there here on this planet.
    Fucking JG….do I get a car guarantee also….how about a wife guarantee too..maybe a my team gets to play in the championship guarantee? How about I get to shoot a basket in a laker guarantee? Shit…why not just make MMT part of the make a wish foundation?

    Diiging ditches??? Y’all are selling your fellow man short. You think your helping them out with your guaranttee job…but youre killing the very thing that makes life worth living? This ain’t AYSO….we all don’t get to play in the game.

    If you want to help someone invest in their education so they’ll be smart enough to figure out a friend is not someone who offers slavery in the form of a JG which will erode your skills and keep you dependent on the state. We are such good people…we gave you a job no one wants for little money just so we feel better about ourselves. How self centered are you? Limousine liberals drinking merlot with pelosi at French laundry discussing how to pull off the JG.

  140. Cullen wrote: “You guys must not live in America. If I went out on the street tomorrow and asked 1,000 people if the govt should hire 5MM people tomorrow to help the economy at least 75% of them would kick me in the shin.”

    The same thing would happen if you asked these people whether government should deficit spend more. That’s not really the issue here. You just think that buffer of unemployed is better than buffer of employed.

    Also Cullen your historical evidence of unemloyed buffer is not a very good argument. Doesn’t MMT say that historically US economy has underperformed because of lack of government deficist spending?

  141. Under a citizens’ dividend system, those without formal employment would be freed up to get their own enterprises up and running. Those new enterprises could then also employ other people. By contrast, the JG would tie them up doing whatever the JG commissioners fancied. That is why I fear a JG system would lead to a slide towards a greater and greater proportion of the economy being under the JG. I also don’t think the JG having a fixed wage would keep prices down unless there was excellent mobility between the JG workforce and the rest of the workforce. I suspect that continued government deficits will create ever more private wealth for the 0.1% and managing that money will be what occupies the private sector. They will import the real goods they want at prices unaffordable for the JG workers. The JG workers will then be directed to producing goods for the survival of the JG workers under the inept direction of the JG commissioners. Basically there will be a two tier system of a soviet style JG command economy and a lucrative parasitic private sector “money manager economy”.

  142. Even if the 20 million people were to end up being the correct number(I think it would be much less as the private sector absorbed many of these currently unemployed), what percentage increase would that be over current consumers? 15%?
    And again its not like these people would be consuming commensurate to a middle class lifestyle, these would be pretty low wage workers, (the kind Mr Perry likes to brag about bringing to Texas).

    And answer me this, in 2006, pre recession most of these people were consuming at a much higher level then they currently are, correct? So how did we ever manage not to have runaway inflation and oil prices in that environment? Wasnt it because we had the productive capacity then to handle them. Have we somehow lost that productive capacity that was there 4 years ago.? We may not be using it but we have it I believe and all it need is a little demand stimulation to bring it on board.

  143. Answer me this LVG, How is it that back when all these people were NOT unemployed and making/ spending/ consuming much more than they are either currently or potentially under a JG program, that we didnt have 200$ barrel oil nor any other runaway prices (except housing).

    Seems we have a real life example for how our economy can handle millions more people consuming a lot more……. its America 2006!!

  144. I think a lot of commenters here have shown a lack of imagination when thinking about a JG. The idea that the only way it could be implemented is to set up a single federal agency that employed people purely to dig ditches or fill in holes is nonsense.

    I worked on a project here in the UK which provide a JG of sorts (allbeit a very weak and time-limited one) to long term unemployed people aged 18-24. While it was funded by central government, the actual jobs were in local government and non-profits. I had a look back at some of the jobs that were offered. This is a random selection offered in my local area for Dec 2010:

    Community Worker
    IT/Marketing Assistant
    Gym Instructor
    Data Entry Clerk
    Advice Worker
    Recycling Assistant
    Trainee Finance Assistant
    Volunteer Coordinator

    Point being that these are regular jobs. They just wouldn’t exist without gvt funding. They allowed the non-profit sector to expand and increase the social benefit they provide to communities. There is no direct competition with the private sector as they are undertaking activites which are not profitable for the private sector. They are also very labour intensive rather than capital intensive jobs. The supervisory capacity already existed, and training was offered as part of the package. It could be argued they are not ‘productive’ in the sense of producing something, but they are providing social benefits, so why does that matter?

    Cullen has stated in his experience unemployment was a motivating factor that made him stronger, but he also said he had the benefit of good parenting and education. I have come across people with great work ethics, but lack the parenting or education, and despite all their efforts, still came up short when seeking work. A much more typical response to unemployment in my experience has been one of demorolisation and a sense of being surplus to requirements. By contrast, once the people were put into jobs on the scheme I worked on, a typical reaction was gratitude that they had been given a chance after thinking they would never be employed again, and a sense that the opportunity had restored their confidence and made them believe they could now aspire to better things.

    I know this is only anecdotal, but it is my feeling that a JG would not lead to stagnation, but would be a very positive contribution to increasing productivity and living standards. While I think Cullen’s ideas on alternatives are interesting, I can’t see how they could bring about a better outcome than a JG in isolation. Put them together and it seems to me the sum would be greater.

    As an aside, I can see the political obsticles to a JG, particularly in the US, but don’t see why you couldn’t start small, perhaps with young people (whose unemployment rates are much higher), or for those whose unemployment benefits are expiring, and build up slowly from there.

  145. These things change, Cullen. The extreme negativity about government wasn’t really a characteristic of the America I grew up in in the 60’s. It started to take hold during the late 60’s and early 70’s, really caught on in the Reagan era of the 80’s, and has been characteristic of the neoliberal era of the past few decades.

    But the generation that was around before this latest anti-government phase took shape believed in the New Deal, had experienced the astonishingly successful government mobilization of the entire society to win a global war against fascism, had witnessed the doubling of the national product that the social mobilization produced, had supported massive national infrastructure projects before and after the war, and had enacted a boatload of Great Society programs and civil rights programs.

    I feel a bit sorry for younger Americans who have never lived in an America in which people believed they had a government that could accomplish large and great things on behalf of the citizenry who possessed that government. But these things run in cycles, as the demands of history require. The experience freshest in people’s minds today is that the engine of free market capitalism – it’s financial sector – is now responsible for blowing up a bubble of debt on the strength of flim-flam, fraud and unregulated recklessness and risk-taking. They have destroyed an economy, put millions out of work and damaged the future prospects of our young people. That’s what capitalism does when it gets the upper hand in its long battle with government and breaks out of the regulatory yoke.

    Young people also know that their future is in jeopardy because the public sector – the organized pursuit of public purpose – stopped investing in important things, including the education of young people, preferring to charge the young market prices for an advanced education and saddling them with years of debt as a result.

    So I think the moment is ripe for a call to return to an activist and accountable public sector.

  146. Dear Cullen

    I dont think anyone will be able to have the last word on this subject ..Warren’s has his point …Cullen has is and Bill also ..all three are perfectly consistent with what each of them is trying to achieve ….

    The views on JG and how it may be put in place is too big for any one mind and too much of it is based on old thinking ..the solution must come from the new economy if the JG was ever meant to be …

  147. I would imagine I’m included in this category so I’m going to respond to 2 points only and then I will shut up for good, I promise.

    “I am truly disappointed in how closed minded so many MMTers are. ”
    The MMT-ers who open up their minds to JG are closed minded
    The MMT-ers who close their minds to JG are open minded…..Nice

    “This conversation really exposed how extremely far left many of the MMT followers actually are”
    How far to the left do you have to be recognise employment as a basic human right?

  148. Question:
    How does JG as described by various MMTers differ from workfare (replacing welfare) as proposed by various social democrats?

  149. I’ve only recently learned of this Jobs Guarantee, but I always figured that if we have unemployment benefits, why not make people accomplish something in return? The “dig a hole and fill it” straw man aside, there is plenty of work that needs to be done. I’m envisioning something like a temp agency. Maintain some database of who is enrolled to assist and expedite permanent placement.

    I don’t see how this kills productivity, getting to Cullen’s point. If I was on unemployment, I would work my ass off to get a real job again. The life style afforded is insufficient.

  150. To paraphrase Warren Mosler, you decide what the government should be doing and you tax people to shift those resources away from the private sector. That’s the political choice. Then no matter how that fight works out the government still needs to create net financial assets to allow the curency user to save. That’s the deficit. Now at present you might think the government is doing too much so taxes should be cut. Assume that happens. Government is now doing what you think it needs to be doing and no more. Here’s the problem. The government still needs to be issuing financial assets. To be an intellectually honest MMTer, don’t you have to explain how you’re going to do that? Bill Mitchell & Warren Mosler have. They don’t mind the government employing a few people directly, so for them it’s the JG. Another alternative is a basic income guarantee (BIG). But if right-wingers hate the JG, then surely they’re going to explode if you suggest creating money out of thin air and just giving it to people. What are the other options? Cullen seems to have something else in mind, but he hasn’t fully explained himself. I can only think of one. What if everyone had a lifetime credit entitlement? Something like the lifetime learning entitlement in Australia. That is, everyone starts off entitled to a certain numbers of semesters of state-subsidized tertiary education. If you use it all up, it slowly regenerates over a period of years. 1/5 of the cost is paid back by the student but only when their income reaches a certain level. Here’s my back of the envelope idea about how the credit entitlement would work. 1. Every citizen is entitled to one (and one only) loan of $100,000 from the national reserve bank (I don’t know what the ideal figure would be. What’s the average start-up cost on a small business?) from the day of their 21st birthday. 2. They can take it at any time they want and use it for anything they want. Start a business. Put it towards a house. Blow it on coke and hookers. Hopefully most would use their once-in-a-lifetime opportunity to build a future but if the goal is to maintain AD I don’t see that it matters. 3. Fed sets the interest rate just like it sets the O/N inter-bank rate -wherever the hell it wants. In the biggest of big booms it could set it at 10% and only those with the hottest of hot investment ideas bite. In the Great Depression it sets the rate at 0% and where the fed is pushing on a string trying to get money into the real economy by lending to the banks, it just walks out the door now they’re lending it to ordinary people. 4. Paying it back. Requires some thought. I’ve got no interest in sending anyone to debtor’s prison but at the same time I would want to encourage people to use the money wisely so there needs to be some sort of penalty for failure. So there you have it, if you want to put more vertical money into the economy and you want to do it in a counter-cyclical way, and you don’t want to change the size of government, I can only think of two options**? BIG (temporary, or increased during downturns to make it counter-cyclical), and let’s call it LCG (lifetime credit guarantee). Are there any more? (**Actually I can, but they’re all pretty wacky. How about this? -gladatorial combat for the unemployed. Winners, having proven their darwinian fitness, receive direct cash deposits from the government. That should satisfy those whose main objection to the JG seems to be that giving any kind of job to the unemployed would result in his/her paying 5% more for their petrol. You know, because they are so obviously feckless and unproductive they could do nothing but drag down the average productivity of us all. I’m sorry, that was gratuitous snarkiness defiling an otherwise perfectly serious post.)

  151. Hi Cullen,

    1)I love these 2, very good food for thought :
    -prosperity is not just about giving people a job. It’s about increasing real living standards by giving people more time
    – Why obsess over FE when the real goal is full productivity

    2)Regarding JG , why doesn’t Warren give a simple exemple of a successful little experience. In France we had lots of experiences of gov temporary jobs to fight UE. It has always been a failure because you end up putting unqualified persons, without any available skilled managers and coaches to train them, into jobs where there was no real demand anyway.
    FI, we had tens of thousands of people hired to “assist” teachers, so that children could be helped with school work. These people having no the slightest pedagogic skill ended up smoking and listening music in the court yard with kids, nothing harmful really but…. The problem is that politicians are ready to waste any sum of money in order to lower these bloody UE figures

    3) Can you give me a link to any article which stresses the differences between MMT and the keynesians? It’s not very clear for me

    All the best for 2012

  152. But the government has already hired these 5MM people by paying them benefits. Don’t get locked up in the label game. Look at it for what it is.

  153. The US economy has “historically underperformed”? If that’s true then why is it the single greatest case of wealth creation in human history?

