Video of my public lecture in Helsinki, February 27, 2018

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1. It’s a terrible shame Peter Green fell in with the wrong crowd and tumbled of the rails at a early age. He was destined for great things.

2. There can be no doubt … the fiscal authorities are, from a technical, administrative and economic management point of view, capable of extracting and transferring to the central bank the resources required to ensure capital adequacy of the central bank should the central bank suffer a severe depletion of capital in the performance of its lender of last resort and market maker of last resort functions …

   … the central bank can always bail out any entity – including itself – through the issuance of base money – if the entity’s liabilities are denominated in domestic current and nominally denominated (that is, not index-linked). If the liabilities of the entity in question are foreign-currency-denominated or index-linked, a bail-out by the central bank may not be possible.

   Where does index linked pensions fall in this scenario ?

   Can index linked pensions bankrupt a country ?

3. I am trying to get my head around how MMT would respond to a stagflationary economy.

4. My early morning housework will be much improved by a new lecture to listen to. Running out of stuff to watch on YouTube. Real progressives are good. Also quite a bit of good stuff in Italian. But I wish there was more material just a bit more in depth but perhaps not quite so academic as some of the conference papers.

5. Henry Rech says:
   Thursday, March 8, 2018 at 15:07
   I am trying to get my head around how MMT would respond to a stagflationary economy.

    
   That’s an interesting question. I hope Bill replies at some point. In the meantime, it might be worth searching the blog (see top right) for “stagflation”. I got about half a dozen hits when I tried, but I haven’t read through the relevant articles fully yet.

6. If you introduced the job guarentee you wouldn’t get stagflation.

   That’s the whole point of the job guarentee it maximises price stability.

   What’s happening in the US now is probably cost push inflation because the FED thinks it is fighting inflation when it raises interests rates but the opposite is true it is causing inflation slowly.

   All else equal rate hikes are just price hikes and then you have the interest income channels to deal with which are a fiscal stimulas.

   If you thought the US rate hikes made the $ stronger and fought inflation. At the time of the first hike

   You would have shorted GBP/USD @ 1.2

   Shorted EUR/GBP @ 1.06

   Went long USD/JPY @ 1.21

   You would be bankrupt.

   So I suppose cutting interest rates would also help like Russia has been doing and you can see the results of that for yourself. If you look at Russia’s inflation rate.

7. Bill, I hope you don’t mind me asking this here, but there is nowhere else suitable.

   What is the purpose of economic immigration?

   Obviously, we do not need economic migrants to keep the government in credit like a bank account, since their taxes do not fund government expenditure.

   There is obviously the argument that immigrants’ taxes contribute to the control of inflation as much as indigenous workers’ do, but MMT advocates themselves are divided on which taxes best control inflation: some are sympathetic to a LVT; Warren Mosler wants to eliminate income tax and VAT; and since MMT is descriptive, there is no reason why it cannot be adapted to a small state attractive to the conservative-minded as much as to a centre-left big government (Reagan ran a high deficit to expand the economy but left the money in circulation for longer by taxing less and not spending more).

   Bearing that in mind, it seems to me that using economic migration for the purpose of inflation control through taxation is a preference (ideological or otherwise), rather than a necessity, given that there isn’t a uniform prescription by MMTers on what type and rate of taxes work best. The same goal could be achieved by a range of alterations of the tax system, without immigration, some of which I suggested above.

   Note that I’m not saying that you or anyone else should oppose immigration; merely that it strikes me that immigration policy, be it extremely relaxed or extremely restrictive, is a choice, none of which is a sine qua non of a well-functioning economy.

   Am I right or totally off the mark? This is just a thought off the top of my head. I am relatively new to MMT and am thinking of ‘basic’ features of the economy that this analysis turns on their heads.

8. Vabadus

   You can never run out of currency but you can cause inflation and you can run out of people.

   So when a government decides what kind of economy it wants it has to make sure it has enough people to carry out the work. So you have to think about it in skills and resources each country has and not in money terms. You have to make sure you have enough skills and resources to absorb the government spending or you might get inflation.

   How big do you want your army ?

   How many farmers do you need ?

   How many doctors and nurses do you need ?

   How many police and firemen do you need ?

   How many judges and lawyers do you need ?

   How many teachers do you need ?

