An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Tuesday, February 12, 2013
Bill Mitchell eviscerates critics of MMT who don't bother to acquaint themselves with the literature
Bill is clearly annoyed, as he should be, that people like Thomas Palley criticize "MMT" without being aware of what MMT economists have published.
Paul Krugman did the same thing on UP with Chris Hayes with respect to the MMT assertion that deficits are sustainable. He interpreted it as "deficits never matter," which MMT economists have never claimed. MMT economists have carefully explained exactly what they means, asserted that inflation is a constraint, and that the size of the deficit at full employment should not exceed demand leakage to saving at that point. Indeed, the point of the deficit from the perspective of a full employment budget according to the sectoral balance approach is to offset demand leakage to saving without resulting in price instability and that fiscal policy is better fitted to this task in that it can be tightly targeted, whereas monetary policy is blunt instrument.
This kind of behavior is more than tacky and annoying. It is unprofessional.
Bill Mitchell — billy blog
I wonder what the hell I have been writing all these years
Bill Mitchell
Bill Mitchell: "If employment is below full employment and thus Yactual < Y*, which means there is an output gap present, then increases in aggregate demand (spending) which are seen by firms to be permanent will result in an expansion of output without any price increases occurring."
ReplyDelete["without any price increases" in italics in original]
Really?
Mitchell:
"With a flexible exchange rate, the increase in imports would promote depreciation in the exchange rate. We should expect the current account to improve and net exports increase their contribution to local employment. The result depends on the estimates of the export and import price elasticities. The body of evidence available suggests that import elasticities are small (around –0.5)."
Body of evidence suggesting low import elasticities. Whatever.
Also, he seems to quote price elasticity btw, ignoring income elasticity.
Primitive as Palley says!
Ramanan
ReplyDeleteIncome elasticity is about zero concerning imports in flex ex rate. That is why a country needs flex ex rate, but it is not so effective if the currency is the world reserve currency. Then you can import a lot more before it takes effect on exchange rate.
Really?" is not an argument
Mitchell:
ReplyDelete"If you can find that body of thought and logic in a mainstream (or non-MMT so-called progressive) literature please let me know. I wouldn’t waste my time though on such a futile search."
Ignoring claims that the only reason for bond sales is to hit an interest rate target, is Mitchell claiming that it is not present in "non-MMT" literature?
I have seen him say that MMT is the only stock-flow consistent theory.
Jure,
ReplyDeleteYes "really" is not an argument but the claim is too much. Economic debates never end, so I didn't argue.
Second it is incorrect to claim that income elasticity is zero in floating exchange rates. Simply wrong.
"Really?"
ReplyDeleteRamanan, in that quote Bill is referring to the simple L-shaped model above.
He then goes on to say:
"after considering all that, the draft of our text explicitly states, that:
'There is some debate about when the rising costs might be encountered given that all firms are unlikely to hit full capacity simultaneously. The reverse-L shape simplifies the analysis somewhat by assuming that the capacity constraint is reached by all firms at the same time. In reality, bottlenecks in production are likely to occur in some sectors before others and so cost pressures will begin to mount before the overall full capacity output is reached.
This could be captured in Figure 9.5 by some curvature near Y*, thus eliminating the right-angle. We consider this issue in more detail in Chapter 11 Inflation and Unemployment.'
That sounds like an explicit statement that there is more to our approach than the reverse-L supply curve. So surely a critic would then abandon the reverse-L claim and head for our work where we discuss unemployment and inflation (the Phillips curve) etc."
I hope Bill edits this piece as it's pretty messy.
ReplyDeleteThe fact that people embrace such shoddy critiques of MMT, while labeling MMT as "Modern Money Tree" tells you more about their attitude and emotions than about MMT.
ReplyDeletehttp://nakedkeynesianism.blogspot.com/2013/02/palley-on-modern-money-tree-mmt.html
Funny how these critiques interweave "all of this is rubbish" with "we knew that all along".
Looks like someone is suspended between stages of Humboldt's "First they ignore it, then they laugh at it, then they say they knew it all along.”
