John Carney asserts....
...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. sourceNeil Wilson responds in a comment here.....
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.January 6, 2012 5:09 AM
29 comments:
Neil, I think you nailed it. The system needs a large pool of unemployed workers to operate smoothly. Of course, the more desperate these workers are, the better.
Great post, Neil. You're clarity of thought shines through again.
Well said, Neil.
It's interesting. It used to be that the free market guys relied on the argument that the markets would give us full employment if the government just got out of the way. But now we see there are more people willing to defend the idea that unemployment is a feature not a bug.
If this is the way all the Wall Street guys feel, no wonder we have a national government that shows no eagerness to end unemployment.
@ Dan Kervick
Enter Occupy.
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.
An example of utilitarian philosophy?
Neil put up another comment over there:
"Those are the Cantillion effects and would apply just as much to endogenous expansion from the private sector from any investment funded with a bank loan. This is new spending and will not be productive initially either – and not at all in the case of most dot com bubble businesses for example.
So should we ban expansionary money lending by banks to invest in businesses – because of the fear it is inflationary? [Ed: HERESY NEIL!]
No, because it isn’t inflationary and it can’t be with the JG anchor in place as I explained in my post. Price expansion is lethal with a wage anchor in place.
There is nothing magical about expanding public spending. It is *exactly* the same as private sector spending with new money borrowed from a bank."
CHECKMATE!
The idea that the present system results in prosperity in the face of the fact that contradict this nationally and globally is astonishing. Only someone who equate prosperity with growth and not distribution could befuddle himself with such nonsense, which is often obviously self-serving.
Marx fully accepted that industrial capitalism brought huge advantages and great progress, but it also brought huge problems that present huge challenges and opportunities.
This kind of objection is too silly to bother meeting, because it is obviously ideological and whatever one argues and whatever data one adduces will just be met with denial and avoidance.
It is an ideological clash with people who want to separate MMT monetary economics from MMT as a macro theory by calling the monetary economics MMT and saying that the rest of MMT is peripheral, optional, and also wrong.
Tom,
I don't know why you've devolved to name calling. Especially considering the fact that you don't even know what an ideologue (look in the mirror) is:
Ideology – n, visionary theorizing
Ideologue – n, an impractical idealist
Tom, YOU are the one doing the theorizing here. It is also visionary. But my vision is grounded in the reality that is the USA and its economic ACTUAL performance. There is no theory in my position. Additionally, I am not being impractical or idealistic. YOU are being impractical by not even acknowledging the substantial risks in this program.
I am merely stating what should be common sense – such a program has never been implemented and so cannot be discussed in terms of “optimal output” without much more substantial proof and real-life evidence.
You are taking 10 years of US economic history and concluding that the whole thing has been a massive failure. Where is your perspective? I don't deny that there are big problems today, but do they require a total 180 degree shift in our thought process and policy? And where is your proof that capitalism has caused some global collapse? The BRIC nations, all of which are moving closer to capitalist ideals, are seeing unprecedented wealth and prosperity. If you go outside the USA and Europe (where socialism is increasingly promoted) you find great prosperity.
We need to add a little perspective to this debate. I am getting tired of all the personal attacks that are largely baseless. The onus is on JG MMTers to prove that the USA is such a mess that it requires a total change in the ideals that built the greatest wealth engine EVER known to man. Good luck with that.
Yes, the burden is to demonstrate that alternative policies would be preferable to the status quo. The proper forum for that is academia. Another option is to run experimental programs. I'm not optimistic that this will happen.
Cullen,
"the ideals that built the greatest wealth engine EVER known to man."
Part of this is true, many people have gotten wealthy in the US over time, but as far as this being driven by Ideals, here is the Preamble:
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence,[note 1] promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."
"Wealth Engine" is not there.
It's supposed to be about more than just wealth building...
C'mon man.... the pie will get bigger and you will be able to obtain even more wealth if that is what you want to do.... "Guaranteed!"
Resp,
The Franklin Stove, invented by Benjamin Franklin to reduce wood fuel consumption and prevent house fires:
"Around this time, the deputy governor of Pennsylvania, George Thomas, made an offer to Franklin to patent his design, but Franklin never patented any of his designs and inventions. He believed “that as we enjoy great advantages from the inventions of others, we should be glad of an opportunity to serve others by any invention of ours, and this we should do freely and generously”.