   If your the monopoly issuer of a currency and then you impose a tax to paid in that currency on the currency users.

   Then you have to allow the users to meet that tax liabilty, save in that currency and spend on goods and services that they need and invest in the productive private sector.

   If the currency issuer don’t allow that. Then what’s the point of ending up with the unemployment rates and youth unemployment rates that the currency issuer has created?

   The currency issuer could spend £30 trillion on the NHS tomorrow morning. Nothing can stop them if they decided to do that but they would cause inflation because there are not enough skills and resources to absorb that much.

   Education is the same as the NHS you need teachers and you need Doctors and nurses just throwing money at the situation won’t help as they don’t appear by magic out of the pavement. You need a plan over many years that produces the skills and resources that you need.

   Ideally you would educate your own Skills and resources to do those jobs. However, there are times when you can’t and that is where immigration comes in. You create an immigration policy that reflects those needs not a free for all that we have now.

   Smart People talk about Government Buying

   https://medium.com/modern-money-matters/smart-people-talk-about-government-buying-f805c18c4d31

9. Vabadus,

   Trump is going to have the same problem he is going to run out of people and will probably have to bring down the wall. 🙂

   Trump has no idea that the US is actually winning the trade war already.

   Canada, China the EU, the UK and Japan work away in their factories working long hours and in some cases under terrible conditions to produce goods and services for the Americans to consume.

   This gives the Americans more leisure time to enjoy life, as they don’t need to produce these goods and services themselves. It also allows them to concentrate their skills in other areas of the US economy. Unfortunately today that seems to be the military. When their skills could be used for better public purpose that benefits everybody.

   In return all that Canada, China the EU, the UK, and Japan get in return for those goods and services are $ blips at the FED. That ultimately get spent in the US economy anyways. Or get saved as US treasuries earning interest.

   Canada has $ 86 billion

   China has $1185 billion

   Germany has $72 billion

   UK has $250 billion

   Japan has $1061 billion

   It just indicates that people outside the US want US$ savings and are willing to exchange stuff for them. And since the US state can print US$ at will, for zero cost, that is a very nice deal for the US.

   Should overseas appetite for US$ savings diminish, then the trade balance will narrow, quite naturally. And should they ever decide to spend those US$, then that spending will result in the US running a trade surplus.

   The accumulated trade deficit is simply a store of future overseas demand for US goods.

   If you are importing it that’s because you want it.

   If you are exporting it that’s because you don’t want it.

   As a country you export ( things you can produce yourselves) to get as many imports ( things you can’t produce yourselves) as you can.

   That’s the reason you trade.

   Think of it as your pile of stuff. That’s your real wealth. Goods and services. So your real wealth is everything you can produce when everybody’s working. That’s how you get the most real wealth. Plus whatever you import adds to your pile of stuff.

   Whatever you export subtracts from your pile of real stuff. Now I did not say that exports don’t help the exporters. Yeah, it helps those people. But it is a subtraction of real wealth from the entire economy. The exports are your cost of imports.

   Back in the old days we called that ‘real terms of trade’. So to optimise your prosperity, you make everything you can with everybody working, and then you add to that with imports, what people export to you. Then whatever you must export, you try and get as many imports as you can.

   If you can export one Ferrari and get four Mercedes, that’s good. If you can export one Ferrari and get five Mercedes, that’s better. Real terms of trade, that’s the important thing.

   So how will the US get more imports ( steel) for their exports when he has just put the price of steel up for US consumers ? He’s going to get less.

   The only way around it is pay the higher prices or by import substitution and that is use US skills to produce more for themselves but that means taking skills from other parts of the US economy to do so. Or using unemployed people that could be used elsewhere. Or try and find steel cheaper somewhere else. If you carry out import substitution you have to make sure wages rise so that you can afford to buy at the higher price.

   With trade it is always the question. What do you want the skills that you have doing ? Trump can never run out of $’s but he can run out of people.

   It won’t happen over night obviousley and Trump would need to win another 3 terms to see it through.

   If he can carry out import substitution and increase wages then he will be considered as a Genius and will have created many more domestic jobs that he predicted.

