Modern Monetary Theory is a concept that makes me a tad nervous because I find that most monetary ideas have been around for at least a century and likely more. In fact, it is pretty damn hard to top the monetary ideas of Lincoln and his Greenbacks, or for that matter, Peter Cooper and the Greenback Party of the 1870s.
But since MMT seems to be the preferred description of the current monetary position of progressives, I am trying to get myself up to speed. First up is a positive explanation of MMT by L. Randall Wray of U Missouri Kansas City followed by a really thoughtful discussion of progressive monetary ideas by Bill Mitchell. All I can say is that if this is what they are calling MMT, it is certainly something that would have made old Peter Cooper happy.Real Economics
Interest in modern monetary theory and related ideas continues to grow, which is great to see. The efforts of the academic modern monetary theorists and their fellow travelers and supporters continue to bring to light the economic challenges we face and the lies we are all up against. The thought that there will be readers who are relatively new to the approach reminds me that occasionally it is worth getting back to some of the basic insights. The purpose of this post is to illustrate a simple point. The simple point is that it is misguided to cut back public expenditure on services such as libraries, education, health services, and so on, as well as to slash welfare protections for those worst affected by the crisis, when private-sector activity is depressed. In a modern money system – one with a flexible exchange-rate fiat currency – financial affordability is not an issue. The government, as sovereign currency issuer, is not like a household.
The only sense in which affordability can be of concern to a sovereign currency issuer is in terms of real resources. In particular, if the available labor force became stretched to the limit, it might be hard to attract or retain sufficient staff to keep public libraries, schools, hospitals, and other publicly funded or subsidized social institutions operating at current levels without the measures being inflationary. At that point, the community would need to make a choice between cutting the provision of these services or raising taxes to free up resources currently utilized in the private sector. But if, instead, overall demand is weak, and unemployment is high, there is no need for generalized government spending cuts or tax increases, and to implement either would be foolish.
MMT as an ECB Alternative (Michael Hudson). The big MMT conference in Italy was a smashing success with thousands in attendance.
Shades of MMT in the Blogosphere (Heteconomist). Obviously, the mainstream Het is trying to exclude and marginalize me (Neo-MMR) and Joe Weisenthal (who is Post-MMT) by leaving our factions off this list.Peter Cooper take note. :)
Read it at heteconomist.com
I have suggested in recent posts that both freedom and equality would be promoted by ensuring that all individuals: (i) are guaranteed a job if they want one; and (ii) can opt out of paid employment if they wish. The first ideal would be met by a job guarantee and the second by an unconditional basic income scheme. Accordingly, I am in favor of a combined job or income guarantee in which all adult citizens are guaranteed a job and/or basic income as a matter of right. This raises questions about the implementation of such a policy.
Read it at heteconomist
My concern here is with the position of the Monetary Realists on full employment as such. Sometimes they seem to suggest that full employment should not be a policy objective on the grounds that unemployment and, by implication, slack labor markets are conducive to efficiency and high productivity. At other times, they instead make the claim that full employment could be achieved through means other than a Job Guarantee, or even that full employment would occur as a matter of course once other objectives (e.g. “Full Productivity”) were met. In my view, both these claims are unfounded. The latter, in particular, has no legitimate basis in economic theory.
This is a brief response to Warren Mosler’s contribution to a dialogue with Joe Firestone, who has put together an excellent multi-part series that can be read by following the link provided. In this post, I am addressing only the section on the Job or Income Guarantee. Mosler makes the familiar MMT claim that the value of the currency is determined “at the margin”, and from this takes a leap to the conclusion that a BIG as part of the JIG would cause a collapse in the currency, hyperinflation, doomsday, etc.
I don’t see any need to respond in depth, because I have already addressed this argument in a previous post (though not with Mosler in mind) and a few comments. My view is that the MMT conception of the value of the currency being formed “at the margin” is incorrect:
Read it at heteconomist.com
This is a brief follow-up to a couple of previous posts (here and here) that concern the market evaluation of social productiveness. In particular, it relates to frequent assertions, for example in the debate over the job guarantee, that private markets are better at evaluating social productiveness than alternative (e.g. democratic) mechanisms.
