There is considerable interest in the Green New Deal (GND) proposal by U.S. Representative Alexandria Ocasio-Cortez, and its relationship with Modern Monetary Theory (MMT). Although my preference is to focus on my business cycle book, since I am one of the many MMT bloggers, I should at least comment on the Green New Deal. The natural question arises: what does the Green New Deal mean, and is it feasible? Based on my very limited understanding of the American legislative process, I would guess that it is way to early to say anything definitive. That said, that has not really stopped anyone else from making wild claims about the proposal...
It should be noted that the concept of a Green New Deal has attracted a good deal of attention elsewhere, such as in Europe. However, since the programme itself is uncertain, the suggested mode of implementation will vary. As a result, we can see calls for a "Green New Deal" from people who are otherwise critical of MMT. In other words, the concept is not synonymous with MMT.MMT makes two major contributions to the debate on the GND.
1. There is no financial constraint on a currency sovereign in deploying real resources that are available.
2. If the government competes with nongovernment for scarce real resources, then the price of those resources will rise in markets, exerting inflationary pressure.
The GND is a special case, since it is represented as an existential threat. This could involve government both commandeering real resources for emergency use and also taking some real resources off the table, e.g., to quickly shrink the carbon footprint.
This could necessitate considerable public investment or incentives to draw forth private investment. The same goes for investment in developing and scaling green resources.
In the emergencies of the past, the real constraint of #2 has been overridden by necessity, e.g, during WWII, price controls and rationing were imposed, and savings bonds introduced. John Kenneth Galbraith was deputy head of the OPA.
Thus, a question of urgency arises with respect to implementing the GND. What resources will be required and how to deploy them is an engineering problem.
This has all to be integrated in terms of a comprehensive policy proposal and then fleshed out into specific legislation. Input from economists will be needed in model construction and fiscal recommendations.
In fact, it is a global challenge that requires concerted effort internationally, and lot of conflicting national interests will have to be taken into account to arrive at something workable that can get agreement.
Comments On The Green New Deal And MMT
Brian Romanchuk
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