Bringing science into economics must necessarily entail measurements in the scientific units. Ikonoclast

...Bringing science into economics must necessarily entail measurements in the scientific units above (plus the utilization of taxonomic schemes for biota). Thus if we assess by scientific studies and measurements that we are causing the 6th mass extinction and forcing dangerous climate change by releasing CO2 from our fossil fuels, then we have assessed that we should stop using fossil fuels. How we stop is the next matter for consideration and then we must examine energy transitions, energy saving and consumption curtailment, all in scientific and technological feasibility terms. Only real resource considerations are meaningful. Money considerations are completely meaningless. This is if we are being entirely logical and scientific.

MMT begins with availability of real resources. 

I have been arguing that the challenge presented by climate change is not so much economic issue as a matter of science and engineering. First the design problem has to be delineated based on scientific research involving measurement that conform to best practice in science. Then, a design solution, or alternatives with tradeoffs, must be proposed in engineering terms. Some of those tradeoffs may involve nominal cost, but in design problems that are regarded as existential challenges, like war, nominal cost is mostly irrelevant to purpose. 

Real-World Economics Review Blog
Bringing science into economics must necessarily entail measurements in the scientific units.
Ikonoclast

Bill Mitchell — Real resource constraints and fiscal policy design

There is an interesting dilemma currently emerging in Australia, which provides an excellent case study on how governments can use fiscal policy effectively and the problems that are likely to arise in that application. At present, the Australian states are engaging in an infrastructure building boom with several large (mostly public sector) projects underway involving improvements to road, ports, water supply, railways, airports and more. I travel a lot and in each of the major cities you see major areas sectioned off as tunnels are being dug and buildings erected. Not all of the projects are desirable (for example, the West Connex freeway project in Sydney has trampled on peoples’ rights) and several prioritise the motor car over public transport. But many of the projects will deliver much better public transport options in the future. On a national accounts level, these projects have helped GDP growth continue as household consumption has moderated and private investment has been consistently weak to negative. But, and this is the point, there have been sporadic reports recounting how Australia is running out of cement, hard rock and concrete and other building materials, which is pushing up costs. This is the real resource constraint that Modern Monetary Theory (MMT) emphasises as the limits to government spending, rather than any concocted financial constraints. If there are indeed shortages of real resources that are essential to infrastructure development then that places a limit on how fast governments can build these public goods. The other point is that as these shortages are emerging, there is still over 15 per cent of our available labour resources that are being unused in one way or another – 714,600 are unemployed, 1,123.9 thousand are underemployed, and participation rates are down so hidden unemployment has risen. So that indicates there is a need for higher deficits while the infrastructure bottlenecks suggest spending constraints are emerging. That is the challenge. Come in policies like the Job Guarantee.

Practical MMT. MMT is made up of an operational analysis of monetary systems, macroeconomic theory, and policy guidance. They are complementary.

Bill Mitchell – billy blog
Real resource constraints and fiscal policy design
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Dirk Ehnts — John Maynard Keynes: “I could create, I could afford” (Public Service Employment)

Here is a quote from John Maynard Keynes, writing in 1933:

If I had the power today I should surely set out to endow our capital cities with all the appurtenances of art and civilisation on the highest standards of which the citizens of each were individually capable, convinced that what I could create, I could afford – and believing that money thus spent would not only be better than any dole, but would make unnecessary any dole. For with what we have spent on the dole in England since the War we could have made our cities the greatest works of man in the world.

econoblog 101
John Maynard Keynes: “I could create, I could afford” (Public Service Employment)
Dirk Ehnts | Lecturer at Bard College Berlin

The quote is from National self-sufficiency (Yale Review, 1933).  See the whole of Section IV. It's brilliant.

John T. Harvey — Yes, There Is Such Thing As A Free Lunch

With the presidential campaign season in full swing, a number of hopefuls have made a point of specifying the monetary cost of various government programs. Some have done so in the context of how they will finance their own ideas while others have used the opportunity to argue that we can’t afford to pay for the programs we already have in place. In both cases, however, they are missing a fundamental point: at the national level, money is not the issue, resources are. Furthermore, once this becomes clear, it is evident that not only can we can “afford” everything currently in place, we can do more. There is such thing as a free lunch when we have idle resources and how much money we have has absolutely no bearing on this.

