It is a premise of the monetarist position, that the real economy is self-stabilizing and that a rule based monetary policy is the most effective way to ensure both low inflation and maximum sustainable employment.I think we can agree with this much, although Farmer's policy prescription is quite different from MMT. However, he has tuned into some significant points that are in agreement with MMT analysis regarding the relationship of growth, employment and price level. In addition, he agrees that accounting is important in economics. And he has an influential voice in the mainstream.
Keynes claimed, in contrast, that the real economy can get stuck in a position of high unemployment and that permanent high involuntary unemployment can persist as an equilibrium phenomenon. See my earlier post on the neo-paleo-keynesian perspective. If Keynes is correct, and I believe he is, a single instrument, monetary policy, is not enough to hit two targets. Fiscal policy in one form or another, is an important second string to the policy maker's bow.
Roger Farmer's Economic Window
GDP: A Brief But Affectionate Review
Secular stagnation: a neo-paleo-Keynesian perspective
Roger Farmer | Distinguished Professor of Economics, Department of Economics, UCLA
