I view the source of this "pushback" as coming mainly from political Libertarians of the Right. (These people would do well to consider that they are in the same political compass quadrant as was the contemptible modern-day philosopher and cult leader Ayn Rand.)
One way to achieve "price stability" would be through direct authoritative government price controls. Perhaps the latest attempt by the US government to use this policy option was during the Nixon Administration so I have been looking for information about what the debate was back then, to perhaps learn something from that part of economic history.
The concept of government price controls is universally condemned by the political right, and not even considered by the political left; so this should be a tip-off to the heterodoxy that this should be looked into further; "The enemy of the moron is my friend".
It often seems to me that the JG part of MMT is a situation where the government is to an extent "controlling" or setting the price of labor, and letting the quantity of that labor that is supplied by the non-government "float", depending on how many people report to the JG. Not so much a human "buffer stock", which I view as a somewhat insensitive term, but rather, people responding to the need to obtain balances of the currency in view of fiscal policy and non-government sector savings desires, both foreign and domestic.
So as to economic policy machinations, playing off the twin concepts of "price stability" vs employment, within the Nixon Administration, I found this write-up at PBS which if accurate is perhaps revealing. Some excerpts:
...confidence had risen in the ability of government to manage the economy and to reach out to solve big social problems through such programs as the War on Poverty. Nixon shared in these beliefs, at least in part. "Now I am a Keynesian," he declared in January 1971 -- leaving his aides to draft replies to the angry letters that flowed into the White House from conservative supporters. He introduced a Keynesian "full employment" budget, which provided for deficit spending to reduce unemployment.
"He attributed his defeat in the 1960 election largely to the recession of that year," wrote economist and Nixon advisor Herbert Stein, "and he attributed the recession, or at least its depth and duration, to economic officials, 'financial types,' who put curbing inflation ahead of cutting unemployment." The administration remained overtly dedicated to markets. But there were those in it who believed that the "market" was more an idyll of the past than an accurate description of how the current economy functioned.It's short and perhaps it will help us remember that there once was a time when people in the government were not afraid to seize the reigns of authority and simply make things happen.
Sterling by Douglas Jay is an interesting Economic History of the pound and part of it is a theory that as well as balancing aggregate money demand with aggregate supply there is a cost of supply flow that needs to be balanced too, if not, then this is what leads to the stagflationary dilemma trading off inflation against unemployment...because of this he says he was converted from being anti to pro-income controls. Part of this is controlling the growth of bank lending as this pro cyclically in/deflates asset markets and costs for business, government and households.
ReplyDeleteGood one Matt. The tradeoffs among optimizing production, full employment and price stability are generally seen in terms of typical triplicities, where max two can be addressed as targets and the other used as a tool.
ReplyDeleteIn a capitalistic economy, the typical thinking is that product and price are the targets to be optimized and is to be employment used as tool. That is the basis of NAIRU and Taylor rules, for example.
This works within pretty flexible boundaries ordinarily but not so well during recessions, when unemployment rises way above the norm. Then it becomes a political problem that will bite the governing party if not addressed.
But high and accelerating inflation presents a similar problem as does lagging GDP. So politicians are forced to jump for one boat to another depending on conditions.
If a macro theory could be devised that offered a policy option that optimized the big three, then problem solved. That is what MMT promises.
WillORNG: Part of this is controlling the growth of bank lending as this pro cyclically in/deflates asset markets and costs for business, government and households. T
ReplyDeleteYes, this is the nub of it. Banks are public-private partnerships and so govt has both the right and responsibility to deal with this issue directly. History shows that cb monetary policy is insufficient to the task, at least as practiced so far.
Interesting story by Nixon speechwriter William Safire:
ReplyDeleteWe were looking for a name for welfare reform. Counselors Pat Moynihan and Arthur Burns had locked horns on a program, and George Shultz, then Secretary of Labor, had come up with a synthesis: the result embodied Moynihan's family-sustaining dream and Burns's stern work requirement.
''Family Security'' was the suggested name; I shot that term down - too much like Social Security. The ''Family Assistance Plan'' was put forward, and despite my protestation that the acronym sounded like an expletive used by Major Hoople, FAP was adopted.
As the sore loser - these nomenclature fights get fierce - I threw a line in the covering speech, and repeated it in the President's message to Congress a few days later: ''What America needs now is not more welfare, but more 'workfare.' ''
...
When it was included in the final volume of the Supplement to the Oxford English Dictionary, I learned that the coiner was someone else. The July 1968 issue of Harper's Magazine had a piece about Charles Evers, a Mississippi Congressional candidate... ''One of Evers's programs is what he calls workfare; he has said that everybody ought to work for what he gets.''
That's all right; I may not have been the first to use the word, but I had a hand in its nationwide launch and feel a stepfather's pride.
http://www.nytimes.com/1988/07/17/magazine/on-language-coiners-corner.html?pagewanted=all&src=pm
Now that really is a shocker. Evers? Who could have guessed?
ReplyDeleteIt often seems to me that the JG part of MMT is a situation where the government is to an extent "controlling" or setting the price of labor, and letting the quantity of that labor that is supplied by the non-government "float", depending on how many people report to the JG
ReplyDeleteExactly!
The concept of government price controls is universally condemned by the political right
Slight disagreement here as the gold standard is also a price control. Not sure that I would associate those giving "pushback" with Ayn Rand but it does seem ideological.
After reading a couple things and writing a couple things today in response to the JG arguments - at times it seems like we're splitting hairs.
You're either for a buffer stock or you're not (totally different from war on terror btw)
And if you're trying to par it down to political reality to get through parliament or congress you need to explicitly say so as well as demonstrate that this is only one step of many and that you're for further progress on the issue.