Matt,
Call it whatever you want. Let's go with living standards. The American economy has created the fastest rate of growth in living standards that any economy has ever produced. I think that falls under "general welfare" pretty nicely. Now, if you think that giving everyone a job is improved "general welfare" over a multi-generational period then fine. But you have to prove that that system is superior to the one in place. And you can't just build vague models based on broad theory.
And let's not "guarantee" anything. I've heard enough comments about this JG being "for free" from pretty smart people. I feel like I'm in a Bernie Madoff meeting circa 1990....
All I'm saying is that we need to be more measured based on a total lack of historical precedence for JG's (no, India and Jefes are not comparable to 30MM jobs in the USA). I don't know why that's so unreasonable and why so many people feel justified in attacking me personally over what is really just a very common sense position?
We look irrational the way we're going about this....But that's just my opinion and you know what they say about those....
Cullen, everyone is an ideologue in the sense of espousing deeply held beliefs and and norms as part and parcel of one's worldview, which is too complex and subliminal for anyone to grasp consciously. Anyone claiming to be "objective" is just deluded.
There are always clashes among ideologies going on — religious, political, economic and so forth, even in families, especially across generations, since cultural worldviews are influx but the older generations do change easily as they advance in age. And now we have the generational digital divide separating those who grew up pre-digitally and those who have grown up digitally. perviously, this was like the generations that experience the great Depression and WWII, and some even WWI first hand, and the succeeding generations.
Science is about attempting to be as objective as possible by reducing as much of the subjective element from knowledge as possible through empirical data and testing. But scientific experimentation must be framed and that requires a context within an already existing worldview. And then there's also the issue of criteria, which are also context and worldview dependent. So the search for absolute objectivity is chimerical. We do the best we can within the confines our make-up.
But we have to be aware when we are debating whether it is within the same framework or different frameworks with different presumptions, explicit or implicit. Otherwise, a lot of the debating will be at cross-purposes, and it will be misunderstood by opposing parties.
I am not denying that I am an ideologue. Everyone is of necessity. I am just saying that I can recognize an ideological disagreement v. a factual one because of this awareness.
In terms of my own principles I totally reject MMT as being a compromise with a system that is immoral in my value system and needs a compete overhaul to get on track. But I am also a realist and realize that progress is incremental, and that the steps are dependent on collective consciousness.
I live my values in a world I have created with those who share those values, instead of waiting for the world to change. But I also participate in the larger world, including entire globe in this age.
And as a citizen of a country and and of the world, I want to see the best for others, most of whom are suffering, often horribly, under the present system. So I aso engage with others in compromise measures like MMT that suggest how the existing system can be improved rather than overhauled.
What I am objecting here to is what I see as attempt to hijack the MMT label for a part of MMT, namely, the monetary economics, by people who object to the norms on which MMT macro is based, i.e., FE & PS, without addressing the argument in terms of the argument but rather throwing counter-norms, which are as ideological as the norms on which MMT is based, and also denying data that has been presented is actually empirical. I don't think I am alone in this.
We all need to go into this with open eyes and realize that the kerfuffle is over different value systems, as much as over the putative facts. The MMT economists have set forth an argument in the professional literature that is replete with models, simulations and data. So far, no one has responded professionally. What I see on the blogs, and I am not pointing a finger at anyone in particular since many are involved, is a lot of stuff thrown up off the cuff and not expressed in a professional format and fashion, even by professionals.
(continued)
(continuation)
People that want to make a case should make one and present it in the forum in which the MMT economists have offered their arguments, namely in professional literature, with citations and data, if they want to be taken seriously.
Some people are very clear on what they are trying to do and others, I suspect, think that they are just being objective in their attacks on the MMT macro position. The Austrians and MMT'ers have had it out on the blogs like Bob Murphy's, and it has come down to a disagreement over basic presumptions. The Austrians admit, for example, that their economics is based on supposedly self-evident a priori principles. That's where argumentation stops.
Other arguments, some now going on, are not as straight forward, at least yet. The presumption of many seems to be that the MMT economists are wrong objectively. OK, so make a professional argument and put it out in a professional forum. I have been trying to get people to focus on specifics in the MMT professional literature, and no one has done that. I have to conclude, therefore, that such objections are not serious, but "ideological" in the sene of just throwing one worldview and its norms against another for purposes other than arriving at truth.
I am not directly this criticism against anyone in particular. Some instances are more egregious than others, but I think that getting more clarity here is needed. If people want to use the monetary aspect of MMT, what's the problem? The MMT economists have said they are OK with that. But why equate the monetary aspect alone with MMT when the MMT economists have made clear that in their minds MMT is a macro theory that reconciles FE & PS? Doing so just leads to more confusion.
