I have taken a hiatus from raising questions about the job guarantee component of Modern Monetary Theory, mostly because I discovered that no one has the answers to the questions I was raising.
But others are still carrying on the debate. For those of you still interested, I'll periodically provide links to the debate.
Read it at CNBC | NetNet
More Questions About the Job Guarantee
by John Carney | Senior Editor
John raises five points, with links involving Rogue Economist, Rodger Mitchell, Randy Wray, Bill Mitchell, and Joe Firestone.
19 comments:
Well, here we go again.
I gave some indications of my perspective in my comments on this post at Rodger Mitchell's site:
http://rodgermmitchell.wordpress.com/2012/01/14/again-i-lay-my-head-on-the-mmt-chopping-block-why-jg-formerly-elr-is-obsolete/
I personally think the Wray-Mosler version of the job guarantee is weak tea. They might not want to call for a significant expansion of the private sector, but I do.
Our society is crumbling -materially, culturally, environmentally and intellectually. It is being dismantled and impoverished, and our children's future being stolen, because we have an atrophied public sector that no longer knows how to mobilize our nation's resources for large public purposes; no longer knows how to organize the latent power of a democratic citizenry to keep the thieves, hucksters, fraudsters and exploiters in line; and no longer knows how to preserve the social income that is necessary for vibrant and broad prosperity.
There is so much work to be done in this disintegrating, decadent country that one hardly knows where to start. Frankly, it is almost beyond belief to me that there are people like John Carney who think that people are unemployed because we have run out of useful things to do, and that an activist public sector would be reduced to hiring people just to rake leaves and paint railing.
We are guilty as a nation of chronic underinvestment in core social purposes, while we waste fortunes on the stupid get-rich-quick schemes and rent collection scams of contemporary casino capitalism and its comically bloated financial sector. While this is going on we allow private plutocratic carpetbaggers to extract massive amounts of our nation's wealth from the US economy, and park it abroad for their own purely private gain, while throwing millions of Americans out of work. This national malinvestment will continue so long as we persist in the childlike and childish faith that the private sector, left entirely to its own devices, functions as an enterprise for the public good.
Only a revitalized and activist public sector can save our country from the grotesque distortions and national self-destruction characterizing the contemporary age.
Like a good MMTer, I believe a good part of the financial tools we need to organize the expansion of public sector action on behalf of public purpose can be created simply by relying on our monetary sovereignty to expand the deficit without additional borrowing or taxes. But I also think we are going to need to rely on added tax revenues as well, because there are limits to the amount of financial resources we can create from scratch without generating excessive, unwelcome price pressures.
Also, even apart from the need for taxation as a way of re-purposing national resources, higher marginal tax rates are necessary in 2012 to shrink the income gap, which in itself unravels the social fabric of the country.
Carney's attempt at a take-down of my post was shall we say, rather incomplete. Thanks John, for the link.
I predict that human beings will never understand labour markets (except me of course).
Joe,
Can I get a full version of your essay?
Dan
I think Carney's point is politics rules. Everyone is for private sector jobs. Public sector jobs are seen as government bloat. Randy points out the jobs will be in the private sector but subsidized by government. No one see a way to accomplish that thru legislation. And with the labor force now global, setting a JG price anchor doesn't seem feasible to him.
I agree with Dan somewhat. There are certainly enough infrastructure projects. There is a need for daycare. Most schools could use more staff (public but paid for by local taxes).
Now if we could figure out how to help private business use JG employees without choosing favorites and creating crony loops, Congress may listen.
There is an old saying that goes something like: "a fool can ask more questions than a wise man can answer"...
Chewitup, why in the world should we want the private sector to pick up all the slack. The public schools already exist; the bureaucracy to run them already exists, from local school boards up to state legislatures; the buildings and school buses and crossing guards already exist. That system can already provide us with a long list of unmet needs and deficiencies. All we need to do is provide the existing system with more resources so they can employ more people and do a better job.
Randy and Warren seem too focused on providing people like Carney with a business friendly alternative to public investment and the provision of public goods. Forget it. Carney moves in a circle of people with their heads up their asses, with a vision that doesn't extend beyond their personal portfolios. They're the ones who got us into this mess.
"There is an old saying that goes something like: 'a fool can ask more questions than a wise man can answer.'"
Really? That's an old saying?
I subscribe to exactly the opposite view of wisdom.
There are many wise questions and many more foolish answers.