Also, this is a simplification:
ReplyDelete“What happens when there are bond sales? All that happens is that the bank reserves are reduced by the bond sales but this does not reduce the deposits created by the net spending. So net worth is not altered. What is changed is the composition of the asset portfolio held in the non-government sector.”
He doesn't mention anywhere that bonds aren’t only sold to banks, and many (most?) are sold to non-banks/ the public etc. This does reduce the quantity of bank deposits, as far as I can tell.
Y,
ReplyDeleteYes, and it deserves editing as it is a strong post, to be referred to in the future. I found a bunch of unfinished sentences but now I cannot locate them anymore. Please comment at his blog with examples you found. I think if we point them out to Bill he will make it look more polished.
y,
ReplyDelete"This does reduce the quantity of bank deposits, as far as I can tell."
yes, but this only changes how savings are stored. Nobody forces a person with a deposit planning to spend the money to buy bonds instead. Bonds are only bought by people who simply prefer sitting on bonds to sitting on deposits.
Ron T The fact that people embrace such shoddy critiques of MMT, while labeling MMT as "Modern Money Tree" tells you more about their attitude and emotions than about MMT.
ReplyDeletehttp://nakedkeynesianism.blogspot.com/2013/02/palley-on-modern-money-tree-mmt.html
Good debate between Ramanan and Ron T there.
y,
ReplyDeleteThe more important point being don't make a claim which shouts "I don't need a qualification". The same point makes a different qualification though - that cost pressures are absorbed in profit margins.
Hence I highlighted the italics.
Perhaps Vimothy will read Bill's piece and stop wondering why it was important for Palley to cite a bit more carefully.
ReplyDelete"yes, but this only changes how savings are stored"
ReplyDeleteYes, but if there were no bonds available then the deposits would be spent on other assets, pushing up asset prices. Unless the Fed pays interest on reserves.
Ramanan,
ReplyDeleteagreed the post could be clearer in some places but he does say before and after that part that he is talking about the simple model, not the real world as such.
y,
ReplyDeleteThe other point I missed is that frequently the technicality is removed in the blogs and is presented as if the Yactual < Y* statement is the only thing.
Note what Palley says:
"That corresponds to an economy with an L-shaped aggregate supply (AS) schedule as shown in Figure 3. Below full employment, the inflation switch is “off”
and expansions of AD generate pure output gains with no price level or inflation effects. At full employment, the inflation switch is “on” and expansions of AD generate pure price level increases with no output effects"
Even if you ask Palley to RTFP, he is still right. One, the statement is frequently used without referring to technicalities. Two, even with the technicality, it doesn't address what happens when output is less than full employment output.
"What happens when there are bond sales? All that happens is that the bank reserves are reduced by the bond sales but this does not reduce the deposits created by the net spending. So net worth is not altered"
ReplyDeleteYes this is incorrect. Bond sales to non-banks reduce deposits. Second, non-reduction of deposits and that of net worth are two different things.
Where did Mitchell claim income elasticity was "zero"? Am I missing a passage?
ReplyDeleteOh Jure Jordan claimed it in comment #2.
ReplyDeleteQuite apart from the points being debated, Palley is certainly not entitled to make sloppy statements such as the following one:
ReplyDeleteMany European governments, aided by the IMF, are seeking to return to full employment output with a budget deficit target. Broadly speaking, they appear to be looking to cut taxes to stimulate output and reduce government spending to hit the budget deficit target.
If an attentive member of the European electorate happens to read this passage on the alleged full employment objectives of IMF (actually, ECB, EC and IMF) programs for periphery Europe and on the intention to cut taxes as a measure for economic stimulus (taxes are in fact being savagely increased in said countries) he or she will likely die of laughter as a result.
On his blog, Vernengo came to Palley's defense and stated that
mainstream models do suggest that austerity does lead to the natural rate of unemployment
but I don't think prominent mainstreamers such as Krugman (with his cherished IS/LM model at a liquidity trap, showing a flat LM curve that makes deficit spending the only way to restore full employment) would swallow that claim.
