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.
Unless I'm misunderstanding you, the JG was in the article.
MMT economists say “full employment” is not only possible, it’s a moral imperative. Anyone who wants a job should have one. They say we must prioritise genuine full employment and governments should spend whatever is necessary to achieve it – no matter the debt or deficit. MMT economists say the national government should run a permanent “Job Guarantee” (JG) program to provide a job to everyone who wants one. They say it could be linked to other economic and social programs, such as a “Green New Deal” – a policy advocated by MMT proponents like US Democratic senator Bernie Sanders and Alexandra Ocasio-Cortez, to create jobs by shifting to zero-emissions technologies. The Job Guarantee (JG) is a central component of MMT. MMT economists say the national government should ensure that everyone who wants a job has a job. The private sector treats labour as a cost to be minimised, so it cannot be expected to achieve full employment without government creating jobs through a Job Guarantee.
Why? Because unemployment is socially destructive and wasteful. “Full employment” should be a national priority, replacing an acceptance of the so-called “natural rate” of unemployment, which is assumed to be around 4% or 5% unemployment.
MMT without a JG is just Post-Keynesian economics, which is actually what Keynesian economics was before Samuelson set to work on it.
Sixth, as has been long recognized, Samuelson purposely threw Keynes out of his analysis as he developed the “Neoclassical Synthesis”. The name dropping was intentional—Keynes was too radical for the cold warrior Samuelson. At best, what Samuelson presented was a highly bastardized version of Keynes—as Joan Robinson termed it, a Bastard Keynesian approach (we know the mother was neoclassical economics but we do not know who the father was).
Incidentally, that was the nonsense that I studied when I was younger, thinking at the time that I was actually studying Keynes.
As for Egmont, I read his article on Kalecki and realized his error right away, which is that he ignores real assets in his analysis. As I was reading through the comments on Tom Hickey's post on Egmont's article, I ran across this comment by André, which confirmed what I'd discovered.
What I believe is the problem of EKH's theory is that it doesn't acknowledge real assets.
What Egmont should do is start with an island economy with barter only, and without government, figure out how profit appears there. Just Robinson Crusoe and Friday, fish and fishing nets, coconuts and sticks to knock them down, etc. You know, build up his model slowly.
I actually like Kalecki's model of the economy better than the one by Keynes as it is easier to grasp. While there are many articles on the internet on Kalecki, this one has a nice picture in color that shows the flows between the two sectors in Kalecki's simple model.
A simple explanation of the simple Kaleckian model without formulas:
Assume an economy with two sectors, consumption goods and investment goods. Also, that workers spend all that they earn, i.e., the wage bill. Recall also that profit is income minus expenses.
The consumption goods sector earns as income the wage bill of the consumption goods sector plus the wage bill of the investment goods sector, and pays the wage bill of the consumption goods sector. Thus, it nets as profit the wage bill of the investment goods sector.
The investment goods sector earns as profit the excess of whatever real investment it produces, minus the wage bill of the investment goods sector.
Profit for the whole economy is the sum of the two different profits. The investment wage bill cancels out, a positive number in the first case and a negative number in the second case, leaving investment as profit.
If by Profit Law you mean Egmont's Profit Law, you can't go anywhere with that. For example, he writes:
From this follows that (1) saving and investment are causally INDEPENDENT and NEVER equal
He makes a false assumption and builds up from that. Take away the false assumptions, and his arguments fall apart.
As for your other point, when you relax the assumptions on Kalecki's model, the saving associated with investment is spread between everyone in society. The reason that you've seen an increase in saving of the 1% during the pandemic is because the government spending, as in transfers, is just enough to pay the bills and leave nothing for saving, thus the saving from the government deficits flows to the 1% instead.
Also, I use Kalecki instead of Keynes because it's easier. I just read an interesting article which ties Kalecki's ideas back to Keynes but I dont' want to comment yet because I haven't fully grasped it. Here is a quote from that article:
"However much of profits entrepreneurs spend on consumption, the increment of wealth belonging to the entrepreneurs remains the same as before. Thus, profits, as a source of capital increment for entrepreneurs, are a widow's cruse which remains undepleted, however much be devoted to riotous living" (J.M.Keynes, Treatise on Money, 1930: p.139)
Or any attempt by capitalists to increase their consumption (and thus reduce savings), will merely result in increased profits - thereby generating the savings to make up for their initial decline. Or, as Kaldor (1955) reminds us, this is merely Kalecki's adage that "capitalists earn what they spend and workers spend what they earn".
Why do we make a distinction between savings and investment? Few people keep their savings under the mattress, or in a place where literally no one can make use of it during the interim.
He makes a false assumption and builds up from that. Take away the false assumptions, and his arguments fall apart.
Different models will have different explanations. I merely note that the outcome being predicted is the same.
As for your other point, when you relax the assumptions on Kalecki's model, the saving associated with investment is spread between everyone in society. The reason that you've seen an increase in saving of the 1% during the pandemic is because the government spending, as in transfers, is just enough to pay the bills and leave nothing for saving, thus the saving from the government deficits flows to the 1% instead.
