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

Wray, Dantas, Fullwiler, Tcherneva and Kelton — Public Service Employment-A Path To Full Employment

Now that MMT is going mainstream, the MMT version of a universal permanent job guarantee that pays a living wage is under scrutiny. Here is an April 2018 presentation on the MMT JG proposal by some of the American MMT economists that clarifies the MMT position.

Key government spending for public purpose falls into important categories, including 1) public service employment, 2) public investment and 3) public welfare (different from "welfare" as transfers). The first and second are about production, that is, generating supply, although some of the income involved also goes toward increasing consumption. The third is mostly about increasing consumption, that is, demand.

Public service employment involves increasing both production/supply through work and consumption/demand through incomes paid to workers. The argument is often heard that "government work" is not productive because "it doesn't make anything." That is to say, the output of work does not increase supply of consumer goods. This objection is rather irrelevant in a consumption-led economy where service work is predominant. Overall productivity is sufficient to meet demand. The increased demand would be supplied by increased investment to meet it.

Where the problem of a mismatch between supply and demand is likely to occur is in extending health care and education to all. This would require increased supply, which could be addressed through increased public investment. However, there could be supply bottlenecks in the interim from passage of the programs to scaled-up facilities.

National defense is another key category. Production and consumption resulting from this category are limited to the category itself. It diverts real resources that would otherwise be available to the economy to use for national security. The incomes involved increase consumption, that is, demand, in the economy.

A job guarantee doesn't exist in isolation from public policy as a whole and it needs to be discussed in  terms of the whole. This requires a public policy vision, which thus far seems to be lacking, or at least is inchoate and needs developing. This will require addressing tradeoffs. It is unlikely that the US can continue to the status quo and simply add desirable programs. Changes will be necessary, especially in incorporating a Green New Deal (GND). This has been inadequately addressed thus far. The GND is chiefly an engineering problem rather than an economic one, and it is international in scope since a global solution is required to address the emergent challenges.

Levy Institute
Public Service Employment-A Path To Full Employment (PDF)
L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton

Peter Cooper — Fairness and a ‘Job or Income Guarantee’

Of the various criticisms leveled at a combined ‘job or income guarantee‘, ones appealing to fairness usually go along the lines that it would be unfair for healthy individuals outside the workforce to receive an income while others are occupied in jobs. In considering this objection, a number of points come to mind:

heteconomist
Fairness and a ‘Job or Income Guarantee’
Peter Cooper

Bill Mitchell – billy blog The Job Guarantee is more than a Green New Deal job creation policy

Everywhere I read it seems, the ‘Green New Deal’ appears. I wrote a bit about it last week in my evaluation of the latest US job numbers – US labour market moderated in November and considerable slack remains (December 11, 2018). The point I made there was that a shift to a green economy would possibly generate around 21 million jobs (14 per cent of total US employment), which given reasonable estimates of excess capacity would require a huge shift in the employment structure and multiples of the available idle labour supply. Of course, that is the objective – to shift workers from fossil fuel, carbon intensive industries into sustainable activities. That is no easy task and would require a fundamental shift in the government-market balance in terms of resource allocation. The market alone will not accomplish that shift in a desirable manner. Cue – more regional and occupation planning. I have also been seeing an increasing number of Tweets talking about a ‘Just Transition’ framework, something I have written about in the past. And there are now Tweets out there equating that with a Job Guarantee. At that point, we get ahead of ourselves. We must see the Job Guarantee in perspective and not ask it to do too much. That is what this blog post is about.… 

Bill Mitchell – billy blog
The Job Guarantee is more than a Green New Deal job creation policy
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Peter Cooper — Illustration of Dynamic Adjustment with a Job Guarantee

In some recent posts, a job guarantee has been considered within the income-expenditure framework. One post in particular suggested a possible conceptualization of the dynamics of the model. It was shown that these dynamics are consistent with the model’s steady state requirements. Demonstrating this took a fair bit of algebra, which may have obscured for some readers the simplicity of the actual model. Much of the algebra was only needed for the specific purpose of verifying that the suggested dynamics are valid. At least for the version of the model presently under consideration, this task has now been accomplished. It is justifiable just to focus on the basic model which is really quite simple while still allowing for somewhat complicated behavior. Below, an example of this behavior is provided. First, though, it seems worth putting things into context with a quick summary of the key variables and parameters....

heteconomist
Illustration of Dynamic Adjustment with a Job Guarantee
Peter Cooper

Patrick Wood — Should every Australian be offered a government-funded job?