   However, there is a very good chance he’ll run out people before that happens. He’ll probably need to tear down the wall to achieve it 🙂

10. Thank you for your detailed response, Derek, but with respect, that wasn’t what I was asking. I didn’t have either Trump or trade in mind, nor was I stating my own position on immigration. It is genuinely, as I asked, a broad set of related questions off the top of my head now I am trying to scrutinise mainstream political and economic platitudes (trade was, incidentally, another question I had, but completely unrelated to this one on immigration):

    1. What is the purpose of economic immigration if, as MMT teaches us, migrants’ taxes are not needed to keep state coffers full?

    2. Given that MMT advocates themselves differ on what sort of taxes best control inflation (this is the purpose of taxation), surely it similarly cannot mean that economic migration is absolutely necessary to control inflation either?

    I must be right in assuming, then, that immigration is merely a preference (because you are culturally liberal, open-minded, do not feel strongly about the matter, etc.), or there is some other economic function of immigration within the framework of an MMT analysis that I have missed.

    To drive home my point, let me pose a starker third question:

    3. From an MMT perspective, what would be the economic consequences of banning immigration altogether if migrants’ taxes are not required to fund the state (since the state is self-funding and creates money in the first place)?

11. Vabadus, you are absolutely correct that the taxes immigrants pay are not needed to fund national government spending in a nation that issues its own currency. In all my reading of MMT there is no particular stance taken on immigration or whether it has economic ‘purposes’ that MMT supports one way or the other. I take that as leaving that issue up to the policy inclinations of whichever nation is in question while hoping that policy reflects the values and the will of the citizens in some democratic fashion. In other words, MMT does not say much one way or the other on this issue and policy choices in this area should be determined for other than economic reasons. But most certainly, immigration is not necessary to fund government spending, and it is not necessary to control inflation.

    If the full MMT prescription, including the Job Guarantee, was implemented, then presumably all legal immigrants would be eligible to participate in such jobs program.

12. Thanks, Jerry. That’s pretty much what I thought to be the case. I initially asked this question elsewhere and got a similarly irrelevant answer at first. I sensed that this was because the pro-MMT blogger inclines towards the political Left and didn’t want to ‘admit’ that immigration was a choice rather than a necessity, and assumed I was trying to co-opt MMT for anti-immigration purposes. I wasn’t, but I think it is perfectly valid to point out that immigration is a political preference and the debate can be addressed from both sides on those terms as opposed to belabouring points under a pretence that it is an economic necessity.

    It’s all very interesting indeed to me as a non-economist and a relative newcomer to MMT. There are all sorts of everyday ‘truisms’ about the economy and politics that seem not to be true after all, and should be put under scrutiny. A topical one for Western countries would be demography: pensions and an ageing society. Presumably, MMT would have us believe that these are problems that can be fairly easily surmounted.

    As for trade, I wonder whether Derek’s post above is simply restating the case for free trade without reference to MMT. Ha-Joon Chang, a South Korean economist gaining visibility in the UK, for example, rails against the ‘myths of free trade’ and advocates protectionism, using graphs and evidence that suggest developing countries grew faster while protecting infant industries. Only once those industries have ‘matured’, he argues, can they then be exposed to competition; throwing them into the cut and thrust of neoliberal international trade is effectively kicking away the ladder. Does MMT have anything at all to say about these arguments, or how important trade (whether protected or laissez-faire) is to GDP, growth, and productivity?

    What does MMT have to say about ‘hypothecated spending’ (for want of a better expression)? In other words, according to MMT, does spending on, say, the National Health Service or state housing for the poor amount to pumping the money into the economy, with all the same risks of inflation, or is it a different sort of spending since the ‘money’ is essentially hypothecated for a particular purpose without circulating freely in the economy in the same way it does when consumers spend in the private sphere?

    I understand that this might not be the best place to ask, but these are all off-the-top-of-my-head questions from someone with no background in economics. I appreciate the responses and engagement with my questions.

13. Vabadus, you are at the right blog to find the answers to all your questions about MMT. There is a little search function up there at top right on the page that can be helpful, and Bill Mitchell has written literally millions of words on the subject. And he is recognized as an authority on the topic. It does require some reading though. But it is time well spent.

    Quick answers from a non-authority- all spending, whether private or government, has the potential to be inflationary. Whether it is more inflationary or less inflationary has to do with the real resource constraints in that field.