Do we observe government transfers going directly to households? After paying their bills, are some of these households left with savings?
Of course, this is a micro-economic perspective. What is saved/invested and spent, will further economic activity. The quote you provide assert that savings will always accumulate to the 1%, which I assume is a macroeconomic argument. After all, if Jeff Bezos were to spend all of his profits, his businesses would suffer, and eventually fail. At which point his savings will be zero.
Conversely, workers can spend all of their income, without impacting their ability to earn.
Returning to outcomes, under what circumstances would Labour's share of savings increase relative to that of Capital? Would a further increase in deficits (government spending) do it? If there were a job guarantee policy, would that perform the trick?
Labour's share of savings increase relative to that of Capital?
What do you mean when you say "Capital". There are four factors of production: Land, Labor, Capital, and Enterprise. Each earns their respective returns from production.
As for capital, that's just stored labor. In that sense, it's labor all the way down. What make's it more complicated is that often the capitalist wears two hats, in that they supply capital, and they supply enterprise. So we have to break the return into the two components.
If there were a job guarantee policy, would that perform the trick?
Yes, it would redistribute savings down to the most disadvantaged. This is because when people become unemployed, their savings are drained away. As I understand the JG, it provides a living wage. Not enough to add to savings, but at least their savings stay intact, until they can find a job in the private sector and once again add to their savings.
I define Capital as those whose profits are derived from commodity production. To them, Labour is an expenditure, where Revenue - Expenditure = Profit.
According to this narrative, capital does not want its labour cost to increase. There are many facets to this, but in summary it is an antagonistic, supposedly zero sum relationship.
Rent extractors are not part of this equation.
Yes, it would redistribute savings down to the most disadvantaged. This is because when people become unemployed, their savings are drained away. As I understand the JG, it provides a living wage. Not enough to add to savings, but at least their savings stay intact, until they can find a job in the private sector and once again add to their savings.
In my mind, that may be why there is no JG. The ruling class is only willing to entertain the concept of greater deficit spending.
13 comments:
MMT, but no job guarantee.
That's the sound of one hand clapping...
Peter Pan,
Unless I'm misunderstanding you, the JG was in the article.
MMT economists say “full employment” is not only possible, it’s a moral imperative. Anyone who wants a job should have one. They say we must prioritise genuine full employment and governments should spend whatever is necessary to achieve it – no matter the debt or deficit. MMT economists say the national government should run a permanent “Job Guarantee” (JG) program to provide a job to everyone who wants one. They say it could be linked to other economic and social programs, such as a “Green New Deal” – a policy advocated by MMT proponents like US Democratic senator Bernie Sanders and Alexandra Ocasio-Cortez, to create jobs by shifting to zero-emissions technologies. The Job Guarantee (JG) is a central component of MMT. MMT economists say the national government should ensure that everyone who wants a job has a job. The private sector treats labour as a cost to be minimised, so it cannot be expected to achieve full employment without government creating jobs through a Job Guarantee.
Why? Because unemployment is socially destructive and wasteful. “Full employment” should be a national priority, replacing an acceptance of the so-called “natural rate” of unemployment, which is assumed to be around 4% or 5% unemployment.
So where is the job guarantee?
Why hasn't it been implemented as policy?
Since you've been reading Egmont's work...
What are the differences in outcome between MMT without a JG, and Egmont's Profit Law?
MMT without a JG is just Post-Keynesian economics, which is actually what Keynesian economics was before Samuelson set to work on it.
Sixth, as has been long recognized, Samuelson purposely threw Keynes out of his analysis as he developed the “Neoclassical Synthesis”. The name dropping was intentional—Keynes was too radical for the cold warrior Samuelson. At best, what Samuelson presented was a highly bastardized version of Keynes—as Joan Robinson termed it, a Bastard Keynesian approach (we know the mother was neoclassical economics but we do not know who the father was).
Krugman Gets it Wrong —L. Randall Wray
Incidentally, that was the nonsense that I studied when I was younger, thinking at the time that I was actually studying Keynes.
As for Egmont, I read his article on Kalecki and realized his error right away, which is that he ignores real assets in his analysis. As I was reading through the comments on Tom Hickey's post on Egmont's article, I ran across this comment by André, which confirmed what I'd discovered.
What I believe is the problem of EKH's theory is that it doesn't acknowledge real assets.
What Egmont should do is start with an island economy with barter only, and without government, figure out how profit appears there. Just Robinson Crusoe and Friday, fish and fishing nets, coconuts and sticks to knock them down, etc. You know, build up his model slowly.
Or maybe just a guns and butter economy.
The End is Egmont!
Further to my comment,
I actually like Kalecki's model of the economy better than the one by Keynes as it is easier to grasp. While there are many articles on the internet on Kalecki, this one has a nice picture in color that shows the flows between the two sectors in Kalecki's simple model.