Tom
ReplyDeleteI saw the Hayes/Krugman debate. From memory, admittedley not great, wasn't it Hayes that used 'the deficits don't matter' line. I thought Krugman was a lot more MMT friendly.
Jose,
ReplyDeleteThere is no sloppy statement from Palley. In fact he denies that European policies will reach full employment. He however is right in saying that the European leaders think their policies will reach full employment.
You are putting words in his mouth.
"An agenda to put Europe on the road to full employment":
http://ec.europa.eu/social/main.jsp?catId=370&langId=en&featuresId=131&furtherFeatures=yes
mainstream models do suggest that austerity does lead to the natural rate of unemployment
ReplyDeleteLike they ruled out events like the GFC?
@ Andy,
ReplyDeleteYes, Chris Hayes introduced the deficits don't matter and Krugman responded that he agreed with the MMT analysis under full employment but that deficits would matter at full employment. Apparently neither of them understand the MMT position very well.
He however is right in saying that the European leaders think their policies will reach full employment
ReplyDeleteHow can he know that, when the policies said leaders are implementing are not expected to lead to full employment - even according to mainstream (IS/LM) models? (within the time horizons that count for normal, non-academic human beings; I'm discounting the "in the long run we're all dead" scenarios).
This is a very serious mis-statement by Palley and we should not leave him off the hook for that.
It´s a cruel joke to presume that supposedly well-meaning leaders of the periphery are striving for full employment, when e.g. the Greek recession, artificially imposed by said leaders' policies - as opposed to the great depression of the 30s where the policies simply aggravated an ongoing slump - has already reduced GDP by more than 20% since its previous peak.
By comparison, the German depression of the 30s reduced GDP by less than 17% at its worst (in 1933).
Are PK economists supposed to "understand" this?
And no, mainstream models don't recommend "austerity in a slump" - I just re-watched Krugman's appearance on NBC on Sunday and he couldn't be clearer: "my opposition to austerity now is based on (mainstream) Economics 101".
So we now have a neoclassical economist opposing austerity and a PK one understanding its theoretical foundations! A paradox, indeed.
Charitably, we might try to excuse Palley's gaffe by attributing it to simple ignorance of real the state of things in faraway lands. Next time, however, he'd better think twice before writing things that will simply discredit him before any European audience.
Forgot to add that the "agenda to put Europe on the road to full employment" cited by Ramanan has got nothing to do with the troika-imposed austerity on periphery Europe.
ReplyDeleteIt might be seen instead as an attempt to mitigate a bit the catastrophic consequences of said austerity - of which Europe's leaders are quite aware, living right in the eye of the storm they have provoked.
deficits would matter at full employment
ReplyDeleteThey might matter in a situation where aggregate demand is too strong and there is evidence of inflationary pressures in the economy.
In that case, deficit reduction would be needed to cool off the economy.
So I don't think Krugman's position is necessarily incompatible with MMT in this regard.
As I have said many times now - the only criticisms of MMT are about the political economy which is just adding politics to the mechanics of economy and what the political ramifications of these things are. That's not a critique of MMT, that's a criticism of the way politics functions.
ReplyDeleteIf you are reading a blog, it is the general case of MMT - you know like the general theory of economics.
There are small nitpicks that can be made like Ramanan does and he is sometimes correct but they're nitpicks on specific Institutional arrangements not the general case.
And in the case of someone like Palley and others where it is "nothing new" or "we know that" it is because they're not willing to admit they were wrong or the wrong information was given out. Simply said it is a "put down" to make the other side look bad.
It happens in all industries and all walks of life. I've experienced it in Vocational Training recently and the fact is I don't care if you want to make your organisation look better than the alternative. In fact I don't care about either organisation, I just want the plain unvarnished truth so I can make an educated decision.
So this is where the politics of that comes in. I don't care about the BS that comes with it. I shouldn't have to winnow the chaff from the wheat.
That's by and large why I'm attracted to MMT and haven't found any major errors because there is no chaff.
Am I the only one who finds Ramaman incoherent? Does he just obsess over technicalities and verbage and miss the general points? or is there a misunderstood genius hidden somewhere?