    Likewise, demographic changes might impose constraints due to a lack of real resources- employment aged labor. MMT does not offer easy solutions for the lack of real resources problem, nor does any other school of thought.

    MMT, or maybe just Bill Mitchell, has been reassessing the position on trade somewhat recently. Generally, MMT has held that exports always represent a real cost of real actual goods and services for the exporting nation, while imports are always a real benefit. This may have evolved a bit in recognition of points similar to what you mention from Ha-Joon Chang. Bill Mitchell is the one to answer this and I hope he writes on this issue again.

14. Vadus

    My orginal post was removed sorry for the confusion the Trump post carried on from that

    Please see smart people call it government buying by Neil Wilson

15. Peter Green sounds like Santana. Or Santana sounds like him…

16. I am trying to get my head around how MMT would respond to a stagflationary economy.

    Hi Henry,

    I recommend reading Bill’s post entitled Modern monetary theory and inflation – Part 2, January 6th 2011, particularly the material under the sub-headings “conflict theory of inflation” and “raw material price rises”.

    https://billmitchell.org/blog/?p=13035

    My understanding of that post is that it covers policy options that should be implemented in the absence of a Job Guarantee. These options include an incomes policy in which the national government prescribes incomes for particular industries so that the burden of overcoming stagflation is fairly distributed between workers and employers. In a stagflating economy, there needs to be a combination of real wage reductions and profit margin reductions. Workers will resist reduced wages and employers will resist reduced profit margins. Therefore, in the absence of a Job Guarantee, the government would have to make a judgement call about what would be a fair distribution of income losses and impose that distribution on workers and employers.

    A Job Guarantee would probably resolve stagflation automatically because if workers demand nominal wage rises that are incompatible with employers’ desired profit margins and the productive capacity of the economy, employers would resist the wage rises, and the workers would either drop their unreasonable demands or they would quit and be replaced quickly by people from the Job Guarantee workforce.

    Without a Job Guarantee, this process cannot happen because there isn’t a pool of mentally and physically healthy employed people who are ready to replace employees who quit over unreasonable wage demands. Instead, there is a pool of miserable unemployed and under-employed people who won’t be ready to step into mainstream jobs. So the employers would be under pressure to grant wage rises that exceed the productive capacity of the economy, and then the employers pass the wage increase onto consumers in the form of higher prices, and the price rises spur further demands by workers for wage rises.

    I think Bill’s argument about inflation is that it can originate from different sources, but in the end it doesn’t matter much where it originates because the outcome is the same: a conflict between workers and employers over how to distribute national income. That conflict needs to be resolved, ideally via the automatic stabilizer of a Job Guarantee.

    The inflation could originate from the demand-side of the economy: i.e. total spending across the economy rises faster than productive capacity.

    If it is demand-pull inflation, then targeting the source of excess demand, wherever it is, could be the right move. If one particular sector of the economy is over-heating, then taxing that sector more heavily, or cutting government spending into that sector, would be a useful intervention.

    The inflation could originate from the supply-side of the economy: i.e. the price of a core commodity increases rapidly and spills over into other prices, including the price of labour.

    If it is cost-push inflation, there might be problems with how a particular market is functioning. For example, food markets or energy markets might suffer from inadequate competition. In that case, competition policy interventions might be appropriate. Or there might simply not be enough productive capacity, in which case the government might need to invest directly in government-owned enterprises to produce more food, or more energy, or assign Job Guarantee workers to produce these commodities.

    If the cost-push inflation originates domestically, the optimal policy interventions might be different from what be would required if the cost-push inflation is imported from the rest of the world. If it’s an imported price rise, then trade policy measures, industry policy measures, energy efficiency mandates etc might be needed to reduce dependence on the imported commodity.

17. Thanks for the pointers in the right direction, Derek.

18. Vanadus,

    My original post is there now.

    The one before the Trump comment.

19. Thanks Nicholas

    Yes capital controls if needed are the key.

20. Vabadus, I must confess I am intrigued about your immigration questions.

    Is immigration framed as an economic phenomenon? Because I thought that even in the mainstream economics theory immigration was not framed as an economic phenomenon.

    I mean, people are fleeing Syria because of the bloody civil war (a political/social phenomenon), not because they want to enjoy better professional opportunities or something like that. They are trying to survive.

