Monday, April 20, 2020

Bill Mitchell — The provenance of the Job Guarantee concept in MMT

As the public scrutiny of the body of work we now refer to as Modern Monetary Theory (MMT) widens there is a lot of misinformation abroad that distorts or otherwise undermines what has been done to date. Most, but not all the misinformation or emphasis comes from those who attack our work. Their criticisms usually disclose an incomplete understanding of where MMT came from and what the core propositions and logic are. They stylise, usually using terms and constructs that are present in mainstream thinking, but inapplicable to an MMT way of thinking, and end up spitting out things like ‘printing money’ etc, which they think represents a devastating rejection of our work. As part of my own work, and I do this in liaison with Warren Mosler, I am interested in documenting the train of events that led to what we now call MMT. I love history and think it is very important in helping us understand things. So today I am continuing to examine archives to trace the provenance of key MMT concepts. And I am continuing to document the idea of a Job Guarantee, which is central to the MMT framework, despite many who claim to be MMTers thinking otherwise. I have noted in the recent press, claims that the origins of the buffer stock employment approach that became the Job Guarantee was the work of Hyman Minsky. Nothing could be further from the truth as you will see. It is important, in my view, to make the provenance very clear and that is what this blog post is about....
Essential reading (higher category than "must-read"). The MMT JG is probably the most misunderstood aspect of MMT. Hence, it is also the most mischaracterized.

It is a BUFFER STOCK (Bill Mitchell) based on an EMPLOYER OF LAST RESORT (Warren Mosler).

It is not Keynes. It is not Minsky. It did not come from Post Keynesianism. 

The BDE/ELR concept is original to MMT, being attributable initially to Mitchell and Mosler independently of each other. They worked out the together to put flesh on the bare bones. 

Randy Wray subsequently pointed out the similarity with Minsky, but the concept of a JG that Minsky proposed and the concept of the MMT JG are different.
The point is that:
1. The concept of a Job Guarantee that is now core MMT was entered into the discussion at that time by Warren Mosler (ELR) and myself (BSE). This was the provenance of the concept within MMT.
2. Minsky was never mentioned. Only his former PhD student, Randy Wray, once exposed to the BSE/ELR ideas, noted some overlap between the BSE/ELR approach and Minsky’s own, earlier ideas. But that was well into the PKT debate about the concept.
3. Anyone with knowledge of the history and the beginnings of the MMT work would not reasonably say that the reason that MMT considers a Job Guarantee to be an essential part of the body of work was due to anything that Hyman Minsky had written or said.
It is important to render history as accurately as we can.
This blog post is a key document of MMT on this matter. Bill is in the process of documenting the history of MMT, and I think it is safe to assume that this will eventually result in a formal document as an article or book. In the scholarly world, provenance is of the highest importance, and Bill documenting MMT history will be valuable in establishing priority. In the meanwhile, here it is.

Bill Mitchell – billy blog
The provenance of the Job Guarantee concept in MMT
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

11 comments:

Peter Pan said...

A rare instance where "history" is documented before getting twisted into a pretzel.

Andrew Anderson said...

And I am continuing to document the idea of a Job Guarantee, which is central to the MMT framework, despite many who claim to be MMTers thinking otherwise. Bill Mitchell

Talk about hitching your wagon to a rock!

I.e. when robots can do almost all useful work then what? Pay people to waste their time?

Otoh, an emphasis on ethics, including ethical finance, would NEVER become obsolete.

And how funny is an emphasis on a JG when social distancing is the order of the today and perhaps indefinitely into the future?

Peter Pan said...

Suffice to say that an automated economy would make the Phillips curve employment/inflation trade-off obsolete.

Calgacus said...

an emphasis on ethics, including ethical finance, would NEVER become obsolete.

Right. That's why Jesus emphasized the importance of a Job Guarantee - no finance without one could be called ethical. Funny how many Christians don't listen to Jesus's clear logic here.

Andrew Anderson said...

You should read the ENTIRE Bible (e.g. Leviticus 25), Calgacus. Then you'd know that working for wages is something that citizens should not normally have to do.

But thanks to no limits on private land ownership and privileges for usury cartels, neither of which is Biblical, what used to be the exception is now the rule.

Btw, if you're such a fan of the Lord, why haven't you read ALL of His Book? Then, according to Him (and if you continue to do so, cf. John 8:31-32), you'd know the truth and the Truth would set you free.

Ralph Musgrave said...

I pretty much agree with Andrew Anderson: the idea that JG is "central to the MMT framework" as Bill Mitchell claims is just nonsense. JG without the rest of MMT is perfectly feasible: they had that (and big time) in the 1930s: i.e. there were large scale JG schemes then - WPA etc.

Conversely, the "monetary ideas" (to coin a phrase) behind MMT can perfectly well be implemented without any sort of JG scheme.

Matt Franko said...

Yo, They are the only ones who get to determine what is in their Theory and what isn’t....

S400 said...

“I.e. when robots can do almost all useful work then what? Pay people to waste their time? “

By then people will redefine what is considered paid work. That has not been a problem before and will not be a problem in the future unless we give the power to people with no ability to think new thoughts to define what paid work is or is not.

S400 said...

“Yo, They are the only ones who get to determine what is in their Theory and what isn’t....“

Yo. Can’t let that important stuff to those who come up with shitty home made hypothesis which can’t be proven and which is based on art degrees envy.

Calgacus said...

Then you'd know that working for wages is something that citizens should not normally have to do.

Even if one accepts this, it has no force against the MMT JG. Jesus's point is that if some of these "abnormal" people want to work for money, it has a moral obligation to satisfy them, because their want for money is caused by society imposing obligations on them. Just the same as if society caused a disease, it has a moral obligation to its diseased "abnormal" members to provide them with (very cheap and beneficial) medicine. It's just an example of reciprocity and redress for injury, absent from your recommendations.

Jesus's finance was intelligent and ethical. Yours isn't - it obsesses about what are imho ingrown toenails and ignores major bleeding. Your system imposes major injury and then pretends the major injury doesn't exist. Jesus is just saying "If it bleeds, it leads". All you ever do is dodge this argument, while many here have considered your ideas charitably and at length. Really, why not face the argument directly? Tell me how Jesus was wrong.

&&&&&&&&&&&&&&&&&

Should really post something about the topic. IMHO Bill Mitchell is quite misguided. On facts, logic and how to approach the history of ideas. His priority on crucial aspects is quite clear. But denying predecessors, saying that "there is only one Job Guarantee", imagining that anybody ever has any idea ex nihilo - is just silly, childish even.

Calgacus said...

Ralph - of course we disagree. On some "formal", "uninterpreted" "syntactic" ways of thinking, yes the JG can be detached; on other "realist" "semantic" "interpreted" ones, it cannot. If you use the rest of the vocabulary of economics in the normal way and for normal purposes it is integral. Work isn't valuable because you can get money for it. Money is valuable because you can get work for it. If one thinks in that correct direction, the JG becomes obvious.

Your "JG without the rest of MMT is perfectly feasible" example of the WPA in the 30s supports rather than refutes the MMTers position. For the economics of the day was MMT. Economics went backwards since then. As you yourself put it once, MMT is just Keynesian economics without all the junk. It is a very common thing in the sciences for earlier theories to be overcomplicated, as Hermann Weyl I think said, "Simple ideas come last". The effect of ignoring this illustrates the danger of Mitchell and Mosler's ahistorical approach to history.