    And no, the question could be posed about tax cuts and you’d get a favorable response. It’s about govt size in America. Not about anything else. I am stunned that more people aren’t aware of this. Do you even watch TV or read a newspaper? America is an enormously conservative country (like it or not).

  154. Okay, reasonable points. But none of this can be proven. I mean, this is my big concern. We’re working in the realm of the theoretical and nothing more. You’re going to sell a 20MM job plan with this kind of thinking? Not happening. Sorry.

  155. Hi Charles,

    Got any data on the French experience? I’d be interested in reading it. I am well aware of the fact that govt employment programs are nothing new. This is a huge stepping stone here. There has never been a society that has prospered on the back of govt employees. Sorry, but that’s a HUGE point everyone here seems to just gloss over. That doesn’t mean it can’t be done….

    Keynesians are mostly neoclassicals. So they work from a somewhat different theoretical starting point. Dr. Krugman is the figurehead of the modern day Keynesian so I would maybe start by reading some of my articles about PK: http://pragcap.com/?s=krugman&x=0&y=0

    Hope that helps.



  156. Difference between UE benefits is that they are temporary. One of the biggest concerns in a JG is that you get paid 20K a year to be an artist or baby sitter. So a family of two gets to make 40K a year (avg median household income in USA is 50K) for pretty cushy work. That’s not a bad deal for a lot of people. I am not saying it’s something to aspire to, but I don’t see how this is the great investment in the USA that so many seem to think it is….

  157. you are thinking in straight lines. It doesn’t matter if the individuals move out of the 5MM, others will take their place. For me the JG does not need to be a non-productive societal role. Further, JG’s can work for private sector but paid by the government. What is obvious is that who ever pays “unemployed people” they must be productive. To say the present system delivers is saying that having unproductive people delivers. What America needs is production, that is the capitalist system.

  158. I am open minded about the JG. I am just stunned at how some people think they’ve wandered upon some sort of holy grail to economic prosperity. Sorry, but I’ve been in enough investor presentations to know when something sounds too good to be true….

    It’s your right to have a job? Where in the world did you get that impression? Is that something your parents taught you? Because mine sure as hell didn’t teach me that. They told me that I needed to work hard and make my way in this world so that other people would appreciate my existence enough to offer me their acceptance in exchange for what I have to offer. You want to give a man a pay check. I want to give him a meaningful existence. You think a nation of 20MM artists or baby sitters is a way to give people meaningful lives? This is your great stepping stone to a better world?

    I am becoming increasingly convinced of how bad an idea this is….

  159. By the way, nobody here will tell you the dark side of the NREGA programme in India.

    The NREGA was guided by a similar 1976 plan which was special to a State in India called Maharashtra.

    Once the late PM of India Rajiv Gandhi said that:

    “If Central government releases one rupee for poor, only 10 paisa reaches them.”


    Here is an example of a scam (and there are plenty of them)


  160. That’s one of my points. This country might evolve over time into a less conservative place. But we’re certainly not there now and honestly, I’d be hugely surprised if this sort of program can be passed in my lifetime….So, one of my key points here is – let’s try to be realistic. The JG doesn’t ever have a chance if people don’t first get the basics of MMT. And if we never get the basics out into the mainstream then it’s a lost cause.

  161. Right. And once you get an army of conservative think thanks on the mission here you’ll find millions of examples of this from India, Argentina, USSR, etc. It’s a non-starter. End of conversation as far as I am concerned….

  162. So, you increase productivity as much as is possible. Then you find that you’re still staring at a very large unemployment figure. You try to increase productivity further, but still you’ve got significant unemployment.

    Then one day someone says, “hey haven’t you read any of that MMT stuff? Surely you should know that improvements in productivity alone will never solve unemployment.” At which point you say, “screw it, actually I don’t really care whether millions of people can’t get a job, and anyway it’s probably good for the country”.

    You have now directly violated US law by reneging on your duty as an elected representative of the people of the United States.

    By all means aim for maximum productivity, but then do what you can on top to ensure maximum employment. It doesn’t all have to be sugar-coated socialist fairytales and pretend make-work. It can be made to function and to deliver real benefit if there is the political will. It doesn’t have to mean monolithic state bureaucracies either – it can be ground-up, involving private non profits and local communities. We need to be imaginative about this, not close down the idea upfront and simplyt turn our backs on the goal of FE.

    MMT explains why many of the economic objections put forward above are potentially groundless.

    Being against the goal of FE seems to me to be a bit like gold-standard thinking.

    At the very least acknowledge that maximum employment should be a goal, alongside maximum productivity. Then perhaps consider acknowledging that improvements in productivity will never achieve it on their own.

  163. Can I get a coffee mug with the sectoral balanaces equation on it? This is a serious question, I want that, badly.

  164. So in your opinion there is not GDP gap right now? There has not been because of lack of deficit spending? Whether we call It underperforming or something else doesn’t matter. The country is not utilizing Its full economic capacity. It can be the richest country in the world or the poorest. It is still the same story.

  165. So is this what I’m going to call, for lack of a better label, the “right-wing MMT” position ? : that you just don’t need a counter-cyclical stimulus program from the bottom up, be it JG, or BIG, or anything else. No matter what, you can always just cut taxes to increase the deficit and the flow of vertical money into the private sector. And this alone is all you need to maintain AD. After that everything else including employment will take care of itself.

  166. I’d love to see you try that one in court….It very clearly states that it is a national “goal” that gives people the “right to full opportunities”….Why do you think legal jargon is so twisted like that? Because a lawyer can then go into court and easily argue that that law does not say the govt has given every American the right to a govt job….

  167. Tax cut amounts to the same thing. I should have said net spending perhaps Cullen.

  168. No GDP gap? Not enough deficit spending? Hello. Search output gap on the website. Search balance sheet recession. I mean, if you’re totally unfamiliar with my position then don’t make yourself look bad by making wildly inaccurate claims about me not being in favor of more spending or tax cuts….No one is saying the govt can’t do anything to fill the output gap.


  170. > Effective aggregate demand is increased by productivity.
    > Not by putting money in people’s pockets.

    You have this confused. Consider the following sequence.
    Group productivity is guided by patterns as well as net aggregate demand.
    Both AG & GP are constrained by the quality of distributed decision-making.
    Quality of distributed decision-making is constrained by the cost of coordination, including preparation/training.
    Costs of coordination are very distributed & dynamic, so they’re optimally lowered by lowering the distributed cost of bookkeeping – i.e., access to currency.
    Distributed currency access (income), preparation & training are – so far – all most efficiently sustained via optimally distributed staff utilization, i.e., full employment.

  171. “It’s your right to have a job? Where in the world did you get that impression?”

    The Universal declaration of human rights

  172. While FP generally is an interesting goal, it’s a bit of a dodgy target. What is productivity? What period of time do we look at? How do we gauge this? What is the satisfaction level of the consumers of the production? Many who remained employed during the recession had to take on more work and productivity gains were considerable. Did the quality of life increase? The quality of their free time? Foxconn employees are quite productive, but when your employer makes you sign a non-suicide pact…

    Unemployed people have quite a bit of free time, but satisfaction is low as they have little means to take advantage of it.

    Get people employed first, especially in a recession, get the economy stabilized and productivity will rise in general. If we want to look at specific issues after that, perhaps you will create a whole new industry wrt socially satisfying productivity.

  173. You dont have to explain your positions to everyone. You’ve been very clear and consistent over the years. Most of the people here attacking your position on the JG look like new readers. I don’t even recognize half of them and I read your site every day. They’re just holding the MMT extreme left socialist party line. They’re doing exactly what the Rothbards do for the Austrians. Personally, I find it disgusting. Keep on doing what you’re doing Cullen. Most of us appreciate it.

  174. I think you are right, I’m pretty new and maybe naive.
    I’m really interested on how the MMT founders ended up here
    They don’t strike me as the meat-eating macho macho BS types who think unemployment works (and I’m not referring to Bill)

  175. Cullen –

    I think you’ve got some good targets there. How do you propose getting the unemployed on to those jobs? What would they do in the meantime?

  176. Cullen, the big puzzle for me though is that if all that government spending on good things is not mopped up with taxation, then ultimately that extra spending ends up in the hands of the wealthiest 0.1% who then deploy it to gather more.
    Spending can increase prosperity by ensuring that all willing man hours are made use of rather than passing unused. That is very different from saying that DEFICITS do that. You could have all of the spending you suggest but matched $ for $ with a flat % asset tax and then have the same aggregate demand but without the transfer of financial power to the 0.1%.

  177. Cullen

    You say “Okay, reasonable points. But none of this can be proven. I mean, this is my big concern. We’re working in the realm of the theoretical and nothing more. You’re going to sell a 20MM job plan with this kind of thinking? Not happening. Sorry.”

    None of WHAT can be proven? Can I prove that all 20 million people wont accept the JG job if offered? No but I dont think its unreasonable to assume (if for no other reason than a certain portion of these people are principled conservatives and would never accept such an offer), that nothing would get 100% participation.

    The more pertinent question is however what would be the macro affects of 20 million more people earning 8$/hr. One must start by asking how much are they *earning* now? If they are getting UI benefits I think the average is about 360/wk (someone please correct me if I’m wrong). Now of course not all these folks are getting UI and are instead drawing down prior savings but they are still consuming. How much more consumption would they do with a steady 320$/wk. Lets say they can double it. So half the 20 million consumes about what they are now (UI vs JG wage) and another half doubles theirs. So we have 10million people increasing their consumption levels.

    Are you asking if I can prove this increased level of consumption wont simply translate to higher prices? Of course not. What a particular merchant does when presented with more customers will vary. Some will raise prices probably, some will bring online new (old) productive capacity that they shuttered after 2007. But I fail to see how that scenario could cause out of control inflation. Maybe a 5-10% rise in some things like fuel or food or maybe housing but we might also see some services drop in price because now we have more people to do them.

    Again, consider 2006 as a test case for what America would look like with 10-15 million more people employed than we have today. In 2006 we had a lot more people working and consuming fuel (construction is very energy intensive) consuming food etc. I dont recall anyone calling for us to put out the fires of inflation, I dont recall anyone giving the clarion call that we had reqched our productive capacity maximum and we were in danger of a perilous fall in productive capacity (yes there were those rightly warning of a housing bubble but that is a single….albeit important…… sector) economy wide.

    As you have well explained (better than anyone Ive read) the BSR was a completely avoidable scenario. We hadnt suffered any “real” losses in economic capacity in 2006 all we did was THINK we were running out of money so we panicked and started firing all these public sector workers (and others) so we could *save* money. These fired workers became real casualties, unable to pay their bills as before…(leading to bank strains) unable to go out to restaurants as much or buy books from Borders (I hate that our Borders is closed!!). The pain trickled up from the fired workers to every merchant that relied on these customers and we are still bleeding jobs today. I dont know anyone who is certain about their current position (at present compensation package) being there in 6 months. We are all waiting for our boss to walk in and say
    ” we are going to have to tighten our belt form here on out”.

    Its a pathetic shame in my view. All because of some mistaken view of “affordability”

    So when someone asks, what our rate of inflation, food prices, oil prices and such would be were we to offer every unemployed person a JG job, I say look at America 2006 when we had 10-20 million more people in the workforce (making way more than the 8$ JG rate) consuming at a much higher level than today . What were gas prices? What was the inflation rate? What were food prices? Also though ask each business owner how he would like 1000 more customers a year.

    There is no way our aggregate demand, even at a 100% participation in the JG, would exceed 2006. Its not possible Is it?

    Now of course the issue is not ONLY about increased aggregate demand ( in regards to your critique of JG) but the main concern of most those against a JG in any form is how that additional demand will affect prices. I say virtually not at all unless you think America 2006 was an overly expensive place to live.

  178. Greg,

    Thanks for your comment. I really appreciate all the great and informative debate that has occurred here even though, at times, it got a bit petty. Unfortunately, I have to disengage from this conversation at this point. I am busy with other things and I have spent the better part of the last week thinking over every angle of this debate. I just can’t bring myself to agree with the JG position. I’ve really tried. Trust me. There are few things that make me less comfortable than disagreeing with Warren on something. But the conversation has actually driven me to doubt the viability of the JG even more than when I initially started writing about it a few weeks ago. Sorry. Maybe we can continue to debate at another point.



