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The Buckaroo and the Demand for Money
by John Carney | Senior Editor
Not surprisingly, John agrees with MMR rather than MMT, as he does with respect to the MMT JG.
I believe the dependency of the value of money on productivity is one of the insights that has driven some former MMT folks, such as Cullen Roche of Pragmatic Capitalism, away from the tax-driven money assumption. As Roche put it recently, “production and not taxation sits atop the currency demand hierarchy.”I read John as saying that he likes the MMT description of monetary operations that is the essence of MMR (so far), and rejects MMT monetary theory (Chartalism) and Post Keynesian macro (Hyman Minsky proposed a JG).
13 comments:
My take on it extending Stephanie's thoughts expressed at the Carney article. Some people like doing community work. They accumulate buckaroos. Some are lazy, they buy buckaroos. Other would rather just do enough community work to get the buckaroos to pay the tax. Some might work a bit more to sell to the lazy (or over burdened) students.
Carney's argument holds only if the taxes and the exchange value were the only motivating factor. The value of the buckaroos more likely derives from how much the excess buckaroo workers value their own time. They always have the option not to sell their buckaroos, as they have already done the work that they derived enjoyment from. They become the "swing producers" of the buckaroo. Remember. the buckaroo is payment for an hour of community work.The exchange value for the buckaroo has been stable between $10-$15 per buckaroo. $10-$15 /hr is the ball park estimate for what a student may get for part time employment elsewhere. so when somebody sells a buckaroo, that fact very likely plays in.
In my view, it is highly unlikely that the value of the buckaroo will ever collapse, unless somebody pulls a Hunt Brothers - which in this case would be very difficult to do -- as one has to perform actual physical work to accumulate the buckaroos and a person only has 24 hours per day. To accumulate the buckaroos to a level where that could be done would take several generations of students. And that can be very easily prevented by UMKC by demonetizing buckaroos issued over 6 years ago.
I believe that both MMR and MMT are the same. Yes on one side of the coin you need productivity but on the flip side you still to pay tax.
What ever it is, I sincerely believe that money must be created in the first place before any productivity or tax can be measured or imposed. Would anyone produce something for free or would anyone be off the hook for not paying any taxes?
My only concern is that MMR and MMT is wedge that being drive in between and giving the Austrians the upper hand.
It seems that Carney is again taking exception to something no MMT er ever says. All MMT says, following the general idea of the state theory of money is that imposing taxes and fees creates a demand for the for the state's money. The value of it is a completely separate question. What you can buy with your money has to do with the level of economic development and diversity in a particular area.No MMTer would argue with that. That this sort of development is facilitated by having an adequate amount of money funding infrastructure and buying goods and services is what MMT argues.
We've seen the whole argument about money as a "store" of value. For a while, and from a certain point of view, restricting the amount of money that flows into the real economy can seem to uphold "the value of money." I.e., people who have money can get what they want and maybe cheaper. Longer term it has a corrosive effect as goods and services cease to be available, roads crumble, bridges collapse, etc. Eventually this comes to annoy even the rich.
I don't think Carney is bringing a whole lot of clarity to these issues and seems to enjoy tilting as the strawmen of his own creation.
I see it largely down to those who really can't abide the idea of a state and the enforcement of social rules against the individual.
It's the same mental attitude that rejects the 'make sure everybody has access to enough resources to survive first' approach that MMT is really all about. As I mention here:
Essentially the 'no such thing as society' mantra again.
who else has the power to print buckaroos? or dollars? there aint no tooth fairy either
I am quite sure that John knows where he is going with this. While it is annoying to MMT proponents, its OK in the larger picture and will turn out well. Look at it this way, we are debating our issues in a major venue with a key figure there. That John for providing the space and free PR.
I think Neil is right. And it's also a case of people rejecting an explanation of how actually things do work based on the fact that they wish they didn't work that way.
Yup, taxes driving money is pretty much a tautology. Disagreement means you don't understand it and what you are saying. Taxes and fees are a demand for money. The demand for money by the 800 pound gorilla drives the demand for money by us little chimps.
Hey maybe what people call "the state" isn't always the 800 pound gorilla. Then MMT/FF says - we'll just figure out who is the 800 pound gorilla and call it the state (the monetary authority to use Lerner's term). Gorilla-demand driving chimp-demand IS a tautology, and if you don't think the US government is the gorilla nowadays, you are in an alternate universe. Almost all the objections to MMT/FF's crystalline logic (e.g. Ramanan's confusions too, kudos to Neil for fighting the good fight down at heteconomist) were understood & answered long ago.
To expand on Neil & Dan - "MMR" is just a political rejection of "an explanation of how actually things do work based on the fact that they wish they didn't work that way." Great way to put it.
I also think there is no persuading Cullen. He hates the buffer stock solution to inflation and he thought he can build his own offshoot from MMT. So he desperately wants to come up with something original he differs from MMT on, whatever it is. He hoped that "MMT doesn't stress productivity enough" would do it, but it is not working - MMT always understood that demand for money fluctuates due to productivity (and many other things), the main insight is why state money has ANY value in the first place.
This whole debate shows that people will try really hard not to understand things that don't jive with their ideological preconceptions, but each MMT-er has known this very well already.
I guess he will take this statement as "a nasty personal attack", of course unlike his calling the MMT-ers "cultists". Oh, irony.
For me, the really telling point on MMR is this one:
The monopolist argument that MMT uses is often taken to an extreme in justifying government interaction in the private sector with a specific focus on justifying their Job Guarantee program based on the thinking that, because the government has a coercive monopoly, that only the government can optimize living standards through the implementation of price setting and government jobs.
They view the JG as a tumor in MMT and not only do they want to cut it out but to make sure they get it all they carve out anything that bolsters the case for it. This leads to some cartoon-style painting a doorway on the wall and walking through it after backing yourself into an ideological corner.
Tax-driven money? That leads to state-created unemployment and if you accept that, you end up with crazy talk about the government having a responsibility to do something about it.
Buffer stock? Gotta tear that down. If you accept buffer stock then you are stuck either endorsing unemployment, endorsing a JG(or BIG) or developing some alternate way of mitigating inflation at full employment.
The only genuine alternative for controlling inflation and for getting full employment put forward by the 'MMRists' has been the suggestion made by Beowulf/ Carlos Mucha, that the govt could introduce Vickrey's market for rights to raise prices. Amusingly enough, this idea is even more socialist or anti-free trade than the JG could ever be.
Eventually the MMRists will probably face reality and decide that 'full employment' actually means a buffer stock of the unemployed. After that they'll probably start asking themselves whether gold isn't really the only true money after all.
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