A Simple Kaleckian Model
re: Kalecki - ELI5 (Explain Like I'm Five)
A simple explanation of the simple Kaleckian model without formulas:
Assume an economy with two sectors, consumption goods and investment goods. Also, that workers spend all that they earn, i.e., the wage bill. Recall also that profit is income minus expenses.
The consumption goods sector earns as income the wage bill of the consumption goods sector plus the wage bill of the investment goods sector, and pays the wage bill of the consumption goods sector. Thus, it nets as profit the wage bill of the investment goods sector.
The investment goods sector earns as profit the excess of whatever real investment it produces, minus the wage bill of the investment goods sector.
Profit for the whole economy is the sum of the two different profits. The investment wage bill cancels out, a positive number in the first case and a negative number in the second case, leaving investment as profit.
Profit equals investment.
QED
I asked about differences in outcome.
So... post-Keynesianism versus the Profit Law... do we end up with the same conditions?
For this analysis, the model has to include government spending.
To paraphrase the Profit Law in the simplest of terms, deficits end up in the hands of the 1%.
Peter Pan,
If by Profit Law you mean Egmont's Profit Law, you can't go anywhere with that. For example, he writes:
From this follows that (1) saving and investment are causally INDEPENDENT and NEVER equal
He makes a false assumption and builds up from that. Take away the false assumptions, and his arguments fall apart.
As for your other point, when you relax the assumptions on Kalecki's model, the saving associated with investment is spread between everyone in society. The reason that you've seen an increase in saving of the 1% during the pandemic is because the government spending, as in transfers, is just enough to pay the bills and leave nothing for saving, thus the saving from the government deficits flows to the 1% instead.
Also, I use Kalecki instead of Keynes because it's easier. I just read an interesting article which ties Kalecki's ideas back to Keynes but I dont' want to comment yet because I haven't fully grasped it. Here is a quote from that article:
"However much of profits entrepreneurs spend on consumption, the increment of wealth belonging to the entrepreneurs remains the same as before. Thus, profits, as a source of capital increment for entrepreneurs, are a widow's cruse which remains undepleted, however much be devoted to riotous living"
(J.M.Keynes, Treatise on Money, 1930: p.139)
Or any attempt by capitalists to increase their consumption (and thus reduce savings), will merely result in increased profits - thereby generating the savings to make up for their initial decline. Or, as Kaldor (1955) reminds us, this is merely Kalecki's adage that "capitalists earn what they spend and workers spend what they earn".
Here's a link to the article.
Keynesian Growth: the Cambridge version
Why do we make a distinction between savings and investment?
Few people keep their savings under the mattress, or in a place where literally no one can make use of it during the interim.
He makes a false assumption and builds up from that. Take away the false assumptions, and his arguments fall apart.
Different models will have different explanations. I merely note that the outcome being predicted is the same.
As for your other point, when you relax the assumptions on Kalecki's model, the saving associated with investment is spread between everyone in society. The reason that you've seen an increase in saving of the 1% during the pandemic is because the government spending, as in transfers, is just enough to pay the bills and leave nothing for saving, thus the saving from the government deficits flows to the 1% instead.
Do we observe government transfers going directly to households?
After paying their bills, are some of these households left with savings?
Of course, this is a micro-economic perspective. What is saved/invested and spent, will further economic activity. The quote you provide assert that savings will always accumulate to the 1%, which I assume is a macroeconomic argument. After all, if Jeff Bezos were to spend all of his profits, his businesses would suffer, and eventually fail. At which point his savings will be zero.
Conversely, workers can spend all of their income, without impacting their ability to earn.
Returning to outcomes, under what circumstances would Labour's share of savings increase relative to that of Capital?
Would a further increase in deficits (government spending) do it?
If there were a job guarantee policy, would that perform the trick?
Labour's share of savings increase relative to that of Capital?
What do you mean when you say "Capital". There are four factors of production: Land, Labor, Capital, and Enterprise. Each earns their respective returns from production.
As for capital, that's just stored labor. In that sense, it's labor all the way down. What make's it more complicated is that often the capitalist wears two hats, in that they supply capital, and they supply enterprise. So we have to break the return into the two components.
If there were a job guarantee policy, would that perform the trick?
Yes, it would redistribute savings down to the most disadvantaged. This is because when people become unemployed, their savings are drained away. As I understand the JG, it provides a living wage. Not enough to add to savings, but at least their savings stay intact, until they can find a job in the private sector and once again add to their savings.
I define Capital as those whose profits are derived from commodity production. To them, Labour is an expenditure, where Revenue - Expenditure = Profit.
According to this narrative, capital does not want its labour cost to increase. There are many facets to this, but in summary it is an antagonistic, supposedly zero sum relationship.
Rent extractors are not part of this equation.
Yes, it would redistribute savings down to the most disadvantaged. This is because when people become unemployed, their savings are drained away. As I understand the JG, it provides a living wage. Not enough to add to savings, but at least their savings stay intact, until they can find a job in the private sector and once again add to their savings.
In my mind, that may be why there is no JG.
The ruling class is only willing to entertain the concept of greater deficit spending.
Post a Comment