ReplyDeleteIn that case, deficit reduction would be needed to cool off the economy.
ReplyDeleteSo I don't think Krugman's position is necessarily incompatible with MMT in this regard.
Krugman's position on deficits at full employment and the MMT position are similar but different. They are similar in that they agree that if the govt deficit grows "inappropriately" at nearing full employment, then inflation will result.
But how "inappropriately" is defined is different. MMT uses the sectoral balance approach to determine the size of the deficit and Krugman does not yet, at least that I am aware of.
Moreover, how to address incipient inflation nearing unemployment is a matter of disagreement, too. MMT would use fiscal policy rather than monetary, and Krugman would use monetary policy.
While Krugman has moved closer to the MMT description of the monetary system and the relation of finance and economics, there is still substantial disgreement on major issues. Krugman is still wedded to ISLM and is a monetarist, while MMT is fiscalist, using Godley's sectoral balance approach and Lerner's functional finance.
I think Krugman is also well aware of the sectoral balances approach. It's in the background of his "cross model" of the economy that was widely praised at the time it was introduced (2011) by the likes of Rob Parenteau and Scott Fullwiler.
ReplyDeleteBut it's true that Krugman likely would bet on higher interest rates to fight inflationary pressures, whereas MMTers (though not fellow travellers such as R. M. Mitchell) don't generally believe in monetary policy.
This, of course, should be a matter to be decided by weighing evidence and not by a priori reasoning. I'd say MMT is a bit too silent on this issue. Its proponents argue for the lack of efficiency of monetary policy but don't often discuss the empirical evidence available to decide the issue.
One instance of this can be found in the argument over the Volcker high rate policies of the 80s. Mainstreamers claim they engendered a recession and killed inflation. MMTers haven't been too keen on countering this POV - that has meanwhile acquired the status of CW.
Jose, there is no evidence that inflation responds directly to changes in the interest rate as ISLM would predict due to the erroneous assumption of loanable funds. The transmission mechanism seems to be the economy contracting with rising rates increases the stock of unemployed, thereby increasing competition for scarcer jobs, hence reducing labor's bargaining power and lowering the wage.
ReplyDeleteThe position of MMT is either a buffer stock of unemployed, which idles real resources and is inefficient, or a buffer stock of employed, which doesn't. That's why the MMT JG is pretty key to the MMT policy proposal for controlling inflation nearing full employment.
One could raise rates, which is basically increasing the cost of capital to slow investment, or use fiscal policy to adjust the deficit to the level required by sectoral balances. That would cool off the economy too by reducing effective demand directly.
MMT economists hold that using monetary policy iaw NAIRU and a Taylor rule is indirect and inefficient in comparison with the MMt fiscal approach.
I think Krugman is also well aware of the sectoral balances approach.
ReplyDeleteKrugman's field of specialization is trade, so he would have to be familiar with it. What he does not seem to be familiar with is the MMT approach based on Godley, Lerner, and Minsky, and he doesn't seem to know much about finance & accounting or money & banking.
The position of MMT is either a buffer stock of unemployed, which idles real resources and is inefficient, or a buffer stock of employed, which doesn't
ReplyDeleteI think many people object to this rather unfortunate "buffer stock" terminology because it's tantamount to treating humans as if they were inanimate objects or products.
Also, the idea of hiring every unemployed worker at the minimum wage may well be logical but it's hardly exciting. In countries like Brazil, with a MW of around U.S.$330 I don't think the JG proposal is going to draw much enthusiasm among the populace. Better than the present situation, perhaps; but not exactly an inspiring view for a just society of the future.
As for MMT finding monetary policy inneficient I'm all for it. My point was simply that its proponents haven't spent much time addressing the issue, specifically by trying to demonstrate that the claims of neoclassicals on this matter lack strong empirical support.
The article is a nice summary of the major MMT points but you guys need a better and more easily understood exposition of the sector balances analysis which was absent from the article.
ReplyDeleteIs that the first Bob Roddis comment ever that spoke of MMT that wasn't critical of the content of MMT? :)
ReplyDeletebut not exactly an inspiring view for a just society of the future.