  179. If you have involuntary unemployment pre-programmed into the system then you are definitely not guaranteeing “the right to full opportunities for useful paid employment at fair rates of compensation of all individuals able, willing, and seeking to work.”

    Especially if you’ve already decided that you’d prefer an ‘unemployed buffer stock’ to the goal of full employment.

    Under current law it’s technically not even the government’s choice whether to have an unemployed buffer stock or not. They have to aim for the goal of maximum employment. But they also have to aim for other goals as well, which gives them cover when they inevitably fail to achieve it.

    MMT lays bare the fact that unemployment is inevitable without some addtional initiative that goes beyond what the market can provide.

    It doesn’t have to be Mitchell’s version of the Job Guarantee. But the logic is pretty unavoidable.

    As far as I’m concerned a job guarantee doesn’t mean a guaranteed job regardless of your behaviour, but the guaranteed option of a job if you are willing and able to meet the basic criteria and conditions. Precisely what these should be is debatable.

    I’d also agree with you that improving the productivity of the overall economy should be the major focus. But I can’t see why the goals of maximum productivty and maximum employment can’t be pursued at the same time. One side can deal with improving the overall economy, whilst the other deals with providing useful work opportunities to those that the economy necessarily excludes through simple mathematics.

    If people are genuinely to blame for their own unemployment (due to an unwillingness to work to acceptable standards), then they should be pushed to the back of the line when it comes to government support.

    An employed buffer stock should also be constituted in such a way that it remains genuinely fluid – i.e. people should not be permitted to remain within it if there are jobs in the real economy that they can take.

    We should not aim to eradicate unemployment, only involuntary unemployment that is forced upon people by the mechanics of a inevitably deficient economy.

    If you can get government bureaucracy out of the picture and simply provide subsidies to non-profit private, charitable and community organisations, then so much the better. Let people organise themselves, and simply provide them with the means to do it.

  180. Everyone seems to be missing Cullen’s bigger point. His goal of FP should be the priority and that when we reach a level of FE (by his standards) then we can sell the point on the govt hiring the remaining few million people who are unemployed? If Cullen were driving the MMT bus he would scrap the whole JG idea for now, sell the public on the core ideas of MMT, push through a FP program, get the economy back on its feet and really humming, show them at the MMT policies work and then say “now let’s pick up the remaining slack and get this economy booming at a rate that will make your head spin”. Is that really such an unreasonable position?

    Correct me if I am wrong there Cullen, but isn’t that basically what you’re saying? MMT can work up to a JG, but we’ll never get there if we package MMT as the founders envisioned it.

  181. OK. I thought by using the term major journalist, you were implying that was some sort of substance and quality, not to mention lack of bias, to his work. What you seem to mean when you use that term is that a lot of people click on the website and the posts contained therein.

    With that criteria, he is certainly a major journalist. Of course by that criteria, a lot of men and women in the XXX domain are “major actors”.

    I’m impressed with your work Cullen; very much so. But the BI isn’t close to a thing of fairness or quality. Your work is in a different class altogether than that presented by the tabloid, politically biased, poorly edited low brow entertainment site that calls itself the Business Insider.

    Keep up the great work. It appears your boxing career didn’t pan out (and in this corner, the heavyweight champion of the world, CULLLLEEEEN RRRROOCHEEEE!!!!) but I am guessing you are going to have a continued career as an outstanding economics author. Maybe even politics?

  182. why this site has been such a refuge from the rest of the finance/econ blogosphere (and why it’s gained so much traction vs the rest of the MMT blogs) is bc it was explaining the way the monetary system works, and dealt in those facts.

    introduce politics and this is what we have…. alas, perhaps necessary to get it behind us – it was always lurking…

    I do look fwd to the return to discussion of FACTS in the future, soon as everyone has their say on their politics… Thanks for the greatest of blogs, Cullen.

  183. That sounds alright to me too, actually.

    I think Warren’s proposal is also about solving current economic problems by injecting income directly into the base, upping aggregate demand and just getting people off the bread line.

    Bill Mitchell also sees the JG as working within the wider framework of an economy functioning optimally under MMT proposals. He proposes that we give it a try, and if it fails, then so be it.

    I think there could potentially be lots of creative ways of implement a diverse range of JG type programs and to scale them up progressively through trial and error.

    For those who remain skeptical about gov-backed employment programs even under optimal conditions, the question still remains what to do with those that are inevitably unemployed due to the inherent structure of the economy. Unemployment allowance + benefits? Or the local homeless shelter?

    The established MMT position is also that an unemployed buffer stock creates higher price volatility. I think it’s partly because trying to manage inflation through employment actually leads to higher unemployment than is strictly necessary. This is worth taking into consideration.

  184. historically has been ok, this deficit hysteria has came up recently? It’s only now underperforming?

  185. Cullen, Dan’s got you with that one. Face it – the parts of MMT that you like and advocate are every bit as politically unacceptable in America as the parts you don’t like and want to discard.

    So you are going to have to come up with a better reason for hating the JG than that it’s politically unpalatable to Americans.

  186. I love love love that list of jobs from Randall Wray. Companion, clean-up “engineer”, artist, musician. Ha. Are you kidding me? Then again, this is the same economist who claims that an overnight $1 million loan recurring over the course of the year is the equivalent of a $365 million loan. He doesn’t even understand basic basic accounting. Why should anyone trust him to establish government policy?


  187. I concur David. In the circles I run in, there is far more support for the idea of giving people government jobs than there is for any theory that claims the federal government doesn’t really have to tax and borrow in order to spend.

  188. Cullen, it seems to me that your position regarding the JG is based on two things: (a) your concerns about whether too much government, as opposed to private, employment can result in social prosperity; and (b) your doubts about the JG’s political practicality given the current political environment.

    The political practicality matter is actually irrelevant to the theory of MMT. The theory is either intrinsically coherent or it isn’t. Bill Mitchell and others have shown through economic theoretic research that it is coherent in its totality, which includes the notion of a buffer stock of full employment. If it is politically impractical, then it is the politics that must adapt (whenever), not the theory.

    As for concerns about whether any given proportion of government employment (as opposed to private) is compatible with social prosperity, that is the same ideological question that’s been in play for a century or more now. People have strong feelings on both sides because each is usually used by the other to stereotype. We can just ignore that juvenile behavior, however. The crux of the matter in terms of this particular debate, though, is that the notion of full employment as a buffer stock is a key aspect of the theory itself. If there’s an objection to full employment via government per se for some reason, then it would have to be arrived at some other way. You can’t just take it out without affecting the cohesion of the theory. Either you have full employment in the economy as a buffer stock or you don’t.

    Anyone who wants to challenge what the theory is, or change it in some way, has to do so with specific reference to the research, it seems to me. It can’t be done seriously or fairly based on ideological objections or through conversational reasoning that excludes the research itself. Personally, I find it plain arrogant to blow off 15+ years of research in a blog thread, but hey, that’s just me. There’s arrogance all over the blogs these days anyway (especially among the heavyweight boxers, but ssh! don’t tell them — they’re adorable when they get angry). So no worries.

  189. Arrogant? Can anyone write a comment on this thread that doesn’t involve a snide remark or insult that totally nullifies their entire comment? Warren has been very clear that the employment buffer stock is not central to MMT. It has been plastered all over these discussions. He wrote:

    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,
always will be
a buffer stock policy. Call that the mmt insight if you wish.so it comes down to ‘pick one’-







    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.



    It might be his position that the employment buffer stock is best, but that’s an “option” as he says in Soft Currency Economics. I don’t know why people keep saying otherwise. Everyone keeps trying to change the theory that Warren invented. Nothing I’ve said here is inconsistent with what he says. I talk to the man on a daily basis for heaven’s sake.

    And if the theory evolves over time and moves away from what the founders envisioned then so be it. As Scott clearly said:

    “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.”

    Where’s the confusion? You want to call me something other than MMT? Is that it? Then do it. Warren says “we’re all MMT”. But if you need to create a wedge in the thinkers just so you can push through your political agenda then do it. But don’t accuse me of being arrogant when nothing I’ve done is inconsistent with comments by Warren and Scott. I’ve gone to enormous lengths to shed light on their work. If I were arrogant and selfish I’d have never turned pragcap into a MMT resource. I’d do what some other websites do and I’d crank out 50 gold articles a day. My traffic would be 100 times higher and I’d probably actually make a decent amount of money from this. But I don’t do that. When I first talked to Warren I told him that I thought he was changing the world and that I wanted to be involved in helping him. If that’s arrogant then yes, I am super arrogant.

  190. You people in favor of the JG really did a nice job of making yourselves look bad here. You sound like the cult that the extreme left wing portion of MMT really is. Between the name calling and proclaiming that Cullen deserves to be “laid out” you’ve built absolutely no convincing case that you’re right. If anything, you’ve strengthened Cullen’s position. Nicely done.

  191. “I’ve gone to enormous lengths to shed light on their work”

    Indeed, and not just shed light but brighter light. Not only would I not know what MMT was if it weren’t for Cullen but even if I had stumbled across it elsehwere I would have a much poorer understanding of it.

    Thank you for all your hard work, Cullen.

  192. Barbara,

    Who is being arrogant here? Bill Mitchell gets upset every time one of Cullen’s articles gets publicity that his dont. He gets upset that people read Cullen’s articles and not his. He says this directly. “I notice that they didn’t read any of my work”. He is crying out for attention.

    Further, the JG essentially proclaims capitalism to be wrong. Bill Mitchell hates capitalism. Read some of his work. He has specifically stated that the USA could learn from China. That’s ridiculous.

    What’s absurd is to look at the world’s most prosperous wealth creating machine in the history of man and proclaim that the system they’re using is wrong because you disagree with some of the social outcomes involved in its existence. Foreigners always hate America. Bill Mitchell is an arrogant Australian who hates capitalism and hates America. He’s just trying to push forward his one significant contribution to MMT which is the JG. Arrogant is Bill Mitchell. He oozes arrogance.

  193. Cullen, My apologies, if I offended by postulating a “right wing MMT” of tax cuts only. I know you have advocated big infrastructure projects too and I certainly didn’t mean to imply you were some kind of covert neoclassical supply sider. I just think there’s something worth thinking about here. If the basics of MMT is endogenous money, sectoral balances, and the causal story that if leakages to savings and imports aren’t filled then the only possible result is that the economy shrinks, then all you need to do is open up the deficit faucet, and a “tax cut MMT” makes perfect sense. 80 % middle-class tax cuts. 20% infrastructure projects. Mission accomplished. You’ve filled the gap with government-issued vertical money. I simply wonder if that’s the whole story. Specifically, I wonder if there are times when you absolutely have to inject vertical money from the bottom. That’s where the JG comes in, but if not that what else? I also wonder about the politics of tax cuts and infrastructure. It seems to lead to the traditional Keynesian problem –how do you ensure that the politicians who approve the tax cuts and the infrastructure projects reverse them when the time is right. Of course the Keynesians thought they had to balance the budget over the cycle and missed. We know that that was probably a good thing. MMT politicians will know they don’t have to balance the budget over the cycle and no doubt miss by more. Is MMT then discredited like Keynesianism was by rising inflation? Again that’s where the JG comes in, it’s naturally counter-cyclical. How do you make tax rates move counter-cyclically too? It should be possible but it requires a lot of thought. I must be clear. I hate the JG. I think we’re moving slowly towards a workless world. I think in the future we’re going to have to find a way to break the link of work to income. Not enshrine it more deeply. Nevertheless, I think the JG would do what it says it would do. Give you the lowest possible unemployment rate for a given inflation rate. As a goal I love the idea of “Full Productivity”. The quicker we get there, the quicker was can get to that workless world. But can it be defined? When do you know you have it? You’d have to prove a counterfactual. And does it really belong in the realm of macroeconomics? Let MMT worry about employment and inflation. Productivity seems to be a job for the microeconomists.