Look, I don't care if someone wants to attack the MMT macro theory. I am not an economist let alone an MMT economist, so this is not in my purview even to comment on. Nor am I attached to its correctness ideologically other than insofar as it seems to me to promise a step forward in the existing economic and political framework, which, however, I would rather see completely overhauled rather than modified around the edges But I realize that this is unlikely to happen given the state of collective consciousness at present.
But if someone is going to attack the MMT macro position, I would like to see it done professionally in the appropriate venue so we can eventually arrive at a reasoned conclusion bolstered by data. That is not happening.
Cullen - I was wondering -
You mentioned before that you're not unemployment is not necessarily a bad thing (depending on context etc. perhaps).
There's a related argument I saw somewhere, that may partly fit your views. Something like this:
"Whatever your view is on unemployment, it is possible that the risk of unemployment (rather than unemployment itself) is an important motivator for people. If there was a JG in place, this motivator would be absent. People could become more complacent. This could be a factor leading to stagnation and a less prosperous economy."
Does this sound like something you would subscribe to?
How about others here? Might sound a bit cynical if you're convinced that the actual unemployment itself is typically detrimental, painful and costly -
- but still - as an argument taken in isolation? Could the absense of fear of unemployment have a stagnating effect?
(Haven't checked if MMT research says anything on this point - should do so, but was curious to hear your thoughts.)
Laura: Another option is to run experimental programs.
Not going to happen. IN the first place MMT as macro theory, including the JG as a BSE and prince anchor, stand or falls as a theory based on the causal claims. Whether the JG would work is beside the point initially. If the theory looks sound, then the question becomes on one of microfoundations, where the feasibility of the JG in terms of application is considered.
Moreover, even if MMT and JG were tried in a smaller economy it would not be decisive evidence that it would work for the US due to the difference in scale. John Carney has already said that he would reject that evidence, even though Neil believes he has refuted that. Does John accept the refutation?
This goes on and on. Look at what happened in the Great Depression. Things got so bad it became politically necessary to implement untested solutions and many of them worked. Not well enough until WWII came along and forced a whole new employment regime. But even that view is disputed by left and right.
Even now, economists argue over the data that was gleaned from the GD and New Deal. Neoliberals claim that the ND just complicated matters and Keynesians claim that the Neoliberals have their facts and theory both wrong. It goes on and on. Blah, blah, blah, while people starve to death.
"Whatever your view is on unemployment, it is possible that the risk of unemployment (rather than unemployment itself) is an important motivator for people. If there was a JG in place, this motivator would be absent. People could become more complacent. This could be a factor leading to stagnation and a less prosperous economy."
IIRC, Cullen stated as much in the recent discussion over at PC, based on describing his personal experience.
Tom,
I noticed Joe Firestone also using that comment in his story today to mount some personal attack on me. He called it a joke or something. Sadly, I retracted that statement very shortly after I wrote it and admitted that my one personal experience didn't prove anything. I know you and Joe saw that comment, but you insist on taking it out of context because it works in your favor (as does the name calling - or so you think).
I am not an unreasonable man. I am merely pointing out facts. You say I am being an ideologue. What is ideological about citing the fact that the US economy has created a better living standard over 235 years than just about any other nation on earth? I am simply citing reality. I am not making things up. There's nothing even remotely ideological in those statements. All I am asking the JG MMTers to do is to show me that the JG model will outperform the Michael Jordan of economies. I think it's hard to do....
As for "hijacking". No one hijacked the theory. Bill has said in the past:
”I have said in the past that modern monetary theory is neither left-wing or right-wing thinking. It is a statement of the way the system functions and what opportunities (and consequences) are available to a government that issues the currency as a monopoly.”
http://bilbo.economicoutlook.net/blog/?p=5762
Scott F has said the same exact thing in his primer. But now the JGers are coming out saying that the JG is "central" to the theory. Well which is it? Is it central or are there different parts? I have always been told that there are two parts. But now I am suddenly hearing that there is only one part and if you're not in the club then you're out of the club. Warren says there are two parts and that E buffer stock is "optional" but people are intent on taking the other side of that.
Fine. I have to run now, but I am not hijacking anything. If you want to call me Market MMT or Post-MMT or Pre-MMT or a fool then do it. I don't care. But please don't accuse me of hijacking anything or being an ideologue.