    Or, in Greece, people are fleeing from unemployment, poverty, violence and so an (which are political/social/economic phenomenons), which is not exactly a war in the literal sense, but it is some kind of social/political war nonetheless.

    Also, there is not necessarily an “economic purpose” for immigration. People are trying to survive, they are not thinking about a bigger purpose…

    One more thing: it is possible to divide MMT in two parts (although Bill Mitchell claim it isn’t): a descriptive part and a prescriptive price.

    The descriptive part simply states how the world works (how central bank and treasury operation work, for example). There is no political ideologies involved.

    The prescriptive part is about suggestion of new policies to make things better. It depends on ideologies.

    You can have an right-wing MMTer and a left-wing MMTer… They will fight with each other about the prescriptive part, but not about the descriptive part.

21. André, I live in the UK. Immigration has been a major, if not the most important, political issue in every General Election for the last 13 years or so. Every time, it is framed by politicians in economic terms: that we need immigrants for their “contribution to society” by working; that the NHS would “collapse” without migrant workers; that immigrants “do the jobs Brits don’t want to do”; and so on.

    This was especially huge in the EU membership referendum and is likely to have swung the result in favour of Leave, since EU membership means unfettered free movement of people across the continent, the effects of which, in the British experience, has been unlimited and unlimitable numbers of poorer jobseekers, especially from the former communist countries of eastern Europe. They compete for the lowest-paid work with the most unskilled of our own people, often in post-industrial areas that are already deprived and unproductive. Those fleeing from Syria are refugees, which is a different issue altogether; calling it ‘immigration’ is unhelpful and misleading.

    What are practically undiscussed in the UK, at least on the political platform, are the sociocultural dimensions to immigration, even though the truth is that many people are simply uncomfortable with seeing their towns and cities become increasingly alien, older and more homogenous communities broken up, and in some cases becoming an ethnic minority in their own area (the demographic decline in the number of White Britons between 2001 and 2011 in the deprived London Borough of Newham, for example, is staggering). Many of these people would sooner take an economic hit by restricting immigration (this is assuming in the first place that mainstream politicians are correct to say that the economy depends on migrant workers) and preserve their communities from the sheer rapidity and scale of cultural change.

    You can agree or disagree with these sentiments, of course, but my overall point is that if the platitudes and shibboleths we hear from politicians about immigration being an economic necessity are false, then I would welcome fleshing out the political debates on the issue on the correct terms, i.e. culture, society, and ideology.

    I notice that Neil Wilson, towards whose work Derek directed me above, has a whole tab on his Medium account dedicated to immigration, and is the only MMT blogger I’ve come across who does. Wilson advocates zero net immigration, which again is uncommon given that most MMT advocates tend towards the political Left, even if the analysis, given that it is descriptive, is not inherently ideological at all. I posed my third question in stark terms – “What would the economic consequences of banning immigration be?” – to deduce whether immigration is necessary from an MMT analytical perspective.

    As for the description/prescription distinction, I was interested to see more than one libertarian praise the insights of MMT. Where they would disagree with you, though, is that they see MMT as identifying what is wrong with the present system, and with fiat currency in particular, for which Austrian School economics is their remedy. So not only will their be right-wingers who want to use the descriptive elements of MMT to illuminate their prescriptive ends, there are those who accept its descriptions of the way the economy and money work as evidence for the need to overthrow it.

22. Immigration is a political question.

    The Beveridge condition is that there is always more work than people that want it in all local areas. That suits the ‘somewheres’ who like to live in a place. In this political set up the work goes to the people, or the work doesn’t get done.

    Neoliberalism believes that there should fewer jobs than people and that people should be factors of production, moving from place to place in search of their next ‘gig’. People follow the work and everybody must be part of a travelling circus. That appeals to middle class liberals who, trained for the professions, wander from job to job. It’s also the life of your average academic. These are the ‘anywheres’ – intellectual travellers – networked to each other, not to a place and its people. It is the Norman Tebbit “On your bike” attitude. And it is the one currently adopted by the UK Labour party.

    Net immigration is not required. Japan bumbles along quite happily with net zero migration – increasing GDP per head via automation and innovation.

    So we have a political choice. Are we in hock to capital and people move to where the capital wants them. Or do we serve the people and move the capital where the people are.