  194. Greg,

    The reason why the demand generated by the employed didn’t create inflation was because they were also generating supply for which there was market demand. Under the JG, they would once again increase aggregate demand without increasing aggregate supply of goods for which there is market demand. Hence, inflation.

  195. Our pre-recession employment patterns contributed to a financial crisis and the worst recession in generations. Let’s not use that as a positive case.

  196. The argument is that the pool of the unemployed is the most liquid buffer stock available. Do you have an argument to the contrary? Or an argument that liquidity is not the category to look at?

  197. It is entirely ridiculous for anyone to claim Cullen is freeloading on MMT’s popularity. He’s been one of its best popularizers. I, for one, never heard of MMT before reading Prag Cap. And now I’m going around talking about it on air for CNBC.

    Freeloading. Ha!

  198. Seriously. Thanks for chiming in John. Some of these people act as though I have made some sort of king’s ransom by talking about heterodox economics all day long. Are you oblivious to your surroundings. I have very little to gain from MMT. I won’t get credit for its founding. I won’t win the Nobel prize. All I get to say is that I helped spread its popularity because I have a big megaphone. And yet some people are upset that I am so vocal about it. They are upset that Paul Krugman cites me and not them. The absurdity of some of the comments here has been outrageous. I don’t expect a thank you from anyone, but I also don’t expect a kick in the shins.

  199. Hell! He’s here responding to the comments to this post!

    Thanks for the link.


  200. Does anyone else miss Hillbilly? No? C’mon! He would have been fun in this conversation.

  201. My favorite job on the JG list is “companion”. Not that I would know, but I believe that $8/hr would be a little low these days, depending on the “services” provided.

    Too bad Bill Clinton wasn’t still in office :)

  202. Carney forgot to mention LVG’s valuable contribution that anyone who thinks the JG is a good idea must be a raving socialist who hates America.

  203. posted in reply to Carney:

    P.R.Tcherneva | Jan 4, 2012 05:17 PM ET

    All of these objections have been addressed in almost 20 yrs worth of literature. More importantly, instead of arguing hypotheticals, best to look at real-world examples of such programs and whether they’ve had any of the problems you identify. One of them is Plan Jefes (there are others) which I have studied extensively. We have carefully documented that 1. appropriate & useful employment was found speedily for millions (even the most unskilled) 2. communities were transformed 3. training and education was provided 4. Jefes workers were not stuck in govt jobs but transitioned to private sector employment 5. IMPORTANTLY (though this was not immediately obvious during our first assessment) subsequent examination revealed a clear bufferstock mechanism, stabilizing wages, prices and GDP 6. NO inflation as a consequence of the program.

    Pavlina R Tcherneva

    1. http://www.cfeps.org/pubs/sr-pdf/SpecialReport2005-3.pdf
    2. http://www.cfeps.org/pubs/wp-pdf/WP43-Tcherneva-Wray.pdf
    3. http://www.cfeps.org/pubs/wp-pdf/WP41-Tcherneva-Wray-all.pdf
    4. http://www.levyinstitute.org/pubs/wp_519.pdf

  204. Argentina’s rate of inflation has been 10% per year since the Jefes program was instituted. In fact, it’s much higher than it was in the decade preceding the program. This is the problem I keep referring to. Argentina is clear cut evidence that this is a spread the wealth scheme. Thanks for giving us real solid evidence. Of course, I see that some MMTers have covered their path by writing research that claims the Jefes program wasn’t a true ELR. Yeah, nice try playing both sides.


  205. I didn’t say you were selfish at all, or that you were always or even typically, arrogant. I said it was arrogant of you to dispute a serious academic idea in the terms you have been doing in this thread based purely on your personal opinion. The idea you’re disputing here has been well substantiated in the literature (W.F. Mitchell (1998) “The Buffer Stock Employment Model – Full Employment without a NAIRU” Journal of Economic Issues 32(2), 547-55; W.B. Mosler (1997-98) “Full Employment and Price Stability” Journal of Post Keynesian Economics, 20(2), 167-182; R. Wray (1998) Understanding Modern Money: The Key to Full Employment and Price Stability, Edward Elgar: Northampton, MA.; W.F. Mitchell and J. Muysken (2008). Full Employment Abandoned: Shifting Sands and Policy failures,. Edward Elgar: Cheltenham. Revised: January 2009).

    If you dispute it, then you need to demonstrate, at the least, that you know that literature, and then substantiate your objections. Otherwise, you’re being arrogant IMO — dismissive of years of painstaking academic work that’s been reviewed and published in the professional literature. Sorry, but that’s how I see it. And I see it this way precisely and especially because you run a popular blog. You have a responsibility to do that much, not just to those who did the research but to all of us who follow along here. If this were any old backwater blog, who would care? Not I.

    I’m aware that you support MMT, that’s obvious from everything you write. I’m aware your blog does a lot to publicize MMT, which is a great thing IMO. I’m aware that you are colleagues, so to speak, with Warren Mosler and Scott Fullweiler. Their positions on whether the JG is integral or not is beside the point I’m trying to make. Even your position on JG is beside my point. I don’t care that you disagree with it. Christ, I don’t know myself yet what I think of it. What I do care about, however, is that it be discussed seriously and with regard for the thought that’s gone into it, as if you’ve studied the matter carefully and understand how it fits into the whole. I just don’t think you’ve done that because that level of seriousness hasn’t come across in your comments. (This is very unusual, in my experience with this blog, btw). Unfortunately, this whole discussion has descended into something more like a high school brawl, with egos getting bent out of shape all over the place. (And please don’t tell me I’ve been part of that because I said you were arrogant. That comment is hardly a snide remark or a personal insult. It’s perfectly acceptable public discourse… particularly when it’s warranted.)

    Finally, I have no political agenda to push. It’s rather presumptuous of you, actually, to accuse me of that when you don’t know me or my politics from adam. Oh hell, there I’ve done it again — nullified my entire comment! :-)

    Actually, you know, I was shooting for a little gentle humor last time when I referred to all those arrogant heavyweight bloggers. But I apparently missed my mark.

  206. I think Cullen and others’ ‘praxeological’ concerns about a full-blown JG have validity. He loses me when he speaks about the ‘positive’ effects of a substantial, ongoing ‘buffer stock’ of unemployed. The attributes: ‘white, male, educated, mobile, of stable family background’ do not characterize those most at risk here, or who could benefit and contribute productivity through targeted, publicly funded employment (Jason Hun makes some excellent points above relating to the potential here).

    In addition, nothing is ‘proven’ on the basis of the past few centuries of western economic dominance. An undeveloped continent to exploit; a few countries’ monopoly of technology and large scale industry, with ready access to the world’s resources and markets; devastating wars leaving only one temporarily intact and paramount; cheap energy from fossil fuels – accompanied by profligate use of human and natural resources (including extensive use of pools of unfree labor and disregard for environmental impacts) – none of this will hold going forward.

    Also cavalier talk of ditch digging: some ditches matter and it matters whether these are done properly. I have put shovel to, and overseen others (at widely varying levels of ability and experience) in the digging of, a few; watched the largest private business in the county (they have a longstanding way with connections, and are currently thriving on the four-lane contract) get paid well to make a mess of one and paid more to remediate the mess by a small nonprofit (I’ll spare you many gory details on that nexus) – and also had a couple of guys with a backhoe do a crackerjack job for a song, and had the overseer of a large commercial project get permission to borrow the company’s over the weekend and do another one for free. Carpenters doing Community Service for DWI have also delivered quality work, glad to be doing that rather than sweeping floors – like the one who designed and built with volunteers, racks to hold recycled windows and doors, to get a resale store up and running.

    Activity not unlike ‘picking up trash/raking leaves’: clearing out the buildup of combustible material that experts say could prevent the wildfires that regularly threaten residential neighborhoods. Another example of manual need: Katrina – before, during, after.

    We can stay in our homogenous enclaves and ideological comfort zones, firing off broad generalizations related to issues and communities of which we have little direct experience or based on little solid evidence – until calamity forces us out of them. Or we can take thought, and listen to any and all serious voices, together; try some things (including a few daring ones, and learning from the occasional ‘Solyndra’ or corn-based ethanol); see what works; and proceed from there.

    And yes, I do agree that the forum Cullen is providing is contributing to this process.

  207. Look, you’re catching the back end of a long and arduous argument here. So my apologies if my tone sounded harsh. I’ve read the JG material. I am very familiar with it. I am sorry if you don’t think I come across as having understood it well enough. To me, that was never my point of conflict. My point of conflict was always about whether we should be focusing on FE to begin with. This is, by my knowledge, a totally unorthodox way of thinking about things since the entire profession obsesses over FE and PS. So yes, I apologize that my thoughts have not been fully developed here, but the thoughts I am having are not developed anywhere so I don’t know what to tell you.

    MMTers are basically in the business of shrugging off years and years of research. We have basically dismissed the entire neoclassical doctrine. Very few people in academia take us seriously. It’s what the MMT school does. We reject the entire old model. We think it’s dead right. But that doesn’t mean it’s certainly right. But then I come along and question something within MMT and all of the sudden I am doing something weird. I am only shooting down research to the same degree that all MMTers do. So, it’s rather hypocritical for a heterodox school to argue that someone within their own school is being dismissive of research. Personally, I don’t think the research is as in-depth as you do. In fact, if it was clear cut and developed as thoroughly as you claim then we wouldn’t be having this argument. But it’s not. I am not an irrational person. I am very thorough in my discovery process. The only research on the JG is grounded in theory and a few really vague social programs in 3rd world countries. I don’t blame the MMT academics for this. They don’t have much to go with. But that doesn’t mean it makes my case any weaker. After all, I am the one working within reality here. They are the ones working within theory. My evidence of prosperity based on unemployment is factual and real. I could cite millions upon millions of research papers. MILLIONS. JGers cannot cite any because it has never been done before. This is the problem with pretending that the JG is core to MMT. There’s no evidence that it can be core to MMT because there’s zero evidence of these sorts of program working over the long-term. We know the core aspects of MMT work because we’ve lived them. We can show you the real life operations. The transactions. The flows, stocks, etc. It’s all real. Factual. But this, this is not factual. It is 100% pure theoretical.

    There are a lot of people here who need to stare long and hard into a mirror. Myself included. And yes, for a heavyweight, that gets painful at times. :-)

  208. Here is an even better chart. You could make a serious argument that the Jefes program contributed to the Argentine hyperinflation. Inflation went from 7.9% when the plan was started to 41% within 8 months. Then the economy crashed and they’ve had 10% inflation ever since. Hardly a good sign that this sort of government spending is positive. I know MMTers will try to argue that this didn’t come from the Jefes program, but the facts speak for themselves. Before this program was instituted, Argentina had deflation. Then it contributed to hyperinflation and now they have 10% annualized.


    Game over MMTers.

  209. LVG: I think the Jefes program actually ended before the big inflationary spike in your graph. The debt crisis remember?

  210. JG, MMT in Argentina – comment on links to Jefe research above …

    The info wasn’t that persuasive, but it’s not easy to do an uncontrolled experiment.

    One thing that struck me is, even if it does work, it probably works best when you have some low level (or 0) closed economy, which could benefit from liquidity injection. The poor argentinian areas didn’t need “imported” high-priced cancer drugs, Japanese machine tools etc. Under this assumption, I’m not sure it’s JG & MMT working, as much as a “microcredit” kickstart to the economy through the “salary”.

  211. You are wrong. It started in April 2002 and ended in December 2002. The interesting point is that this was the high point of the hyperinflation with the program kicking off at 8% and ending at the exact peak at 41%. In other words, once the government stopped this program the inflation slowed. I am actually surprised that anyone would come close to calling that plan a success given the fact that it coincided with one of the worst hyperinflations of the last 50 years.

    So we have massive corruption in the India program and hyperinflation in the Argentina program. Do you need more evidence that everything we’re worried about is totally justified?


