Thursday, January 5, 2012
John Carney clarified his stance on the MMT JG
John Carney commented on Pavlina R. Tscherneva's post, What’s MMT About Anyway and is the Job Guarantee Crucial to the Project? at New Economic Perpectives, the Kansas City School MMT site. I am reposting John's comment here for the record since it concerns the entire debate that has been raging since John initially proposed it some time ago, as well as to elicit comments from commenters here that have been following this debate.
John Carney writes....
Since I've been one of the critics of the Job Guarantee, there are a few points I'd like to make in response to this.
1. I agree that (a) unemployment is a social evil, (b) it is a serious macroeconomic problem of capitalist economies, and (c) the private sector cannot deliver a long term solution. Our point of disagreement is not on whether the world is beset by evils but whether or not a state-created program--more specifically, the Job Guarantee--can eradicate the evils.
2. I've laid out some serious problems with the JG: (a) there's no evidence that enough suitable ready-made jobs exist or can be created (the typical MMT list doesn't work), (b) we cannot possibly know or reliably predict the full range of consequences that will arise from changing the terms of employment so starkly, and (c) we are basically in the dark about how this will interact with the vast web of complex regulations already in place.
3. Unemployment is much simpler than the JG. It does not require a vast nationwide apparatus of job inventors and supervisors. It leaves the work of job creation in the private sector, where most jobs will be created by small start-ups. We know already that large bureaucratic organizations are bad at creating jobs.
4. The JG creates systemic risk. If it is too generous, it could undermine the private sector. A private employer who 'overpays' is disciplined by the market in the form of lower profits. A public employer just has to guess.
5. It may be the a JG would be the preferable stabilizer if we could make it work. But if we cannot, perhaps we must stick with other economic stabilizers that we know are imperfect but operationally sound.
6. The burden of proof is on the reformer MMTers to show not just that unemployment can be eliminated and prices stabilized, but that we can be prosperous in this new and untried system. As Cullen Roche said, we know we can have widespread prosperity and improved living conditions with unemployment. We don't know if we can have prosperity with the JG.
7. Not all of us are would-be world-improvers. In fact, I tend to believe the urge to world improvement interferes with analysis and telling the truth. There's a long and respectable tradition in avoiding the urge to improve things.
I do appreciate the uncommonly civil tone with which we've been able to conduct this discussion. Maybe we all feel some sympathy for fellow fringe wing-nuts.
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6 comments:
From http://www.cnbc.com/id/45818274/
...The JG is a creature of happier times and smaller economies. Bill Mitchell explains that he thought up the idea while he was a student at the University of Melbourne. The total employed population of Australia is only about 11.5 milllion. Australia currently has an unemployment rate of around 5.3 percent, which translates into 635,800 jobless people. In other words, a jobs guarantee in Australia might be workable. But it doesn't scale to fit the United States.
Let's assume these numbers are correct. What would be the effect of reducing unemployment by 5.3 percent in the US? What measures would you advocate to address the remaining unemployment gap?
I'm not sure I understand the point about scale. The larger the scale, the greater the economies of scale. Running a JG should be cheaper for the United States per capita than in Australia.
The larger size of the United States, though, perhaps says something about the dangers of excessive centralization of the JG. Fortunately, we have a wonderful pre-existing system here in the US of 50 functioning state governments and thousands of municipal governments. So the Feds can provide some cash and general guidelines and rules, and leave it to the sates to do the actual hiring.
Put it all online, Ebay-style.
http://biggovernment.com/tag/guaranteed-income/
Of course it scales.
Once you state that the government will fund the employment of anybody unemployed at a fixed price (restricted to non-profit making entities presumably) then two things will happen.
(i) non-profit making entities will go wild recruiting
(ii) profit making entities will go wild recruiting to service the demand created by (i).
And then you see where it stops - bearing in mind that (ii) necessarily disciplines (i) because (i) is at a fixed price and can't compete.
Eventually you'll reach a higher level of employment across the economy - and then you see what is left on the unemployment register.
John Carney keeps repeating nonsense I have already debunked.
There is no increased bureaucracy - the state just pays the wages at a fixed price to certain entities. If the US hasn't got a system to do that, then it just needs to copy the UK one. We can certainly do it with the public systems already in place.
If 'undermining' the private sector means getting rid of slave labour jobs worse than the guaranteed jobs, then I consider that a win. The private sector does not have a right to exist, or profit at the cost of anybody else.
Remember the other job of the government is to eliminate the private sector's tendency to create externalities.
The objections I've seen so far basically boil down to a crowding out argument: "I want the unemployed to be paid less, so I can have more"
Yet surely, morally, if you advocate a system where necessarily there are people unemployed, then you should fully compensate them for their loss due to your system design.
Unemployment is a systemic failure. It need not exist. MMT shows how to eliminate it.
Promoted to a post, Neil.
As for John Carney's statement that we are not all "world-improvers", I would just say to him that you are either part of the solution or you are part of the problem.
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