US economist Stephanie Kelton, who served as Bernie Sanders' economic adviser during the 2016 presidential campaign, is currently touring Australia to promote the concept she says isn't too good to be true.

"There is nothing to prevent the Australian government, if it chose to do so, from funding a large-scale government job program that would offer employment to anybody who wanted work and couldn't find it anywhere else in the Australian economy," she said. 

"Let the private sector create as many good jobs as it is willing to create, but the problem is there is always a segment of the population that doesn't get invited to the table. 

"And so this program is there as a backstop to just soak up the people who are left behind."

ABC (Australia)
Should every Australian be offered a government-funded job?
Patrick Wood

Peter Cooper — Job Guarantee as Nominal Price Anchor

I’ve been thinking about the job guarantee as it is envisaged by proponents of Modern Monetary Theory (MMT). My focus has been on various quantity effects of the policy that can be considered using the standard income-expenditure model as a base (for preliminary posts along these lines, see here and here.) Since the income-expenditure model takes the general price level as given, it does not directly shed light on the aspects of a job guarantee that would pertain to price stability. To provide some context for a possible future discussion of quantity effects, it is perhaps worth summarizing how the job guarantee would moderate price pressures. Clear statements of the MMT position on the topic can be found in a billy blog post (here) and closely related academic articles by Bill Mitchell (here) and Warren Mosler (here).…

heteconomist
Job Guarantee as Nominal Price Anchor
Peter Cooper

Sandwichman — Job Guarantee versus Work Time Regulation

There has been a bit of commotion recently about the Job Guarantee idea (AKA employer of last resort). I don't consider myself an opponent of the strategy but I do have several reservations about its political feasibility, the marketing rhetoric of its advocates, and its economic and administrative transparency. Some of these concerns I share with an analysis presented by Robert LaJeunesse in his 2009 book, Work Time Regulation as Sustainable Full Employment Strategy. For that reason, it would be timely to post an excerpt from Bob's discussion of"Job guarantees versus work time regulation."...

Lot of the things to think about and debate here.

It is framed in the spirit of inquiry rather than polemic, persuasion or invective, or in a such a formalized (wonkish) style that it is impenetrable to non-experts.

The following excerpt is from pages 125-134 of Work Time Regulation as Sustainable Full Employment Strategy.

 Longish but worth the read.

Basically the idea is that increasing distributed leisure made possible by productivity gains from technology is superior to a buffer stock of employed approach that simply continues the existing system after it has reached its expiration date.

This is the type of discussion we should be having.

Econospeak
Job Guarantee versus Work Time Regulation

Sandwichman

Mark Paul, William Darity, Jr., And Darrick Hamilton — The Federal Job Guarantee-A Policy to Achieve Permanent Full Employment

More MMT without mentioning it specifically. 

MMT economists are credited in a footnote:

For other scholarly work exploring similar job guarantee proposals, see Harvey 1989, 2000; Wray and Forstater 2004; Wray 2008; and Tcherneva 2012, 2013.

This is a fairly long and developed proposal.

Center on Budget Priorities
The Federal Job Guarantee-A Policy to Achieve Permanent Full Employment
Mark Paul, William Darity, Jr., And Darrick Hamilton

Bruce Lesnick — The Unemployment Conspiracy

JG v. UBI

Counterpunch
The Unemployment Conspiracy
Bruce Lesnick

Peter Cooper — Some Macro Effects of a Job Guarantee

A recent post considered one way of including a job guarantee in the income-expenditure model. Doing so makes it possible to represent various macro effects of a job guarantee within the model. An obvious effect is that the program would deliver a degree of demand stabilization. An effect that is perhaps not quite so obvious is the way in which a job guarantee would ensure supply-side changes in the economy automatically impact on demand, actual output and employment. Before illustrating a few of these effects, the modified income-expenditure model will be briefly outlined and tailored to present purposes. A fuller discussion of the model is provided in the earlier post....

