Friday, November 27, 2015

Brad DeLong — Must-Read: So should central bankers be given more tools--conduct monetary/fiscal policy via "social credit"

Must-Read: So should central bankers be given more tools--conduct monetary/fiscal policy via "social credit" assignment of seigniorage to individuals and monopolize financial regulation? Or should central bankers focus on price stability and only price stability? I would say central bankers should be (a) more modest, but also (b) commit not to price stability but to making Say's Law true in practice...
Refet S. Gürkaynak and Troy Davig: Central Bankers as Policymakers of Last Resort:
"Making Say's law true in practice" amounts to the fiscal authority ensuring that sufficient net financial saving without unsustainable domestic borrowing is always available in order to prevent build up of unplanned inventory resulting in reduction in quantity of production and consequent layoff of workers.

The question here whether that should be the exclusively the role of fiscal authority as presently constituted in liberal democracies, that is, the elected representatives of the people, or at least be partially delegated to the monetary authority.

See the Wikipedia article on social credit as a means for doing so proposed originally by C. H. Douglas, an engineer rather than an economist, based on accountancy (stocks and flows).

I think that in the case where the monetary authority as the dual mandate of maintaining price stability and full employment a good case can be made for giving the monetary authority limited fiscal powers.

Whether it is a wise thing to do is another matter, since it appears to some to infringe upon democracy and to strengthen technocracy in an environment in which technocracy is already ascendant and democracy in decline.

9 comments:

Ignacio said...

They really hate democracy don't they? Elitistfest or moronfest (or both).

Matt Franko said...

Anyone with half a brain can see monetarism is all false.....

Neil Wilson said...

It always amuses me how much the left love these schemes. They are so full of themselves and think they are so clever by establishing panels of so called 'experts'. They chuckle to themselves as they create overruling structures that try and create a 'permanent left'.

And then a few years later they are amazed to find that these structures have been taken over by the forces of corporatism and you now have a 'permanent right'.

Parliament should always decide and no parliament should be able to bind a future parliament. Then you can change things.

There are niggles to work out in that. The state has to pay the politicians and they have to pay them more than commerce can. People struggle with that one, but it's very simple. Those who pay the piper call the tune.

Politics should be golden handcuffs. You are paid by the people and you are pensioned by the people and you are not permitted to do anything else once you become a politician - or afterwards. Any suggestion that you have been influenced by corporates should involve a very long jail sentence.

Neil Wilson said...

""Making Say's law true in practice" amounts to the fiscal authority ensuring that sufficient net financial saving without unsustainable domestic borrowing is always available in order to prevent build up of unplanned inventory resulting in reduction in quantity of production and consequent layoff of workers."

The problem with that is how do you know that what you are buying is the right stuff - since you are artificially propping up output in a completely undirected manner.

This boils down to a fundamental philosophical position about the use of societies resources. Should the public sphere have first access to the resources of the state, or should it have to 'compete' for those resources with private firms with their own agenda.

In other words do you support democracy or corporatism.

Tom Hickey said...

@ Neil

Plato goes into this in his requirements and training for the "guardians" in The Republic. For one thing, they are not allowed to own anything.

Tom Hickey said...

The problem with that is how do you know that what you are buying is the right stuff - since you are artificially propping up output in a completely undirected manner.

Government would not necessarily be buying anything with helicopter money. The idea behind social credit is a social "dividend" as a transfer payment, which amounts to a tax credit in that government credits bank accounts with tax credits.

G W Bush actually did this fiscally with congressional approval after Warren met with his chief of staff, Andy Card (as Warren recounts in 7DIF).

Of course there are other ways to do it too.

MRW said...

which amounts to a tax credit in that government credits bank accounts with tax credits.

Which always leaves out the poor or homeless who have lost their jobs.

MRW said...

Parliament should always decide and no parliament should be able to bind a future parliament. Then you can change things.

Amen.

Tom Hickey said...

Those FRNs in your wallet are tax credits. Transfer payments are tax credits. Food stamps (now cards) are tax credits.

That's why there is always demand for them in the marketplace.

Because Chartalism