ReplyDeleteNot possible under capitalism, where capital is treated as the dominant factor, nor under propertarianism based assuming the tragedy of the commons.
The MMT policy proposal is compromise that is doable under existing institutional arrangements and would be a step forward. It's not proposed as a map for a just global society that considers the global economy in terms of a closed system.
JK,
ReplyDeletejust wait a few minutes...
I think someone hacked Bob Roddis' profile, not nice.
ReplyDeleteI think many people object to this rather unfortunate "buffer stock" terminology because it's tantamount to treating humans as if they were inanimate objects or products.
ReplyDeleteI love the terminology because it doesn't dissemble. The status quo is that we're already commoditized. The "buffer stock" label makes it harder to tell ourselves comforting lies to the contrary.
It's really me. I like it when you guys are clear about your nefarious schemes (which isn't all that often). So, I'm trying to entice someone to write a nice and clear exposition of the sector balance analysis.
ReplyDelete(The JG is) not proposed as a map for a just global society - Tom
ReplyDeleteThen its proponents should perhaps underline the relatively modest ambitions of the proposal. It should be presented as a technique to improve the system - not as the road to a new Valhaha.
But it looks as if it's the opposite that's been happening. Many MMTers have left us under the impression that the JG is the central tenet of MMT.
Close observers such as Marc lavoie have even written that
"it is my understanding that the (MMT) emphasis on the analysis of the way in which central governments could finance their expenditures...arose because of the desire to demonstrate that ELR programs could always be financed"
IMO,such an unbalanced emphasis on the JG will do MMT no favours among the public at large, especially in emerging economies where wages are still pretty low.
I think your use of the term “deficit” spending is misleading because “deficit” means a deficiency or disadvantage. According to you guys, the effortless and cost-free spending of new NFA into existence is a big plus for society.
ReplyDeletedef•i•cit
n.
1.
a. Inadequacy or insufficiency: a deficit in grain production.
b. A deficiency or impairment in mental or physical functioning.
c. An unfavorable condition or position; a disadvantage: rallied from a three-game deficit to win the playoffs.
2.
a. The amount by which a sum of money falls short of the required or expected amount; a shortage: large budget deficits.
b. A business loss.
________________________________________
[French déficit, from Latin deficit, it is lacking, third person sing. present tense of deficere, to fail, be lacking; see defect.]
http://www.thefreedictionary.com/deficit
I think your use of the term “deficit” spending is misleading
ReplyDeleteQuite right.
A better alternative would be "net savings of the private sector".
They're the same, to the penny, when the foreign sector is balanced.
Jose, MMT is based on a description of the existing monetary system. It's proposals are in terms of the existing system, warts and all. This system is never going to be able to create anything near a just society, even in the rich countries because capitalism is based on maximizing profit share and that means keeping labor share as low. It's not about equity. MMT economists would be happy if unemployment were reduced. That's hardly a just society. A whole lot else would have to be addressed that could not happen without overhauling the entire system culturally and institutionally.
ReplyDeleteAs far as the JG goes, Warren has said that implementing fiscal policy iaw the sectoral balance approach and functional finance would be a step forward even without the JG, but don't blame MMT if you do that but don't implement the JG and get inflation.
Actually, I was going to mention that you really also need to quit using the word "savings" which means to forego current consumption and save for future consumption. Spending new NFA into existence does not involve foregoing current consumption with an eye toward saving something for future consumption.
ReplyDeletePerhaps good point wrt the negative connotations of the word 'deficit' Bob.... RSP,
ReplyDeleteyou really also need to quit using the word "savings"
ReplyDeleteGreat point.
Maybe austrianism is not that distant from post keynesianism. Remember Ed Harrison? :)
Bob,
ReplyDeleteGovt spending nfa into existence to buy a bridge is not consumption... It is "G" in the GDP equation
. Rsp
Maybe austrianism is not that distant from post keynesianism.