For the individual, having money is extremely important as it represents a claim on existing resources. The more money you have, the more you can claim. It’s a bit like having a winning raffle ticket. If you have three winning tickets, you get three prizes; if you have zero, you get none. To the organizers, however, the tickets are an afterthought. The scope of their event is limited by the number of prizes available, not how many claims exist. They would never say, “We can’t afford to do the raffle this year because we don’t have enough winning tickets!”

Yet this is precisely what many presidential candidates are arguing. When someone says, “We can’t afford to continue to fund Social Security,” they are saying that we lack sufficient winning tickets to hand out to seniors. Okay, print some more. If that’s the only problem, then solving it is trivial (notwithstanding any politics). On the other hand, if we lack the ability to produce sufficient goods and services for both the working and the retired, then we’re screwed. Our ability to support Social Security depends on productivity and not how much money we have.

Frontal assault at Forbes.

Forbes — Pragmatic Economics
Yes, There Is Such Thing As A Free Lunch
John T. Harvey | Professor of Economics, Texas Christian University

Cory Hoffman — The Collapse of the Russian Ruble Does Not Undermine the Central Premise of Modern Chartalism (MMT)

The collapse of the demand for the Ruble in the face of falling oil prices concretely confirms the central premise of modern monetary theory; that the real constraint on a state’s ability to move real resources are its productive capacity and its ability to put its resources into motion. 

That is to say that the basic equation is that, in both the short run and “the long run”, public expenditure is constrained by the real resources and real productive capacity of a given macroeconomy.…

Overlapping Consensus
The Collapse of the Russian Ruble Does Not Undermine the Central Premise of Modern Chartalism (MMT)
Cory Hoffman

Neil Wilson — Scottish Independence - a Modern Money analysis

Neil gets real. Forget about the money, look at the reality. Scotland has everything it need to be an independent nation and then some. The rest is just bookkeeping.

3spoken 

Scottish Independence - a Modern Money analysis
Neil Wilson

Peter Martin — Muddled Thinking Watch #1 “We will need decades of austerity not years” writes Phillip Booth in the Daily Telegraph

Its not a question of whether it “can be afforded” in money terms but whether “it can be afforded” in resource terms. Present commitments may or may not be able to be afforded at some future time. It will depend on the resources which will be available at that future time.

Alan Greenspan's response to Paul Ryan in congressional testimony: “Well, I wouldn’t say that the pay-as-you-go benefits are insecure, in the sense that there’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question is, how do you set up a system which assures that the real assets are created which those benefits are employed to purchase.” 

Greenspan lays the smackdown on Paul Ryan

Modern Monetary Theory: Real Economics
Muddled Thinking Watch #1 “We will need decades of austerity not years” writes Phillip Booth in the Daily Telegraph
Peter Martin

Der Spiegel — Ailing Infrastructure: Scrimping Threatens Germany's Future

From the outside, Germany appears to have a robust economy. But a new study by a leading economic institute reveals that the country is investing far too little in infrastructure and its future, effectively saving itself to death. 

Spiegel Online International
Ailing Infrastructure: Scrimping Threatens Germany's Future
Spiegel Staff
(h/t Dan Lynch)

Confused idea of saving and investment but the problem is clear, underinvestment in the present threatens the availability of resources for the future.

John T.Harvey — Austerity Leads To... Austerity!

Ever since this blog started about two years ago, I’ve been repeating over and over that what the economy needs is more deficit spending, not less. This is so because:

* We have plenty of idle capacity....

* The reason for the idle capacity is the systemic inability of the private sector to generate sufficient demand to hire every willing worker....

* The extra demand necessary to bring us back to full capacity and employment can come from foreign countries (i.e., US exports) or the public sector (i.e., the government)....

* Not only that, but the federal government does not face a budget constraint....