    The Job Guarantee makes the work go where the people are, and serves the ‘somewheres’. That makes them content and increases their capacity to handle the ‘anywheres’ that move amongst them. The political challenge is to get the anywheres to realise that they ‘crowd surf’ on the shoulders of the ‘somewheres’.

23. Thanks Mike and Nicholas

24. Vabadus,

    “there are those who accept its descriptions of the way the economy and money work as evidence for the need to overthrow it”

    Yes, there are groups of people who accept MMT’s descriptive part and then their prescription is to overthrow (abolish) money, because they are aligned with some libertarian/anarchist/Austrian ideology.

    However, there are also people like Bill Mitchell, who prescribe the job guarantee, more control over government etc, because he is aligned with left-wing ideologies.

    I believe that those kind of debates are healthy, and they may lead us to a better place.

    On the other hand, I believe that is extremely unproductive to deny MMT’s descriptive part, assuming that money is like a commodity (gold?) or that money is neutral etc. Those kinds of denials/ignorance lead us to nowhere useful.

25. Neil, Richard Murphy (who I initially asked the immigration question) reckons MMT has nothing to say on immigration, and that “it would be a mistake” to restrict it, although he doesn’t explain why. He seemed almost hostile to merely posing the question.

    I see from subsequent replies that he and you don’t see eye to eye on a few issues, notably tax havens.

26. Richard Murphy is hostile to most things MMT prescribes because it bumps up against his strong religious belief over the secret powers of taxation.

    You tax the rich because you want them to have less money. That’s it. Taxation serves no other purpose in that direction. It’s a moral confiscation to correct a distribution failure. The spurious justifications of the tax justice warriors are just wrong. MMT demonstrates that and that destroys the basis of Murphy’s arguments for taxation.

    Taxation is largely just a very bad way of releasing resources for public use. Generally there are better more effective ways of freeing up resources – restricting bank lending, banning activities and delaying activities. There’s always a background of taxation that has to be fairly distributed in a simple manner, but it is a background process rather than the be-all and end-all tax justice warriors seem to want it to be. I don’t like their reliance on envy as a political weapon.

    Murphy is also against the Job Guarantee – which means he favours an unemployment buffer instead. Or rather he favours paying people to be unemployed, which as you know always goes down well with those who work. I have a section on the Basic Income which explains why, and which ultimately shows that Basic Income is about the theft of time from workers, whereas the Job Guarantee is the exchange of time between workers.

27. I’d make one further point on immigration. One nation’s immigration is another nation’s brain drain. The brain drain to London has hardly helped places like Rochdale. Those effects don’t stop at country boundaries.

    How is taking medical professionals from third world countries where they have endemic rickets a progressive act? It isn’t. It is pure imperialism and colonial appropriation. The hypocrisy of a set of people crying ‘freedom’ when really they want cheap servants is sickening. Let them, instead, go to the source nations and correct the political problems there.

    Fix Greece rather than championing the forced transportation of Greeks.

28. Some people are able to access, use, demand, influence or control far more of the real resources of society than most others for the simple reason that they have more money. These are what we might call ‘the rich’.

    Taxation of the rich is not only about wanting them to have less money- it is also about limiting that control over real resources in order to free them up for use by others.

    I agree with Neil Wilson that taxing the rich is not usually really necessary for the government to spend on any particular program or project that uses or transfers real resources. But at times, it is necessary to free up privately controlled resources so that they can be used for the ‘public purpose’ (whatever that may be). Taxation is one of the more benevolent options a government might use in order to ‘free the resources’ (its a more humane way of confiscating some of them). Sure, the government could go around confiscating real resources, but most people find that a little too oppressive and it is usually quite unpopular.

    In other words, taxing the rich is not all about envy and there are good reasons to do it.

29. Neil, that is interesting given that Murphy sings the praises of MMT.

    Regarding immigration, how does the lump of labour fallacy fit into your analysis? Surely if there are more jobs than people, this is where economic immigration serves a positive purpose? (On a slightly unrelated note, did you know that the only party in the UK that advocates zero net immigration is the Socialist Labour Party, lead by none other than Arthur Scargill? This is more restrictive than what Ukip advocate.)