ReplyDeleteNo. Austrianism is at the Waldorf Astoria. MMT is on Alpha Centauri. Or maybe galaxy MACS0647-JD.
Govt spending nfa into existence to buy a bridge is not consumption...
ReplyDeleteIt probably is. Since "buying" a bridge with funny money provides no essential price information, it most likely would amount to capital consumption. Plus, it would have been built with purchasing power stolen from everyone else in society. Nostalgic for the USSR, are we?
So Bob wants to help with "the framing." Here's a hammer. Try not to hit your thumb.
ReplyDelete"it would have been built with purchasing power stolen from everyone else in society"
ReplyDeleteBob,
Imagine our economy with without the highways. Now imagine an economy with our highways. And you're complaining about stolen purchasing power?
Sheesh. I very much like public purpose projects. I'd like to see many more of them.
Jose: IMO, such an unbalanced emphasis on the JG will do MMT no favours among the public at large, especially in emerging economies where wages are still pretty low.
ReplyDeleteHuh? Huh, huh, huh???!!!!
A low wage is better than no wage. The JG wage must be the minimum wage. This is a truth of logic, and not an optional feature. The spectrum of possible (real) JG wages depends on the productivity of the economy.
Ordinary people who might need the JG, "the public at large", unlike economists and intellectuals, are forced to think logically about the real world, by the real world. Therefore they would support a JG wholeheartedly. WPA workers - e.g. Hyman Minsky - tended to think it was a damn good idea. Nice to know where your next meal is coming from.
The poorer the country is, the less it can afford unemployment and bad "economics". The above amounts to saying that the low JG wage would be unpopular in emerging economies because it would prevent their poor, their unemployed from eating cake.
Basically, a monetary economy without a JG is an insane idea - "logically absurd".
the above amounts to saying that the low JG wage would be unpopular in emerging economies
ReplyDeleteNot "unpopular" - just not likely to draw enthusiastic support.
Whereas policies that combine transfer programs for poorer families, annual MW increases above inflation and a commitment to keep GDP close to potential (the so-called "social tripod") have already proved to be enormously popular among the electorates of emerging economies such as Brazil.
Jose
ReplyDeleteDon't pit those things against the JG. They are not mutually exclusive. The JG wage can rise just as your preferred mw if it's not inflationary. But the limits to those things is always inflation, and so you will always need a buffer of unemployed or a buffer of employed to go with them. That's the point.
Also, I highly doubt warren had the JG in mind in the 1980s when his understanding of the monetary system came together. It was about making money. I don't understand why anyone cares which came first anyway. If its right, then it's right. Seems the point is to imply some sort of underlying, disingenuous motive to publications on how the monetary system works, which I find to be a completely ridiculous point to make. It's insulting to me in particular, as my research certainly has always been about understanding how the world works. It's as if they resent that we've explained monetary operations to the world because we also support a JG. Wtf?
Let's also make sure we are talking about the actual JG proposal, and not a caricature, as Jose has been doing so far (and I'm not suggesting Jose meant to do this--it's a rather common mistake). Here's Randy Wray back in 2000 answering some of the same objections:
ReplyDelete"The first component of the proposal is relatively simple: the government acts as the employer of last resort, offering to hire all the labor that cannot find private sector employment. The government simply announces the wage at which it will hire anyone who wants to work, and then hires all who seek employment at that wage. A package of benefits could include healthcare, childcare, sick leave, vacations, and contributions to Social Security so that years spent in ELR would count toward retirement. Of course, there will still remain many (non-ELR jobs) jobs in the public sector that are not a component of the ELR and that could pay wages above the ELR wage. This policy will as a matter of logic eliminate all unemployment, defined as workers ready, willing and able to work at the going wage but unable to find a job even after looking. Certainly there will still exist many individuals—even those in the labor force—who will be voluntarily unemployed; there will be those who are unwilling to work for the government (perhaps at any wage!—survivalists and the like), those who are unwilling to work for the government's announced wage (for example, because their reservation wage is too high), those who are between jobs and who would prefer to look for a better job while unemployed, and so on."