  212. Success? Hell, I am surprised anyone would even bother citing that case in a research paper. Damning evidence.

  213. I was really starting to buy into the whole MMT thing until a few weeks ago when I saw Wray’s piece on the Fed’s loans. Then I realized that one of the main MMT advocates didn’t even understand basic accounting so how could he understand macroeconomics? Now we’ve got Pavlina Whatever her name is spewing on about the Jefes program and how great it is. Oh, never mind that it coincided with a hyperinflation. Inflation later fell, right? Yeah yeah.

    Crack pots.

  214. Can anyone point me to academic research or studies of explicitly outlined Job Guarantee alternatives?

    For example, perhaps some kind of partnership where government temporarily subsidizes the hiring or training of the unemployed by the private sector, rather than hiring the unemployed directly in JG “make work” projects.

    I’m SPECIFICALLY INTERESTED in learning about: the pros and cons of such JG alternatives; how to ameliorate the cons (e.g. employers “gaming” the system and getting subsidized to hire workers they would have hired anyway); how to segue or migrate over time from greater to lesser subsidies as a given worker gains skills and experience; how to minimize the “voluntary” unemployment of the highly skilled (and formerly highly paid) who are holding out for a good job, not just any job; etc.

    Thank you.

  215. LVG, your tone has gotten a little old. The JG is not central to MMT and the Argentina case doesn’t prove anything. Comparing Argentina to the USA is beyond absurd. Even if the Jefes plan there had been a raging success I’d still discount it solely on the points that the two economies are nothing alike.

  216. So ban me or whatever you want to do. It doesn’t matter to me. But now we’ve got you guys on record as being in favor of programs that are clearly interconnected to a case of hyperinflation. Bill Mitchell says the JG is central to MMT so can I just go ahead and send this to all of my Austrian friends letting them know that your precious JG program helped cause hyperinflation in Argentina? Or should I send them the links where Randy Wray can’t do basic accounting? Huh? Balls in your court.

  217. I like you Cullen. But you’re trying to play both sides here and it is disingenuous. You can’t be against the JG and in favor of MMT. If so, then we have to conclude that you’re in favor of potentially hyperinflationary programs. I have tried to support your stance here, but now it’s clear that you’re on the MMTers side. So just be aware of whose ship you’re on as it’s sinking.

  218. You have a good night too Cullen, It’s been a long day and I truly
    appreciate you bringing this topic (and so to speak fight) up against the JG program. If It is a bad idea then It doesn’t survive. If It is a good idea then It should be able to take any attacks. :)

  219. Wray was also in on the Argentina hatchet job. He’s just in favor of anything progressive. If it’s anti big banks and capitalism then he’ll cook your books. If it’s anti capitalism and in favor of welfare then he’ll fly down the Argentina and proclaim hyperinflation programs to be smashing successes.

    Frauds. The lot of you. I hope MMT goes right back where it came from.

  220. The only thing anyone needs to know about the JG is that the Jefes program kicked off one of the worst hyperinflations of the last 50 years. This is one of two JG programs that have been tried and cited by MMTers. The other one is in Indian and as cited above it’s overrun with cases of corruption.

    Thanks for posting that link Phil. It really helped put a dagger in your case!

  221. Cullen, here’s what you can say:

    “I subscribe to MMT, which provides an accurate account of the actual workings of a modern fiat monetary system.

    It also includes a theory about the role of a ‘buffer stock’ to maintain aggregate demand and price stability. Many of the MMT founders believe a JG would be the most effective candidate for this role. I have reservations about how this would work in practice, and have some ideas about how this could be accomplished by other means.”

    As near as I can tell, you gave much of your New Year’s weekend to this debate. Take some time off and go fishing. Come back and tell us anything you like about what you caught. None of us will have any basis for arguing with you.


  222. I just finished reading the Pavlina papers. I have to say that I am not stunned. I am shell shocked. The program does indeed appear to have started when the Argentine hyperinflation began in 2002. And yet there is almost no mention of this in any of the research she posted. In fact, in two of the papers the word inflation does not even appear. In the first, it appears just a handful of times with no detailed discussion. And in the most descriptive paper it is discussed in terms of how a ELR would work but the Argentine experience is omitted from the inflation section.

    This is not poor research. It is staggeringly poor research. The one mention says:

    “The early experience of the Jefes program shows that a huge program can be implemented quickly without major problems. As mentioned above, within a couple of years after implementation, the program was employing five percent of the population. Further, implementation was accomplished in less than ideal conditions: economic, political and social instability was high; there were literally riots in the streets that forced the government to move quickly; the economy had collapsed, unemployment was above 20%, and GDP was falling rapidly; consumer inflation was running at 40% while producer prices mushroomed by 125%, and currency depreciation reduced the peso by more than 200%. Admittedly, the dire economic straits forced the government to take action, and it saw Jefes as something of a last ditch effort to restore stability. This made the program more politically feasible, which helped to overcome some of the other problems.”

    This is entirely misleading. The CPI was not 40% as it started. It was 40% well after it started.

    I am literally shell shocked by this.

  223. But she claims “NO inflation” in her obnoxious comment to Carney’s great response. Ha. Yeah right. No inflation. Maybe she is subtracting the inflation out. Maybe she was taught math by Randall Wray.

    Anyone looking to bury the MMT job guarantee just found the gift that will keep on giving.

  224. The Conservative belief that there is some law of nature which prevents men from being employed, that it is “rash” to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years… Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense. We shall try to show him that the conclusion, that if new forms of employment are offered more men will be employed, is as obvious as it sounds and contains no hidden snags; that to set unemployed men to work on useful tasks does what it appears to do, namely, increases the national wealth; and that the notion, that we shall, for intricate reasons, ruin ourselves financially if we use this means to increase our well-being, is what it looks like – a bogy.”
    –John Maynard Keynes

  225. Why do you assume Mr Carney that production wont ramp up to meet the increased demand? Are you saying we’ve lost the capacity to produce at the level we were in 2006? I fail to see how if we could produce at 2006 levels in 2006 why we cant produce at these levels now. Have we gotten stupid?

    We arent producing at those levels currently because we simply didnt need the capacity after all the sales fell off. The fall off in demand LED TO the fall in productive capacity, the productive capacity did not lead the downturn.

    The crux of this argument seems to be that you question whether we WILL increase production in the face of more paying customers. I hope its not whether we can. Clearly we can produce more, because we did.

    You seem to be arguing that in the face of a 20% increase in customers, a restaurant owner will simply raise his prices in order to try and drive down the customers to keep them commensurate with his wait staff, while I think its more likely that he will hire more wait staff and add tables. You seem to think that all who are faced with more requests for their services will just charge more instead of getting more people to meet the increased demand. This seems to fly in the face of all prior evidence. We have years of seeing how firms react when year over year growth is expected to be positive. Usually they just hire more instead of working their current force more or simply jacking up prices.

  226. I dont think your comment is relevant really John.

    Regardless of how our employment was maldistributed (and I agree it was) the fact remains that there were more employed people spending more money in 2006 and we did not have runaway inflation or 200$ barrel oil. The productive capacity kept up with our spending. I fail to see why it wouldnt today.

  227. Cullen,

    This is the best MMT site because you have the right mix of technical talk with a smattering of other articles. You do a great job in your commentary of the other articles as well because you show how MMT principals can be used to better understand and critique where a lot of other guys thinking is questionable.

    Nothing but props here.

  228. OOOOOOOHHHH Watch out Cullen!! LVG is going to go across the internets dissing MMT now…… Im not sure it will survive the onslaught. What are we going to do now ?………………. WE ARE DOOMED!!!

    LVG….. go and take you anarcho-fascist views with you to Zero Hedge or something. You’ve never contributed anything to a discussion here anyway *dickweed*

  229. First off the peak of the finacial crisis in Argentina was LATE 2001. By 2002 things were stabilizing the highest inflation for 2002 was April at 10%. There was no 2002 hyperinflation

    LVG is pulling crap out of his ass and strutting around like ignorant ass he is. All bluster *dickweed*

  230. Looks like someone is mad that I just debunked their precious social welfare program. Don’t use Wikipedia as a source. It makes you look like an idiot. Even Pavlina says inflation peaked at 40% in 2002. The IMF and CIA World Fact Book both confirm.


    various other sources confirm:



  231. Now you did it. I was just beginning to enjoy this exercise in left-wing fantasy when you start talking sense.

    Why not leave them alone so they can restructure our world to their hearts content. After all, social engineering is the latest rage.

    Don’t tell them that many of the unemployed are doing just fine: drugs, booze, crime and let’s not forget my personal forte, self-employment in the underground economy.

    Next thing you know these guys will want to give the post office back to full control by the feds.

    Only problem with that idea iseven Congressmen need the mail delivered.

  232. For those who who think LVG is onto something, linking Argentina, a JG, and inflation, here’s some foor for thought. During 2002 what else did Argentina do, besides run a JG-style program. I don’t know. Break a 1:1 peg with the US dollar and devalue 75%. Yes, at one point the peso collapsed to 4 to the dollar. Could that be relevant to a massive spike in inflation ? More relevant than a relatively small government employment program ? I’ll leave it to the fair-minded observer to decide. As I said before, I’m philosophically doubtful about a JG but on the straight economics of inflation, employment, and aggregate demand, I’ll trust the MMTers.

  233. You guys are so completely off on this it’s ridiculous. Argentina left a currency board, for crying out loud and allowed the currency to plummet. Look at what the value of the currency was doing and look at the timing–THAT’s why you had inflation. And when that stabilized, so did inflation. Jefes had little to nothing to do with it. The number of workers in Jefes continued rising until the middle of 2003, while inflation peaked before that and was coming down by early 2003 (again, timed perfectly with the currency–if anything, full implementation of Jefes coincided with stabilization of the currency and inflation). This is all perfectly consistent with what happens to countries when they get in trouble with currency pegs and have to leave them–none of those countries had Jefes, but you’d probably find some way to blame Jefes anyway. “No inflation” relates to the effect of Jefes, which any actual rigorous study (as opposed to politically motivated opinion) would have serious difficulty pinning any lasting inflationary effect on Jefes–as Cullen says, they’re very different countries, and you can’t expect that a few years after leaving a currency board they would have 2% inflation every year like the US (not to mention that they had hyperinflation before the currency board, so relatively speaking the 2000s after the currency board have been stellar).

    I was with the Argentine Labor Ministry economist that designed the program in December of 2005 at a conference in Australia, so I know that for a fact because he was explaining that politicians wanted to replace it with welfare. And he would be the first to acknowledge Jefes wasn’t a JG, and that what it was was all he could achieve politically.

  234. Screwed up my own point there–I was trying to say that I know for a fact that Jefes was up and running well into 2005 because I was with the Arg. Labor Ministry economist talking about how things were going in December of 2005. LVG somehow wants us to believe the program ended in 2002, and that 40% inflation is hyperinflation (not that Jefes had anything to do with it).

    Not trying to get into any drawn out debate here–had enough of that, just like Cullen–but these latest few comments on Pavlina went beyond ridiculous, not to mention excessively personal.

  235. Exactly. Aside from JG, I don’t know of anyone I agree with on more, including even some of my MMT colleagues, than Cullen. Seems too many have forgotten that we are all on the same side 95% of the time or more. And we can agree to disagree, try to understand, and come back another day and see where we get then on the rest of it. If nowhere, then we still have the 95%.

  236. Ha. You MMTers are cracking me up. So your defense on the high inflation is “the JG had nothing to do with it”. Yeah, you can’t prove that at all. All we can prove is that there was really high inflation. You and I both know that do don’t bother trying to bull shit me.

    Besides, even though the rate of inflation slowed in 2003 it jumped right back to the teens by 2006. http://www.tradingeconomics.com/chart.png?s=arcpiyoy&d1=20020101&d2=20060131

    That’s supposed to comfort those of us who are worried about inflation? Ha.

    And don’t lecture anyone on getting personal Scott. I’ve seen you around here enough to know your style. You were attacking Cullen just the other night. Grow up. And stop posting embarrassing stuff all over the internet like your colleagues. You wouldn’t want to discredit yourself like Randy and Pavlina have done.

    Sorry to spoil your socialist party.

  237. That sounds about right. I debunk your socialist program and you blame it on something else. Ha.

  238. I too learned MMT from Cullen.

    But I like the idea of a JG.