    How do we work out what rate of taxation and what type of taxes best serve the purpose of inflation and unemployment control, then? Does the type of taxation even matter as far as MMT is concerned? For example, would a full Land Value Tax as envisioned by Henry George be just as feasible as an assorted range of different taxes? Is a flat tax necessarily worse than progressive taxation to achieve MMT’s prescriptions?

    Sorry for what might seem like basic questions, but again discovering MMT turns all the fundamentals I thought I knew on their heads, and I’m trying to make sense of it all.

30. “How do we work out what rate of taxation and what type of taxes best serve the purpose of inflation and unemployment control, then?”

    Well, I don’t know whether my answer represents 100% of the MMT view, but I will try.

    First of all, inflation may not be related to taxes. Probably inflation is much more related to a lot of factors (amount and quality of government spending, for example) other than taxes or the government deficit (nominal or primary).

    Second, the tax policy will define who will work for the government (directly or indirectly) and how much, and not the level of inflation.

    If you want to everyone in the society to make an equal contribution to the government, a poll tax would be ideal, and a house tax could also do the trick.

    If want people with bigger houses to contribute more to the government, then you should charge more taxes to big house owners.

    If you want to consumers to contribute more to the government, you should introduce a consumption tax. If smokers should contribute more, you should charge cigarettes taxes, and so on.

    Hence, the tax policy is a social/political choice that will define who will directly/indirectly supply the government and how much.

    One of the infinite possible tax policies is the “tax the bads, not the goods” proposed by Warren Mosler. It means that government should tax more things that are bad to society, and tax less what is good. Just one of many examples.

31. I think a key insight from MMT that is relevant to immigration policy is that the currency-issuing government of nation with a high level of political development and administrative capacity has immense scope to mobilise real resources to educate and train locals to meet the nation’s requirements for skilled labour. The claim that a high immigration intake is necessary because of “skills shortages” is false. A nation like Australia, for example, can and should develop its skilled workers locally. All that is required is for the national government to resource the education and training systems adequately and to maintain full employment so that everybody who wants to do paid work always has the opportunity to develop their skills and knowledge and productive capacity through engagement with paid work.

    A net migration intake of zero would be perfectly compatible with Australia having all of the skilled workers that it needs.

    For nations whose political development is limited and whose governments have weak administrative capacity, the options are more limited. Those nations depend on foreign technical expertise to develop their local workforce and their local infrastructure and services.

    Whether our net immigration intake should be above zero, and by how much, should be determined by ecological, humanitarian, and cultural considerations.

    Personally, I favour a net immigration intake of zero, meaning that right now Australia would have an intake of 80,000 migrants per year. I would skew the intake heavily towards refugees and other humanitarian categories of migrant (perhaps 60,000 per year), and have modest numbers of skilled and family reunion migrants for the sake of cultural diversity.

32. “Murphy sings the praises of MMT.”

    If you don’t support the Job Guarantee, you’re not doing MMT. You’re just doing Keynesian pump priming which will cause a wage/price spiral just like it did the last time it was tried in the 60s and 70s.

    Job Guarantee puts the currency on a time standard and anchors the currency in reality at all physical locations in the currency area. That’s vital for inflation control.

    “Surely if there are more jobs than people, this is where economic immigration serves a positive purpose?”

    Again has the immigration into London from Rochdale helped the people of Rochdale? We keep recreating 1840s Manchester time and time again and every time we wonder why we have deprivation and social ills.

    In a modern world of automated technology, we should be moving the work where the people are, not the other way around. That prevents the destruction of social capital inherent in a local community.

    ‘lump of labour’ analysis fails under a Job Guarantee scenario – because by definition a job is destroyed when the new one is created so there is little net benefit – particularly as the negative effects of large population centres start to bite: Increased housing costs, increased commuting times, and the environmental impact of that concentration in density.

    All you are doing is moving activity from one country to another. You’re not increasing it in any way that justifies the social costs either on the source society or the destination.

    The political difference with MMT is that it advocates moving the work where the people are and provides a way of doing it that *forces* capitalism to do the same – the Job Guarantee. That keeps social structures intact for the majority of people that want to live in a place, while still allowing those that wish to wander the opportunity to do so in a non-destructive manner.