heteconomist
Some Macro Effects of a Job Guarantee
Peter Cooper

Michael Stephens — Watch Live: A New New Deal and the Job Guarantee

Today at the New School, L. Randall Wray and Stephanie Kelton take part in a public workshop organized by the National Jobs for All Coalition that is focused on developing a “A New ‘New Deal’ for NYC and the USA....

Multiplier Effect
Watch Live: A New New Deal and the Job Guarantee
Michael Stephens

Brian Romanchuk — How I Would Analyse A Job Guarantee

The Job Guarantee proposal is a core part of the policy analysis of Modern Monetary Theory (MMT). If implemented, it would be expected to cause a structural change in the economic structure, and so analysis techniques that extrapolate current conditions would be inapplicable. Although this analysis is aimed at the Job Guarantee, the basic principles would be applicable for other measures that cause a structural change in the labour market, such as the Universal Basic Income. (In fact, it's my adaptation of analysis by Hyman Minsky for the fore-runner of the basic income proposal, the negative income tax.) The analysis here is a back-of-the-envelope discussion for Canada; it could be adapted to other countries and more detailed at the analyst's discretion.

As an initial disclaimer, the title of this article is a very deliberate choice: it is how I would approach the problem, and does not reflect the state-of-the-art research on the topic by academics in the MMT school of thought. I only have a limited knowledge of their detailed research. Furthermore, I discuss a potential implementation in Canada that is based on my political instincts as to what would be politically sustainable programme; as a result, my views on implementation probably vary from the main MMT academics. My political instincts are probably out-of-date, so what I write here should not be taken as a definitive statement on how Canada should approach implementation....

Bond Economics
How I Would Analyse A Job Guarantee
Brian Romanchuk

Neil Wilson — Job Guarantee - Jobs For the People

In the normal job selection process, first a job is created and then the matching system looks for people to match to that job. Once you get to the margins you end up with jobs that cannot be filled and people that cannot get jobs.

You have a matching problem.

That can only be resolved a little bit via training, job redesign, sanctions, etc. and you always end up with a list of vacancies and a list of people who want a job.

Always.

The job guarantee is different.

You take the person as they are and you find/build a job for them as they are.

You are guaranteeing a match because you are helping the person to become employed as a function of the programme. Coming up with jobs is part of the process….

3spoken
Job Guarantee - Jobs For the People
Neil Wilson

Snadwichman — Jobs Guarantee vs. Work Time Reduction

…what are the alternatives to a job creation program -- especially a a work-sharing program and permanent reductions in the hours work, what John Maynard Keynes called the "ultimate solution" for unemployment.  

"...the full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will not do the trick. Less work is the ultimate solution (a 35 hour week in U.S. would do the trick now)."

Econospeak
Jobs Guarantee vs. Work Time Reduction
Snadwichman

Max Sawicky — Jobs for all–the impossible dream?

My friend Matt Bruenig does consistently great stuff, but I have to object to his recent critique of the idea of a Job Guarantee (often called the government as an Employer of Last Resort, or ‘ELR’). I want to walk through his arguments, point by point.

This explainer by the illustrious Randy Wray provides background on the entire idea, including the macroeconomics of ELR, while Matt and I mostly stick to the mechanics.

MaxSpeak
Jobs for all–the impossible dream?

Max Sawicky

Bill Mitchell — The Job Guarantee would enhance the private sector

Since Bill is the originator of the MMT Job Guarantee and its chief spokesperson through The Centre of Full Employment and Equity (CofFEE), you probably want to read this if you are at all interested in MMT.

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

Gaius Publius — To guarantee a living wage, make government the employer of last resort

MMT, Stephanie Kelton, and the JG. Excellent post with links. Pass it on.

AMERICAblog
To guarantee a living wage, make government the employer of last resort
Gaius Publius