    Yet I agree with Cullen that the JG can’t be central to MMT or else it will remain a backwater “theory”. There are too many close minded trolls like LVG who are blinded by their idealogy, and the JG is just red meat for them which would be used to victoriously claim that MMT is wrong because they “know” the JG wouldn’t work. In other words, you infect the truth by injecting a theory.

    Cullen, unlike LVG and a few others above, is trying to be open minded about the JG. Its a bit like watching the Terminator (in T2 I think, when Schwarzegger returns to protect the teenage John Connor) where the Cop terminator gets dropped in molten steel and as he is dying each of the people whose form he had taken grasps out one after the other and dies. A metaphor for trying to hang onto your conservative roots when you’re also trying to be open minded. Its far easier to proclaim you are right and not actually consider well thought out arguments.

    I don’t know if the JG can work or not. But most of the arguments against it that I’ve seen above are idealogy, and not useful. I look forward to watching Cullen’s molten steel experience as he struggles with the merits of a JG vs. his political leanings.

    Now… can we get your 2012 predictions? I’m weary of eveyone elses.

  239. So a program that was less than 2% of GDP caused 40% inflation? And removing a currency board and seeing the currency fall to about 1/5 its previous value did nothing? Whatever. You’re a joke.

  240. Not my program. As I said, I don’t like it but for philosophical rather than economic reasons. But let’s try some productive discussion.
    Two questions. If the US government introduced an unconditional JG tomorrow, how much inflation would you predict? If the US dollar collaped by 75% against the yuan, the yen, and the euro, how much inflation would you expect? My answers are 4-5%, and 40-50% respectively. Maybe yours are different. But when Argentina breaks their peg in January 2002 I see a massive one-time burst of inflation caused by the devaluation. And yes it might have been pushed a point or two higher by government spending. Obviously you see something different.

  241. That was directed at LVG, obviously, not Cullen. Again, not defending Jefes, per se against any points Cullen has made. Just correcting some obvious errors.

  242. Ok fine, Cullen. But you don’t have to yell all the time since that is the first sign of descent into fascism and satanism.

    You’re making me uncomfortable.

  243. “You guys must not live in America. If I went out on the street tomorrow and asked 1,000 people if the govt should hire 5MM people tomorrow to help the economy at least 75% of them would kick me in the shin.”

    That comment is win.
    I just had a mental image of a Job Guarantee program operated by the TSA, where the unemployed can undergo a grueling two day boot camp/Powerpoint seminar/Vision Quest and emerge with a federal badge and a union card. Who could could possibly be against that? :o)

    “Airport screeners will get badges after finishing a two-day training program covering issues related to badges as well as how to talk to passengers in a calming manner…A.J. Castilla, a screener at Boston’s Logan Airport and a spokesman for a screeners union, is eager to get a badge. “It’ll go a long way to enhance the respect of this workforce,” he said.”

  244. Thank god. You know, you were a LOT more fun when you where a supply-sider. Just FYI.

  245. “I didn’t say you were selfish at all, or that you were always or even typically, arrogant.”
    “But you don’t have to yell all the time since that is the first sign of descent into fascism and satanism.”

    More of this please.

    “Sorry I let this conversation get so out of control. Okay, now I am really disengaging from this one…”

    No, it was a great discussion, sorry I didn’t have more time to jump in and throw some chairs at the people attacking you from all angles. You just need to figure out a way to harness the craziness and monetize it. Start selling memberships with a chatroom or videoblogging or whatnot. It will be good practice for your inevitable radio/TV shows.

  246. @ BarbaraNH

    Second the motion. This has been my criticism, too, not only of this issue but others, too. I have not seen an instance on any of the blogs of any of the critics of the MMT JG actually citing references and object to specifics.

    No counter view is going to get a serious hearing absent a proper professional work up joining the debate at the level at which it has been initiated.

  247. Wait? You didn’t like my “You’re making me uncomfortable” comment? Any manager of a large corporation learns from sexual harassment training that your first response should always be “You’re making me uncomfortable”. And I don’t know why people arm me with this kind of information since it was my ONLY response to any manager that ever tried to speak to me going forward. Then they just stopped speaking to me. Win/win.

    “sorry I didn’t have more time to jump in and throw some chairs at the people attacking you from all angles.”

    Riiiiiiiiiiiight. RAWR! ;) Look we got the whole place to ourselves now that Cullen has banned himself from this conversation. I say we tear it up and finish the “99 Bottles of Beer on the Wall” song. You go first.

  248. Well, he was good for sparring with. Kind of predictable though. Seems so many of them bring a 5 to an g/n fight.

  249. Cullen, I’ve been following you for about 2 years and have never really felt the need to post. I am posting today only because I think that you should know your work is appreciated and I think certain people on this thread went too far. Keep educating the masses about MMT.

  250. “Seems so many of them bring a 5 to an g/n fight.”

    Unforgiven, I have no idea what this means. And I am not trying to be stupid about it. Bring a 5? g/n fight? I can’t parse that to save my life.

    And you’re making me uncomfortable.

  251. Cullen –

    There have been so many posts generated about this, could you shoot me a link to your definitive FP post? I’d like to make sure I get it in the right context.

    Thanks for all your work and putting up with all this!

  252. Right, 95% — which, interestingly, could roughly be the employment level achieved by a MMT-aware but non-JG government? The difference is about those last 5% :-)

  253. Trixie –

    Never mind. It was late and I was engaging in a bit too much divergent thinking.

  254. What the hell is wrong with that LVG guy?

    The idea that the Argentine hyperinflation was caused by Jefes is simply idiotic.

    To sum up my position: I think a version of the JG could potentially work well, if it was done properly. I think different initiatives would have to be tried on a small scale and then scaled up based on trial and error. I think it would probably work best if it was decentralised and involved a range of different public, private and charitable organisations, and if it was based on appropriately structured incentives and sanctions.

    I think that the JG idea can be considered a central part of MMT as a macro theory which attempts to achieve optimum economic and social outcomes. It is derived directly and logically from core MMT insights regarding the nature of an economy that uses ‘state money’. It is not just a proposal that is advanced because it could make the lives of the unemployed a bit better. It has a purely macro-economic purpose too.

    I agree with Cullen that the idea would not be acceptable within the US in the current political climate. I also agree that it would probably be best to implement other MMT proposals before considering the JG idea. However, I think that there should always be a commitment to achieving maximum employment. I don’t think it’s acceptable to decide in advance that a part of the population should always be unemployed (i.e. the unemployed buffer stock idea). If achieving this goal means overcoming certain ideological barriers, then so be it. As I said earlier, I don’t think that the JG idea necessarily entails vast faceless government bureaucracy, as it could potentially be implemented at a local level by different groups subsidised by government.

    If MMT ever does become influential in the circles of power, it would probably be best to try and implement its less problematic aspects first. If and when they are successful, then other aspects such as the JG should also be tried in the absence of maximum employment being miraculously and sustainably achieved by other means. If it fails completely, then so be it.

    On the other hand, Warren thinks that if it were implemented tomorrow, it could contribute to a huge improvement in the state of the economy…

  255. Greetings everyone, seems like I missed all the fun here. I will not bother addressing LVG’s comments, who seems completely out of control. Scott Fullwiler is correct, inflation began before Jefes was up and running. it collapsed soon thereafter. We were on the ground talking to many experts from the Finance Ministry, Labor Minstry and a number of academics. All experts who studied the problem agreed that the initial hyperinflation observed was from currency depreciation, and the subsequent gradual increase in prices came from imports and commodities. Many of you perhaps don’t realize that Jefes was discontinued and replaced by a traditional welfare program–money spent but no output produced by beneficiaries. I have a paper coming out on this. Inflation if you look at the chart above had picked up afterward even though Jefes was no longer there. I have argued in my papers that long-term welfare is more inflationary than job creation in part because you don’t have the supply expansion. More studies are needed to demonstrate causation, but the data seems to indicate something similar. What Jefes did when it was in place is increase demand and supply at the BOTTOM of the economic ladder, it didn’t spill over to broad based consumer goods prices. Like I said we were on the ground. We visited the projects, we saw what the people produced and what the new incomes were spent on. Our findings about the benefits of the program were confirmed by another group that went to study some projects in 2006 in completely different ares. A world bank researcher, completely unrelated to us and the whole MMT project, did her own study on the effectiveness of Jefes projects and visited a different province (references are in my dissertation and a new working paper coming out at levy). Same results. Now there are a number of Jefes studies out there by economists who have never seen a single project. I am a macroeconomist, but even I know the limitations of my macrodata.

    I am sympathetic with Cullen and others who believe JG may be politically infeasible, but as I have told beowulf and others, political infeasibility is NOT an argument against the effectiveness of a program. What’s politically impossible today is suddenly possible tomorrow. I have a blog on NEP on this point coming out later today.

    I appeal to all that we argue on the MERITS of these programs, let’s argue their intrinsic features, their stabilizing mechanisms, give me your–better–version of a bufferstock mechanism. Let’s hash this out, but just because you “don’t like it” is not an argument. Once again, I agree with Cullen that we have a major obstacle–we do not have a pure/universal ELR/JG to examine–but we have many direct job creation programs with many features of the JG that can teach us a lot about the effectiveness of these policies. Scott Fullwiler has done some important simulations. Simulate your alternatives. Let’s compare and may the best program win. Best to all.

  256. Pavlina,

    Thanks for the comment. My stance is MUCH broader than “I don’t like it” or it’s a political non-starter. There are real rational reasons why it’s a political non-starter in this country. People like myself wonder if it’s actually a net benefit when compared to potential other policy options that MMT gives us (and no, bad policy now doesn’t mean marginally better policy is good). So, it’s not about not liking something. It’s about measuring whether it is really in the best interest of the nation’s long-term prosperity. I’ve outlined my concerns here and they are many and in my opinion, almost impossible to prove wrong because the data and real-life experience is just not here. That doesn’t mean I am not potentially open to a JG at some point in the future or that it debunks your work (not even close!), but I think the risks at this point are not disproven to a point that justifies such a program.


    So, it’s my recommendation that we use MMT to focus on other policy measures that can shed light on the MMT economics and policy options, but aren’t viewed as being so risky to society. And who knows, over time, maybe society will evolve closer to the JG idea?



  257. Hi Cullen, thank you. The comment was directed to the broader MMT community, because these sentiments (about JG supporters being naive) are very strong out there. On the corruption issue–I am just as concerned as anyone about fraud–so get me the best quality control experts, let’s set up a system of rules, checks and balances to minimize corruption. Why is corruption always such a big objection to JG, and not any other private or public behavior. Do we downsize the entire financial sector because of endemic fraud? Shut down Wallstreet? No. We think hard about financial reform. So I disagree with Ramanan that the issue of corruption should be the final nail in the coffin of NEGRA.
    You have raised technical questions which I welcome and am happy to address (hopefully in a longer post). Some of your readers have philosophical objections to the JG, so I ask them to consider this…in a monetary production economy, the only access to a livelihood is through wage/money income. Many people work very hard for it, as you say (some not so hard but nevertheless have jobs). Others want to work, but there are no opportunities. The JG offers the opportunity to participate–it neither forces, nor guarantees and easy, cushy, OR permanent jobs to the unemployed. many of you have heard it before. But I wonder whether people newly introduced to the JG aren’t confused by the semantics–when we say GUARANTEE, some people understand a permanent job for an individual. That’s not what we mean. We mean that the program itself is permanent but the jobs are transitional. But all of this boils down to design and implementation. Ultimately, society may not think that the unemployed are deserving of an economic opportunity. But one way or another society pays for their livelihood with our real resources, so the question is whether we should allow them to participate in the process of production and provisioning or not.
    Best, Pavlina

  258. Thanks Pavlina. I’d love to continue the discussion as time goes on. And sorry for allowing the personal attacks. I should have wrangled this conversation in long ago. I for one am a huge fan of your work.



  259. Agreed.

    A clear general statement of what I was referencing concrete experience and specific example in support of.