MMTers have never quite been very good at clearly explaining their position and it's now clear that the line in the sand has been drawn. At least that's one good thing that's come out of all this. No more miscommunication about what MMT is and isn't. Some people on my site are calling the JG version "Marxist MMT" and I think that's totally unfair, but perhaps it's time for me to become a "Market MMTer" and for the MMT name to stick with the JG idea. It might be better off that way after all since I have no desire to be associated with the lie that "a statement of the way the system functions" involves the govt hiring 30MM people....
Have a good weekend. It's too bad that so many people have made this personal and been so egotistical about MMT that they had to own it. We have this great gift to give to the world, but personal ideologies have gotten in the way. Too bad.
Cullen, an ideological argument is partial of necessity, and all position are ideological to the degree that they are framed in terms of worldviews and norms. That's neither good nor bad. It is just the way things are.
Debate can more productive when it involves a clash of ideology than when it is conducted within a single framework concerning which everyone agrees and slaps each other on the back in self-congratulation for being so brilliant.
This is what the notion of human knowledge being "dialectical" is all about. It is about the clash of ideas. I am not opposed to a clash of ideas and indeed I welcome it. As a philosopher, one of my chief jobs is to attempt to bring clarity to the logic of the debate, since logic often gets hidden in language, unintentionally and inadvertently, or purposefully (sophistry).
I think that we can have an intelligent and respectful debate, recognizing that in the final analysis some of us will agree to disagree about key fundamentals involving the frame of reference, especially in terms of values. There can be unresolvable disputes about putative facts, too, since complexity is difficult to unravel.
What no one should do is attempt to mischaracterize the opponents position, and this is difficult because in offering opposition, one is criticizing in terms of one's own framework.
What we need to recognize in the end is where different frameworks are compatible and incompatible, and where compromise is possible to achieve and where it is not.
The upshot is, however, that convincing someone to abandon their view and to adopt another involves not "the facts" when worldviews are concerned but a conversion from one way of seeing the world (structuring reality) to another. That is usually very difficult to achieve.
So the optimal solution is generally some sort of compromise that both sides can live with.
Here it may be agreeing on the monetary economics and disagreeing on the macro. It seems to me that it is not just the JG that is in question here but the role of government, the meaning of public purpose, and so forth, as we see from the commentary. Such are the matters that distinguish Neoliberalism and Keynesianism in the broadest sense, and the political right from political left.
There are going to be people attracted to MMT or aspects of MMT from a variety of backgrounds and with different worldviews and value systems. Now that MMT is getting wider exposure, this is a natural development.
No need to get our underwear all twisted up over it. We can work out the issues rationally and agree to disagree where appropriate.
> "And let's not "guarantee" anything. I've heard enough comments about this JG being "for free" from pretty smart people. I feel like I'm in a Bernie Madoff meeting circa 1990...."
Right, and Scott Fullwiler has even suggested it could be a net gain.
Sounds plausible to me but implausible to you. A quick motivation would be something like as follows.
There would be costs. Real resources would be used up in the JG program. (And those receiving a JG wage would be able to claim some real resources too using their income, but they would otherwise have received UE-benefits presumably of the same scale - so I think this effect is pretty much cancelled out.)
There would also be gains. MMT academics claim their research show that the social costs of unemployment are enourmous. There is crime, ill health, drug abuse, family problems etc. These costs would be diminished, they claim - again, based on their academic work.
Also, don't forget all those people working with cleaning up the results - in prisons, as social workers, as security personell, police officers etc etc. Many of these people could have worked with producing "better" things. Such resources could be freed with a JG in place.
Also, the actual output of the JG program should have some value, although difficult to measure.
All in all, to me it doesn't seem too implausible that a JG program could be "for free" or even constitute a net gain.
Now, I appreciate that you would disagree with these estimations. I guess the debate should initially be held on an academic level - there is no point in us debating too much in blog comment fields, now that there is so much academic research to look at - and criticize - preferably academically.
And I'm sorry I said JG could be roughly "for free" as if it was common MMT knowledge or something - I thought it pretty much was! I shouldn't have.
But what's with these snarky comments? "heard enough", "Bernie Madoff", "shockingly naive", "delusional" etc? Isn't that unnecessary? Can I convince you to try harder to avoid them? Please?
Of course, I realize that you certainly get your fair share of attacks, so it can't be easy. But you're a big guy in these circles. And as you told me when I snarked back at you - it only makes your actual argument come out as weaker.