* The basic accounting is inescapable: public sector deficits = private sector income and public sector debt = private sector assets....

And so it is high time for an outright rejection of the austerity model for recovery. It doesn’t make sense theoretically, there is no empirical evidence, and it is illogical. Are the groceries that air traffic controllers used to buy gone? Did we have less stuff to go around and therefore needed to reduce their income so their demand wouldn’t just lead to inflation? Of course not, the groceries are still there, they are just sitting unsold on the shelf. The air traffic controllers are worse off, the grocery store is worse off, the farmers are worse off, and air travelers are worse off. Nothing positive have been accomplished. Austerity accomplishes one thing and one thing only: austerity. We demand aggregate demand.

Forbes — Pragmatic Economics
Austerity Leads To... Austerity!
John T.Harvey | Professor of Economics, Texas Christian University

Randy Wray — Social Security’s Unfunded Entitlements: Much Ado About Nothing, Or Little To Do About Something?

Back in January 2005, when President Bush was ramping up his attack on Social Security, Peter Wehner, a White House political strategist, wrote in a memorandum to conservative groups: “We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course. The reality needs to be seared into the public consciousness.”

Bush desperately wanted to privatize Social Security—to send the hundreds of billions of dollars to Wall Street so that the geniuses who manage money could blow the whole wad on their speculative schemes. Just imagine how that would have worked out! The already bubbling real estate and commodity markets could have reached an even more stupendous peak before crashing into what presumably would have been an even worse Global Financial Collapse. And today’s seniors would be dumpster diving without Social Security to fall back on.

Bush lost that squirmish but he won the war. Now even the “friends” of Social Security have the program’s unsustainability seared into their consciousness. The program is broke, bust, bankrupt. If you are young, you’ll never collect a dime from the program. But is there any truth to the rumor? Of course not.

Economonitor — Great Leap Forward
Social Security’s Unfunded Entitlements: Much Ado About Nothing, Or Little To Do About Something?
L. Randall Wray | Professor of Economics, UMKC

David A. Jones — Economic theology

I consider mainstream (neoclassical) economics a kind of modern day theology, and the question about angels is akin to the question, “How much economic growth (GDP growth) can our ecosystems cope with?” For the economic “theologians” the answer is once again “as much as you like,” because economic growth can supposedly be decoupled from physical impacts.

First a reminder about what GDP is. GDP stands for gross domestic product. It’s a measure of the total market value of the goods and services produced within a nation’s borders during a year. The basic formula for calculating GDP is:GDP = private consumption + gross investment + government spending + (exports − imports)

One way to calculate GDP in practice is to track the monetary exchanges that occur when final goods and services are purchased. GDP, therefore, measures how frantically money is flowing among people, companies, banks, and other players in the economy. And so the dancing angels become monetary exchanges, the pin becomes the Earth, and the “theological question” becomes, “How many monetary exchanges can fit on the Earth?”

Mainstream economists argue that a constant rate of GDP growth is desirable. In other words, monetary exchanges are supposed to grow exponentially and forever on a finite planet. This is only possible if an increasingly small component of GDP growth relates to physical impacts (i.e., a smaller and smaller number of activities that add to GDP produce any environmental impact). Otherwise the physical impact of our economies will grow exponentially too — a truly impossible scenario. You cannot have an infinite number of people dancing on the head of a pin! Unlike angels, people are corporeal beings.

Read the rest at The Daly News | Steady State Commentary and News
Economic theology: Angels dancing on the head of a pin
by David A. Jones

Richard Heinberg — What Is Sustainability?

The essence of the term sustainable is “that which can be maintained over time.” By implication, this means that any society that is unsustainable cannot be maintained for long and will cease to function at some point.

Unfortunately, in recent years the word sustainable has become widely used to refer merely to practices that are reputed to be more environmentally sound than others. Often the word is used so carelessly as to lead some environmentalists to advise abandoning its use.

Nevertheless, the concept is indispensable and should be the cornerstone for all long-range planning.

The Post Carbon Reader Series: Foundation Concepts
What Is Sustainability?
By Richard Heinberg