  260. Much of personal rancor I’ve read in this thread can only hurt MMT. Since discovering MMT (on Cullen and Warren’s sites) I’ve always felt the JG was a problem. It illustrates the naivete so many of our foes use to laugh us off the stage. It’s not that the JG, in principal, isn’t a good idea. It’s simply because in the near future it is politically untenable and in the long-run it can’t be implemented until its advocates really develop models and implementation strategies that one can realistically envision working and being supported in a pluralistic republic (optimistically, as we now live in a pseudo-democratic plutocracy). Otherwise, the only way it’s going to get done is after a crisis propels an MMT-minded takeover of the government. How likely or desirable is that?

    Ironically, as I’ve written here before, unless the world falls apart I believe advanced AI is going to lead to high systematic unemployment sometime in this century. So some form of income guarantee is going to have to evolve in this timeframe, whether it involves artificially created jobs or not. Otherwise, our problems with aggregate demand will lead to economic collapse under conditions that should otherwise be the most productive in history (Cullen, please take note of this regarding your productivity aims). I see a JG, at best, as only a transitional device to some new paradigm few seem to want to discuss or prepare for. And just maybe by brainstorming that future paradigm we might be able to deduce some realistic JG principals in the nearer term.

    But so many realistic details have been left out of the JG and there has been such a paucity of creative practical thinking about it that it makes its MMT advocates look a bit ridiculous to me. I’ve read Bill Mitchell’s work but it simply does not do enough to lay out a practical working mechanism politically or even economically. He only does a good job of justifying it from a buffer-stock perspective. But real jobs employing real people on a temporary basis via a long-term (presumably permanent) government program that supposedly must gauge the buffer capacity at least somewhat accurately (using what precise model?) seems like a pipe dream now. I’ve never seen MMT propose models that handle speculative and other hysteresis-inducing effects on the economy so forgive me if I find it hard to believe it can properly set buffer employment schedules when there is so much that nobody has yet modeled.

    Unless a lot of other regulations are put in place in our economy, I also don’t see how MMT or the JG will save us from future economic calamities. The paradigm of our current balance sheet depression is much different than our typical recession and it’s hard to see how the program will be sustainable unless many of the wider issues are solved first.

    While the JG might work employing those used to earning minimum and near-minimum wage I wonder how this would play out for the millions of higher-paid workers. How will it look on your resume if you took such a job after earning $30+/hr.? Should the JG be tiered like Social Security? Why not pay people to go to school/training and upgrade their skills? Wouldn’t that be better than a make-work job? What about policies that bring outsourced jobs back to the US? For example, a company moves its operations overseas because it saves X. If we can develop reasonably comprehensive methods to establish what X is (it doesn’t have to be perfect) for many large industries (e.g., call centers, light manufacturing, etc.) , it seems to me that the government could leverage its money and tax laws to effectuate those jobs here. The regulations and formulae would have to be developed with sufficient rigid uniformity so they would be least prone to government picking winners and losers and crony capitalism. If you say that’s impossible, perhaps so, but so is JG. Any jobs program, unless it really involves nonsense hole filling jobs, will still impact and bias the economy if its useful work performed displaces private sector employment. Just look at prisoner work programs. Don’t you think private companies would make license plates if they could compete with prisoners.

    The only temporary jobs program I see that can practically be implemented in the near term is in rebuilding our infrastructure. Whenever jobs are needed, the government should simply allocate sufficient money to needed infrastructure to be carried out by private companies, not construction workers hired by government or via government actors. Let American-only private contractors bid on the money to get the most productivity for the money but also have to specify the labor to be hired so that the government can model how the money translates to immediate jobs. Perhaps the same should apply to green energy, special scientific endeavors, etc. There should be a buffer-modulated component to such spending to make it counter-cyclical and a base amount the country agrees should be sustained. These are the types of ideas and thinking I think we have to extrapolate to practically get any useful form of JG-inspired buffer stock. Can we get to a JG in baby steps? Because I don’t see how we get there in one giant leap unless there is the perfect storm of crisis.

  261. Agree AWK. I don’t mean to rain on the academic work (and yes, I’ve read most if not all of it), but this is not nearly developed to the point where it is remotely feasible or convincing enough. Aside from the other hurdles, this is perhaps the largest one. But hey, I guess that gives the MMT academics some more work to do in convincing us that we’re wrong, right? I’ll certainly keep an open mind. That’s for sure.

  262. The MMT JG-ELR is part and parcel of a macro theory that claims to reconcile the major issues in macroeconomics: production, employment and price level. No other theory reconciles them in a way that promises to deliver full employment and optimal output (most efficient use of resources) along with price stability.

    The initial challenge in addressing MMT is not the practical feasibility of the JG. Granting the assumption that it is feasible at the micro level, does the theory hold water, is it inherently flawed as a theory, or can the reconciliation of the big three be accomplished in a more optimal way from the macro perspective? Then questions of micro and political feasibility arise wrt to application of the theory as a policy instrument.

    If it is granted that the theory holds water and offers the best available promise wrt macro, then the micro questions arise, such as the feasibility of the JG-ElR. These are not the only feasibility questions. There are also questions abou the feasibility of functional finance. Even Abba Lerner later had questions about this, and developed MAP(Market Anti-Inflation Plan) with David Colander as a fourth part of functional finance that would be more market-based. Questions have also been raised as to whether sectoral balances can be anticipated in order to design fiscal policy wrt changing saving desire, as well as issues about MMT wrt external matters like fx and the effects of the current and capital accounts.

    Suggesting that JG is the weak link in MMT and if it were removed everything else is fine is just not the case. There are a lot of questions about MMT to be resolved by economists when they get around to taking it seriously, such as whether MMT as a coherent and comprehensive macro theory, whether it is superior to monetarism, and whether it is politically feasibile as a policy tool.

    MMT economists have written pretty extensively in defense of MMT both theoretically and practically. Have they resolved all questions? Perhaps not. But an examination of MMT requires framing issues clearly and addressing them with specific reference to the literature. Generally, that depth of analysis requires more than a blog post or two to do justice to the matter. So far few economists have taken up the challenge professionally, but instead have been rather dismissive, acting like MMT is not worthy of serious consideration by serious people. So while some suggestions have been raised my critics recently as MMT gets more notice, there have been few serious attempts to address it professionally at the level at which it has been presented.

    Even Paul Krugman started shouting Zimbabwe and Weimar instead of approaching the matter in the spirit was offered. Similarly, the JG elicits howls of derision. MMT economists are still awaiting a professionally mounted response in a forum in which serious and knowledgeable people interact.

  263. Tom,

    This statement is simply not proven in any way:

    “promises to deliver full employment and optimal output (most efficient use of resources) along with price stability.”

    You have NO empirical evidence proving that an employment buffer will deliver “optimal output”. NONE! This sort of unfounded comment discredits MMT as a theory since there is no proof behind such an astoundingly bold comment. I have no problem with people continuing to beat the drum on MMT and the JG being central to it (even though Warren clearly said otherwise), but I think we need to be more careful making statements like this that cannot be proven at all!

  264. “Suggesting that JG is the weak link in MMT and if it were removed everything else is fine is just not the case. There are a lot of questions about MMT to be resolved by economists when they get around to taking it seriously, such as whether MMT as a coherent and comprehensive macro theory, whether it is superior to monetarism, and whether it is politically feasibile as a policy tool.”

    Sounds like you have a bit of chicken and egg problem here, Tom.

    I have several arguments to make that I think illustrate why the JG does not need to be central to MMT and, in fact, shouldn’t be – at least not until MMT academic theorists (as Mitchell calls them) and practical real-world people like Cullen can formulate an intuitive narrative easily understood by the typical voter that comports with common sense and/or popular beliefs about human nature.

    First, Warren gave several buffer alternatives that we can all argue are inferior to the JG. But let me give you one that wasn’t on his list. Why not just give unemployed people money? Why do they have to work for this subsistence at potentially mind-numbing make-work jobs? Now, your political and common sense understandings of human nature will now jump in with all sorts of reasons why people have to work for this money rather than just be given it as handouts. And you may be right. But those ideas ARE NOT central to MMT. In other words, by invoking a JG rather than helicopter payments, the MMT theorists are paying at least lip service to political acceptability of “work” vs “welfare” and/or the popular common-sense belief that working is necessary (see where I’m going?). Now I could make arguments that our common sense regarding work may be misplaced. Studies I’ve read (sorry – don’t recall the source) indicated that those on welfare spent more income in the economy than the working poor of similar income. Maybe having all that time to sit around promotes more spending. Alternatively, I know a lot of the so-called idle rich, and even some lower middle class people (who tend to be more generous than rich people) who work very hard, perhaps harder than most, on charities and other ventures for which they receive no income. And let’s not forget, just giving out money requires much less of a bureaucratic monster than the JG probably does without any concerns about whether this or that job in the JG distorts wages or productivity in some private industry.
    My point here isn’t to prove that temporary helicopter payments are better than the temporary JG, only that the JG is an artifice that is not canonically fundamental UNLESS MMT invokes a calculus on the need for jobs per se along, essentially, the same sort of pragmatic and/or political concerns that Cullen, others, and I recognize are needed to really make a JG feasible and presentable both technically and politically.

    Whoops, I gotta run. I’ll post this now and come back for more if anyone cares.

  265. Cullen, “promises” does not say proves. It is impossible to prove a scientific theory or any of the hypotheses since theories are sets of affirmative general propositions. Positive results of experimentation add confirmatory evidence but not proof. However, one can disprove affirmative general propositions with negative particular propositions. Hypotheses can be disproved by data that disconfirms them, even when they acquire the status of scientific “law.”

    Theories make claims. No theory even in the hardest of science can be proved correct, no matter how much evidence confirms them. All theories stand or fall on negative counter-instances. However, a single negative counter-instance does not call an entire theory into question. It just calls for an ad hoc adjustment of the theory to newly discovered facts. This happens in the science all the time. A theory is not overthrown until a new and more promising theory is offered, which then gets tested by the same procedure.

    MMT is a macro theory that “promises” full employment along with price stability. This is the thrust of Randy’s Understanding Modern Money: The Key to Full Employment and Price Stability (1998). It is bolstered by subsequent MMT publications. None of the major hypotheses that constitute the theory have been disproved for the simple reason that there is no professional debate concerning MMT as yet, hence, no serious objections professionally stated that MMT economists have not been able to overcome. Perhaps 2012 will see the beginning of a serious professional debate now that MMT is becoming more widely known.

  266. Sorry. Didn’t type that fully (on a phone). That first sentence should read – theories need to provide empirical data helping give their theory a reasonable expectation of being true…..sorry.

  267. @ AWK

    I am simply reiterating how the MMT economists have set forth MMT as a macro theory. See, for instance, L. Randall Wray, Understanding Modern Money: The Key to Full Employment and Price Stability (1998). Read the subtitle carefully. The whole contribution of MMT as a macro theory lies in the claim that it shows how to achieve FE & PS, thought previously to be unachievable. If this turns out to be true, it will stand the approach to macro on its head. Anyone who appreciates the history of economics will realize that this is an earth-shaking claim. Therefore, claiming that the JG-ELR as a buffer stock of employed that provides a price anchor is peripheral to MMT misses the entire point of MMT as a macro theory. It is confusing MMT with only a part of MMT, the monetary economics. Unfortunately, the name Modern Monetary Theory adds to this now common confusion. Maybe it would have been more felicitous if they had called the monetary economics MMT and the macro theory as whole something else, but they didn’t.

    Read Randy’s book or other publications stating the theory in its entirety, although keeping in mind that Randy’s book is just a summary of it for non-economists, so the nitty-gritty is left out. The JG-ELR is an integral component of a comprehensive theory that allows MMT economists to assert that they have finally found the holy grail of economics. I am not making this up myself. This is my understanding of what the MMT economists have said about their contribution.

  268. The data and empirical evidence supporting the claim that an employment BS is superior to a ue BS is totally unfounded and not based on any real factual data.

  269. Cullen, the MMT economists believe that they have provided sufficient data in their professional publications. A rejoinder would require reference to this claim to show that the data they have provided is insufficient. Then they could respond in another round of publications addressing the points raised. I am sure they will just blow off a claim that they have not provided any relevant data or sufficient data as simply uninformed.