Sounds fair? If nothing else, could you please snark at anybody but me? That would suffice.. as a compromise :-)
Cullen,
You overstate the success of industrial mass production capitalism. The US in the 1st 2/3 of the 19th century was primarily agricultural and the economy had little to do with mass production. It also was an empty land offering tremendous opportunities for expansion (except for the Indians). Even so, there was massive discontent in the period up to WW1 about living standards, unemployment, and massive inequality. Both WW1 and WW2 can reasonably be viewed as logical outcomes of global competition for markets and therefore one of the consequences of your beloved system. In between the wars, of course, we had the Great Depression. There were a couple decades immediately after WW2 when incomes rose at a quicker pace but unemployment was still often high and there was massive discontent, as we saw in the great unrest of the 60's. Since then, median wages have declined and today we have protests throughout the world.
The system has provided material advances, no question. But they've been grossly mal-distributed and nearly everyone lives under continuous insecurity. Economic statistics aside, the actual quality of life for the average person over the past 100+ years can't have been that good; why else would there have been such widespread protests?
The system doesn't seem capable of providing such essential basic human needs as security, leisure, or self fulfillment.
Pure empiricism tells us the system is inadequate and must be changed. Only a status quo ideology can support its continuance.
Cullen,
Another thing here is perhaps consider that Krugman may be trying to manipulate you politically.
You probably feel a bit ingratiated to him for mentioning your blog in his NYT properties, but I dont trust Krugman, and he will throw you under the bus in 2 seconds if he thinks he can score some cheap political points.
He is 100% political, he is not an academic economist anymore as he is the #1 candidate for THE academic who refuses to engage MMT in the professional academic sphere that Tom has written about here. he simply will not engage.
Dont be surprised if the next time you are mentioned by him it will be where he points out how the political right (which I assume you come from as do I) "thinks unemployment is good for you" or some such BS.
Suggest keep a skeptical eye on him...
Resp,
Marxist MMT vs Michael Jordan? We're toast.
Hugo, as I read it the MMT claim is that FE & PS would be a huge net gain because if it cut into into a fraction of the waste of resource, not only resources being idle but also deteriorating and resulting all sorts of social costs, it would not only pay for itself but produce a positive return.
However, it is not only a positive return on investment in financial terms but a huge net gain in real terms when the value of human beings and quality of life is considered, which cannot be even estimated in terms of money.
And remember, this is not just the US. MMT is a macro theory that is being shopped around the world and find a more welcome reception in the emerging world. MMT economists report going to China some fifteen years ago and getting a very good hearing and reception of it.
The countries that adopt MMT macro soonest are going to start funning ahead and then everyone else will jump one, if MMT turns out to be what it promises to be.
Jim, good points. As I said to Cullen over at his place, he needs to study up on US history, beginning with Howard Zinn.
You're even suggesting a huge net gain. I won't disagree too hard (I'm already labeled both naive and delusional), but wanted to be a bit conservative there in order to maybe reach some understanding with Cullen.
Hugo, the MMT economists, especially Bill Mitchell, have written about the costs associated with a buffer stock of unemployed. It really is huge economically and corrosive socially. It is also a political powder keg. And remember that this is not only the US or the Western countries. It is a massive global problem that also presents a huge opportunity.
MMT lately has degenerated into a theological dispute and those of us on the right are simply scratching our heads. Is this an academic exercise or hubris
You have two groups of unemployed in my experience. One group has no skills to speak of. They will remain unemployed even with a government job proffered to them. let's not forget that there is always a reason these people aren't in the workforce.
The next group were people working and living the good life when their job was taken from them through no fault of their own. These people have skills and a work ethic and will land on their feet over the next year or so and do just fine.
Capitalism works because we have a reservoir of labor at any given time to be tapped at the correct price. And it has always been tapped.
I'm simply explaining that the unemployed on the whole are between jobs not helpless as you like to think.
If you really want to help the unemployed, hire one!
Or perhaps you would prefer debating how many angels can dance on the head of a pin?
@ bosscauser
That's kind of a rant and is a rather superficial way of looking at it for the most part, IMHO, but it contains an important contribution to the discussion worth elaborating.
You have two groups of unemployed in my experience. One group has no skills to speak of. They will remain unemployed even with a government job proffered to them. let's not forget that there is always a reason these people aren't in the workforce.
Good point and one so far overlooked for the most part. This has garnered huge attention over many years in sociology and public health but not enough attention has been paid to it outside the economics of poverty and development, which is sort of peripheral, whereas it should be central because millions of people are involved.
I won't get into here other than to say that a well designed JG could address this in part at least.
Post a Comment