I drive around my state and the roads and bridges are crumbling. The schools are overcrowded and were designed in the fifties. Many of the hospitals for the mentally ill have closed and the patients ultimately end up in jail. How about a large scale recylcling program where we stop burying resourses in landfills or vastly increase education and employment in the medical profession to control costs. There are many useful things public sector employees could do if really wanted to do it. Do we want to or not. I can't shake off the feeling we are comprimising our position to deflect charges of socialism from our more conservative bretheren.
I also have a big problem with the private sector recieving free labor on the public dime.
John,
Take your stand and run with it. Dont try to wrap it up and justify it with "economics", or some concern about "inflation".
Cullen Roche did this. He disclosed that he once was on unemployment and he thinks it helped shape his values or something like that. I dont fully understand his rationale, but apparently he thinks unemployment is good for people and says so, I can respectfully disagree with that.
If you think unemployment is good for personal reasons then just say so. And continue to advocate for unemployment to be used as an effective economic tool by govt policymakers.
Here is an excerpt from a book I found written by JK Galbraith back in the 70's:
"When Professor Milton Friedman proposed a guaranteed income for the poor, it was considered (quite correctly) an act of creative imagination. When a Republican administration proposed it to Congress, it was a mark of conservative statemanship. When George McGovern, running for President, advanced a close variant on slightly more generous terms, it was condemned by conservatives as the dream of a fiscal maniac."
So here was "free market" darling Milton Friedman advocating a Basic Income Guaranty in the 70's when supposedly there was great concern about "inflation" at the same time.
Per Friedman here, one has to assume that he worked out the "economics" and wasnt concerned about any "inflationary" effects of his BIG or why would he have proposed it during a period of high inflation concerns. Freidman's BIG would be similar in effect to a JG.
There is no economic case to be made or has ever been made that shows how unemployment is the most economically effective policy tool in the lawfully mandated quest for maximum employment with price stability. To the contrary most academic studies document the high cost to society of mass unemployment.
You do not have the economics on your side in this. But that doesnt mean you are prevented from taking the position that you personally prefer a policy of unemployment over a policy of full employment for ideological reasons.
Randall Wray and Bill Mitchell formulated very clear replies back in 2004 to just about every criticism I have encountered in the recent JG/ELR debate:
http://e1.newcastle.edu.au/coffee/pubs/wp/2004/04-03.pdf
I really don't think anyone reading this article could at all come away with the idea that the ELR program is just supposed to consist in government paychecks for private sector jobs. It sure sounds like direct public sector hiring for public sector jobs to me. Good! let's be serious about this.
John keeps saying that nobody is answering his questions. But I really don't see him engaging with the answers that have been given. So either he is not looking at those answers or he just doesn't like them.
Child/geriatric care, hydroelectric projects, mass resisential solar/wind turbine installations and even mentoring.
As an educator, I cannot emphasize enough that there is no such thing as a foolish question. Some of the most "foolish" questions, turn out to gateways to wisdom.
In fact, the history of thought, invention, and discovery is littered with "foolish questions" that when they were asked everyone thought they knew the answer to in terms of conventional wisdom.
Some "foolish questions" are catalysts to bring out important points that would otherwise go unnoticed, but some are really out of the box thinking that takes the debate to another level.
No one should be timid about either apparently foolish questions or foolish answers, or criticize others for advancing them. It stifles the debate, and makes people self-conscious and defensive.
We are here to advance the debate, not make points for "our" side.
Section 2A of the Federal Reserve Act:
"Section 2A. Monetary Policy Objectives
The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."
MMT shows how to get to all three goals.
There is no economic case to be made or has ever been made that shows how unemployment is the most economically effective policy tool in the lawfully mandated quest for maximum employment with price stability.
One thing that came of the JG debate is that many people simply don't share this policy goal of maximum employment and price stability, Matt. Instead they believe we should aim at something like the greatest achievable aggregate production, with the most efficient employment of resources in generating that aggregate level. They believe that preserving some quantity of unemployment keeps labor costs low, which is good for the prices of the goods that those fortunate enough to have jobs are then able to buy.
Right Dan,
I just posted the 2A of the FRA above unless anyone forgets that these goals are in the laws of the US.
Question for the lawyers: Does "maximum employment" imply a level of employment above "full employment"???
iow to me "full employment" would mean anyone voluntarily seeking a job would be able to get one. "maximum employment" to me would go beyond this, ie if someone was able bodied and able to be employed, they would be perhaps "coerced" or if not going that far, they would be offered great incentives to go back to work...
Resp,
If you read the FRA para above, it implies that we have "production" in the first place in order to facilitate maximum employment, stable prices and moderate interest rates.
"Production" itself is subordinate to achieving the 3 goals ie maximum employment, etc... "production" (and related "productivity") is NOT a goal.
This is the law, to advocate for anything else is lawlessness.
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