  270. Tom,

    Your points are well-taken and I have read Wray’s book, BTW. I realize he, you, and others think FE & PS achievability is the Holy Grail but I don’t, at least not in the long-run (but still in this century). As alluded to in my first post in this thread and others, I was originally drawn to MMT because I wondered how an economy increasingly automated by AI (I’m an AI scientist/entrepreneur) could sustain demand, income, and a sense of human worth as human labor was increasingly unneeded and marginalized. MMT filled in some of those gaps for me (but I still have many more unanswered). I realize this bias is not reasonable from your perspective and probably most others so I don’t expect it to be convincing. But I still think you’re putting the cart before the horse as i will explain in another post I’m working on.

    I want MMT to win. That means it doesn’t simply win the war of ideas amongst academics and smart people but gets put to work on real problems ASAP. Your approach requires too many ducks in too many rows. Honestly, how long do you think it will take to get MMT working in the public domain under your strategy? The models you seem to agree are needed will probably take decades to develop, and that’s after the time needed to get a critical mass of respected mainstream economists on board. MMT policy prescriptions need to be reformulated into as practical baby steps as possible leveraging causes, crises, and issues where the often counter-intuitive ideas of MMT (with respect to the conventional wisdom of the common man) can be made easy to understand. Until we figure out how to sell MMT beyond an almost cult-like religious following we will be stuck in the backwater.

  271. again, please don’t disregard all the simulations that Scott Fullwiler, Ed Nell, Ray Majewski ran–after all they used the major macro model out there (Fair). I’ve shown the countercyclical impact of ELR on prices using a Kalecki model. My work shows that inflation emerges from pro-growth, pro-investment strategies and government spending other than that on the ELR. There is a recent UMKC graduate, Mike Murray, who is doing ELR in an input-output framework that deals with output allocation. His paper will appear in upcoming volume. In the absence of a real world example to study, we can simulate and model these effects and that evidence cannot be discounted.

  272. 28% of US households (35% of individuals) in 2010 made 25k/yr or less. From what I understand, JG is mostly aimed at these households. This would seem to provide a floor for demand. I think it’s safe to assume that most of these households spend most of their income.

    As I understand it, higher income individuals could participate if they found it desirable, but JG would provide stability to the economy on the whole and so buffer potential shocks to higher income households, which keeps supply up and allows (by and large) everybody’s dollar to have more domestic buying power. Note I said domestic.

    So, that is the basic design and function as I understand it. Further design begins to encounter political preferences and my own is that I would like to see JG employees produce something of value to offer to the market.

  273. Tom,

    I wanted to expand on my previous post to you. I think you’re being a bit naïve about how the world works. I’ve been in both academia and business and I respect the MMT academic “theorists” as well as the pragmatic thinkers like Cullen (Mosler seems to straddle both worlds and also proves his knowledge in the real world by making money with ideas rather than just peer review). Both are going to have to work together for MMT to succeed. This is the age of the internet, blogs, forums etc. For better or for worse (I obviously think for the better ) the academic theorists chose to put and evolve their ideas out in the blogosphere and they can’t put the genie back in the bottle, nor should they.

    Twenty years + ago and more, before the internet, politicians aligned themselves with esteemed academics to both formulate and promote economic policy. And the typical voter was happily resigned for the most part to leave it to the experts. I still recall the great influence the like of Galbraith (esp. via JFK) had back in the sixties, right or wrong. While politicians still seek such council, it is much more like draftsmen at best and window dressing at worst.

    Today it’s very different. You can find a Nobel Prize winning hired gun on any side of an argument. Everything is fragmented. Economists and their theories are always suspect as to their ideology now – far more than in the past (unless you jumped over to Marxism). And they should be. And if you look at present day Republicans, there is a strain of know-nothing derision at anything academic or egg-head.

    The irony is that the heterodox school that has gotten the most political play is Austrian, via Ron Paul, Paul Ryan, and others. Why is that? I’d argue that the main reason for it certainly has nothing to do with the prominent academics aligned behind it in the sense of any prestige or intellectual gravitas. And it certainly isn’t, because they’ve carefully crafted complete testable policies. It is driven by a seemingly common-sense narrative about how human nature morphs from the micro- to macro level, however incomplete or wrong-headed, that comports with what Joe Sixpack thinks. And these ideas influence political thought today and can, to some degree, be implemented piecemeal. It’s much easier to argue, at least to most voters, that complex structures few understand be dismantled than new complex structures be created (e.g., the bureaucracy and modeling needed to make the JG work)

    Alternatively, much of MMT is counterintuitive to conventional wisdom until you invest enough time to do something called “thinking”. I’m a smart guy but even for me there was a catalytic activation energy (sorry, chem and physics background) required to get the epiphany after chucking much of the baggage of “conventional wisdom”. I’m a pragmatist. I want MMT to succeed not only on a theoretical basis but, even moreso to actually get implemented in our economy ASAP. Today, the JG is a far bigger impediment to promoting MMT than an asset. It’s one of the first thing critics use to dismiss us as socialists and kooks and it works. If there was a consensus behind it and sufficient policy models and mechanics that could answer the skeptics objections (including mine) I would happily want to include it. But to put it out there as canonical and then admit “we need more mainstream economists to flesh all this JG stuff out” will continue to hold us back.

    There is much more I’d like to add, but no time. Thanks for the thoughtful reply Tom. I’ve been following you on many sites, not just this one and I do value your opinion.

  274. That’s a good point. To counter you to some degree I’d need to provide evidence that the rate of unemployment of the 28% was not too much higher than the other 72%. I don’t have time to look for the distribution but I suspect the number of unemployed with higher incomes is still proportionally highly significant.

    Again, from a practical political perspective rather than a theoretical economic one, I think this will present problems unless there is some sort of tiered rate, just as there is for unemployment insurance and Social Security. And this is just one of many philosophical and political battles I envision trying to implement such a program.

    MMT’s ideas will truly have to be accepted by the populace at large for this to work, i.e. at least common acceptance of the idea that taxes don’t fund government. Otherwise, the high income unemployed are going to be really pissed that they paid all those high taxes all those years proportional to their higher income only to find that their safety net is not proportional to what they paid in. Think about that. That is the kind of thinking that will cause revolt unless there is broad consensus. You just don’t get that kind of buy-in overnight. People need to see stuff work first.

  275. I disagree. The evidence absolutely can be discounted. You’re building models based on the same sort of thinking that goes into efficient market models. The problem with models like this is that you don’t know what’s wrong with them until they break. And the problem in any JG model is the praxeological effect. No one knows what the true behavioral response will be. You’re assuming a Chicago School style of rational choice. It’s a colossal error! Economists have built broken models based on these false assumptions time and time again.

    Unfortunately, the only true way to know if a JG is workable is to implement one and find out. Only then can we actually test the theory, because, yes, this is almost entirely theory! Implementing it in an economy as large, diverse and complex as the USA on any large scale would be beyond irresponsible. And yes, as a citizen of this country who cares deeply about its well-being, there is no way I could ever back such a policy without substantial empirical proof of its effects. Perhaps over time these programs will develop in smaller comparable countries, but until there are real workable models then I am afraid that the models are built on quick sand….

    I hope your work continues to progress and grow. I hope it reaches a point of convincing evidence. I really do. But I do not think we are there. Sorry to be so stubborn….

  276. AWK, I am not naive about practicality. My point is simply the meaning of MMT. There is a lot confusion surrounding it because it has become ambiguous. I am attempting to clear that up somewhat, if possible.

    I seriously doubt that the whole MMT policy package would be enacted by Congress all at once. A piecemeal approach is more likely. But that won’t be a test of MMT as policy instrument.

    The way political (policy) change occurs is two-fold, from the bottom with voters and from the top with the policy wonks that control the governing process at the time. The policy wonks are heavily influence by the leading economists of their party, or at least the faction to which they belong. They don’t adopt policy without the blessing of the high priests of academia, e.g., Harvard chairs, and they definitely won’t adopt in the face of their opposition.

  277. Cullen, this argument essentially rules out a JG in the US ever, since even success is a smaller economy has little or no relevance for an economy on the scale of the US. There are virtually never empirical tests of economic policy before implemented. This is just saying that we might as well stick with the invisible hand of market forces, which is itself on that has virtually never been tested at least since the introduction of state money.

    This is just not in accord with the way economics is practiced and used as a policy instrument in most developed countries that have economic available.

  278. I agree with you. I wish MMT theorists would devote more of their time to ideas that could be implemented piecemeal and/or formulate stages that can be evaluated as the whole evolves. If I’ve missed where this is laid out I apologize and would like references. People will need to see this stuff work somehow before the country commits.

    Another one of my big problems with MMT, but a problem I think is much more tractable if only somebody would set their mind on it, is to figure out a way to formulate how MMT fits with behavioral finance. I think MMT should have a lot to say about policy and regulation with respect to speculation, credit bubbles, and the dynamics (esp. hysteresis) that I surmise must impact stocks and flows in a much more non-linear way than I’ve read in MMT so far. The more MMT can accurately predict the more respect it will garner.

  279. So, we should take a model that has been hugely successful in creating prosperity and wealth and implement a policy that potentially permanently alters the model (without any real empirical evidence and proof that the new model is superior)? I just don’t see how this can be seen as rational? I know I am being difficult, but this just doesn’t make any sense to me….This is not to say that the current system is perfect, but this sort of policy shift implies that it is largely broken….

  280. Tom,

    Yes, I agree about the wonks. You’re right. I overstated my case.

    I would like to learn more about what the piecemeal strategy would be and how it will truly differentiate MMT from other theories. For example, if we implement a stimulus for temp. job creation (e.g., infrastructure spending). Krugman and others will claim a victory if it works too. Is anybody even thinking about a strategy for this yet?

  281. @Tom,

    I would hope that Cullen, like myself, would be encouraged by any national economy that tested MMT. I recognize economics is a very imperfect science that relies, by the standards of the hard sciences, on very shallow extrapolation and tenuous analogy. At the very least, they would serve as incubators to validate ideas, much as Krugman has used Iceland’s example of default. I find it irksome that economics is so reliant on backfitting data.

    The next time the UN creates a country we should stipulate that they agree, from time to time, to have their economy completely revamped to fully test new economic theories ;-)

  282. I am not an irrational person. At least I don’t think so! I will certainly take any new data and evidence as it progresses and grows and consider it with a very open mind. I am not trying to be closed minded here at all. If anything, I am incredibly open minded about the JG. I am just not convinced. I am really sorry….

  283. REally, depends on the vantage one is viewing that model from, Cullen. Even Marx agreed that industrial capitalism was a milestone in human progress, even as he was criticizing what he saw has its shortcomings.

    I think that you are way overstating the case from your side, as well as the weakness of the weaknesses of the MMT position regarding the JG. This is just going to remains ideological rambling though until you or someone else works up a paper specifically addressing the arguments advanced by the MMT economists in their publications.

  284. The reason that there is are few empirical studies in macro is forst due to the scale and secondly due to the fact these kinds of decisions are political. Countries doen’t like being experimented with any more than people do. Not going to happen. The way policy is shaped is on modeling and simulation, using as much data as possible and extrapolating the rest.

  285. As I understand it, there are about 30 MMT economists in the world at present. That is not a large resarch group, considering they also have day jobs like teaching or in finance.

  286. “Ideological ramblings”? This is the second and last time another MMTer calls me an ideologue. It’s clear that some people don’t even know what an ideologue is.

    Ideology – n, visionary theorizing

    Ideologue – n, an impractical idealist

    Tom, YOU are the one doing the theorizing here. It is also visionary. But my vision is grounded in the reality that is the USA and its economic ACTUAL performance. There is no theory in my position. Additionally, I am not being impractical or idealistic. YOU are being impractical by not even acknowledging the substantial risks in this program.

    I am merely stating what should be common sense – such a program has never been implemented and so cannot be discussed in terms of “optimal output” without much more substantial proof and real-life evidence.

    I think it’s about time to turn the comments off here before I get called any more names….Have a good night.