"The ELR will eliminate the need for a minimum wage, as the ELR wage will become an effective minimum wage. It could also establish the base package of benefits that private employers would have to supply. It could replace unemployment compensation, although it could be simply added on to give workers who have lost their jobs more choices. In the US well under half of the officially unemployed even qualify for unemployment compensation. The point is that no matter what social safety net exists, ELR can be added to allow people to choose to work over whatever package of benefits might be made available to those who choose not to work. Obviously, generous benefits to those who do not work can affect willingness to work. The ELR benefit and wage package should be set higher than the benefit package given to similar individuals who do not work, but even this is not absolutely necessary. If ELR enhances one’s access to desirable private and public sector (non-ELR) jobs, then some individuals will choose to work in the ELR program even if this means taking a benefit cut. However, if society values work, it seems far more reasonable to reward ELR workers with a better compensation package than they would receive if they did not work."
http://www.cfeps.org/pubs/wp/wp9.html
Not "unpopular" - just not likely to draw enthusiastic support.
ReplyDeleteWhereas policies that combine transfer programs for poorer families, annual MW increases above inflation and a commitment to keep GDP close to potential (the so-called "social tripod") have already proved to be enormously popular among the electorates of emerging economies such as Brazil.
AAaaargh. I do not at all mean to be personal or insulting, but my reference was to Marie Antoinette, and it is entirely appropriate for the unrealism of such (hoary) criticisms. Again, they express such illogic that they would never be, are never made by "the public at large". Should look in Lerner to see if I'm stealing from his catalog of replies to objections to FF.
A JG that gives a reasonable slice of the economy's productivity to the poor and unemployed, AS A MATTER OF RIGHT, would be fantastically popular, particularly among the public at large, who are forced by the real world to think more logically than "economists" and "intellectuals".
Governments can make all the promises they want. What matters is if they carry them out, or if they can carry them out. The bad guys would much rather "give" people a BIG or other kind of cake. Which can be withdrawn when it becomes inflationary, when it becomes convenient to attack the working class again.
What people really want - logically, rationally, because they know it can work forever - is a chance to predictably earn their daily bread, not to subsist on erratic handouts of cake - quite possibly, quite probably unsustainable "transfers", "commitments" or "increases" from their "betters".
Don't pit those things against the JG. They are not mutually exclusive. The JG wage can rise just as your preferred mw - STF
ReplyDeleteno matter what social safety net exists, ELR can be added - L R Wray
I do not at all mean to be personal or insulting - Calgacus
Yes, I agree the JG or ELR could be added to successful policies such as the "social tripod" presently being implemented in Brazil.
My criticism was directed towards certain expressions of the concept of JG. There is sometimes a streak of overenthusiasm around the idea, not to mention some intolerance towards critics that do not help it, IMO.
The ELR/JG may be an excellent proposal, but it hasn´t yet been tested in real life, at least on a massive scale. It's (naturally) too soon to tell whether its implementation will fulfill the expectations of its promoters. I'd thus conclude that a less emotional tone around its debate can only contribute to its general acceptance in the not too distant future.
The ELR/JG may be an excellent proposal, but it hasn´t yet been tested in real life, at least on a massive scale.
ReplyDeleteLike in the Great Depression — WPA and CCC? Both were voluntary employment programs funded and administered by govt.
Jose, I am indeed enthusiastic about logical thinking. I am saying that most / all opposition to a JG is grounded in illogic and unworldliness. Ask a poor, unemployed or homeless person what they think.
ReplyDeleteI would even criticize MMT academics for calling the JG an "add-on". That is not the way it should be thought of. Rather, modern monetary production national economies without JGs should be thought of as a weird, (failed) experimental "subtract-off" from the ancient, standard, common, natural, universal, massively-tested-in-real-life case of a JG, which we see EVERYWHERE but there, if we just look at things right. The BIGs & Tripods & Social Security etc are the add-ons. The WPA, the worldwide postwar boom full employment era were a (partial) reversion to the ordinary, natural general equilibrium :-) of full employment, which can only occur if the government does its natural job of providing a JG. I could go on at length, but I am not sure people would like that.