    As to setting taxation, a fair system is all that is required. Overall taxation will always end up as being about 90% of what government spends with the other 10% as an increase in savings. Chancellors can only really affect the distribution of taxation. The total is a function of the system and the desire of the non-government to save. I’ve not seen a lot on the type of taxation in MMT analysis because that’s a political question.

    In aggregate taxation has to be high enough so that the Job Guarantee buffer never exhausts at any physical location within the currency area – even at peak private sector boom. You want to keep the anchor operating at all locations.

    Under our current system the exhaustion of the ineffective unemployment buffer at physical locations where a private sector boom is underway is one of the reasons you start to get inflation. And that’s because you’re revving the private sector engine into the red zone to try and generate jobs. Under a Job Guarantee system you don’t need those private sector jobs, so you can limit the private sector engine to a lower level – which helps stop it blowing itself apart.

33. Could not agree more regarding how the Left turned from public to private. The official neo-liberal government leader in Sweden in the 80-90´ was the socialdemokrat Erik Åsbrink(Treasury -secretary, – dep minister, -minister(1982-91, 1996-99). He was also head of the board of the Riksbank(cb) 1985-90 which was responsible for the total failure of the monetary policies that led to the worst depression in Sweden in modern times. Åsbrink is married to the former communist(1988-91) Ylva Johansson, now minister of employment in the socialdemocratic government.

34. Erik Åsbrink is an adviser to Goldman Sachs from 2011. Many former swedish government-leaders have been associated to Goldman and other investmentbanks.

35. Neil Wilson,

    “If you don’t support the Job Guarantee, you’re not doing MMT.”

    Well, MMT was a term invented by Bill Mitchell, so it means whatever he wants it to be, but I have to disagree with you and risk myself anyway.

    Once you understand how modern money actually works, you acknowledge that there are a lot of ways to fix an unhealthy economy, guaranteeing full employement, low inflation, growth, equality and whatever society deems important. Analyzing social, political and economic factors, most MMTers claim that the Job Guarantee is the optimal solution, but, well, they may be wrong, who knows?

    The Job Guarantee is just one of many untested possibilities. In my understanding, you may be an MMTer while still supporting other alternatives.

    Here are examples of some alternatives:
    – Unlimited budget while strictly controlling public wages and prices. You would not need a JG program if the government always spend enough.
    – ‎A job program like the one present in House of Cards, where the government subsides some of private sector wages (very different from the JG proposed by most MMTers. Maybe one they there will be the MMT liberals)
    – ‎A full scale war (WW3?) that would sure employ everyone to achieve world destruction (maybe one day there will be crazy MMT facists?)

36. Andre- Neil is right. MMT without a JG is not MMT. It is not a coherent body of economic thought without it. If you want to divide into descriptive and prescriptive, the JG belongs essentially to the descriptive part. Everybody, including modern mainstream economics pretends to have the same goals, uses the same natural language descriptions of economics.

    The difference is that MMT theory coheres with the natural language, plain English or plain Estonian common sense, while the mainstream plays crazy word games when it identifies its theoretical terms and propositions with the natural language terms it pretends to apply them to. It has “axioms” that boil down to “money doesn’t exist” and “unemployment doesn’t exist”. Its logic and arguments are not logical and make no sense and usually reverses everything, including directions of causation.

    The JG is a logical consequence of these universally held goals (full employment, low inflation etc) which are embedded in the language and practice of all economics. If you do the economics right, don’t indulge in mainstream crazy talk, you get to MMT, including the JG.

    Well, MMT was a term invented by Bill Mitchell
    No, I believe it was invented by a blog commenter, at Warren Mosler’s site IIRC.

    The Job Guarantee is just one of many untested possibilities.
    The JG has been tested, with great success, many, many times. The New Deal in the USA, the postwar era worldwide, etc, etc. Bill’s Full Employment Abandoned book records these successes.

    There really isn’t any alternative to the JG. It doesn’t matter what you call it, if it works for these universally accepted aims of a JG, it will be a JG. There really isn’t any alternative way to fully employ the unemployed except by government spending targeted at the unemployed, which is a JG, no matter what you call it or how you pretend by having spending pass through “private” employers. If you spend like wild, without targeting, you will get inflation.

    I don’t agree with Neil on the necessity of having taxes high enough to have a JG pool operating everywhere. That it be substantial over the whole country should be enough.

37. “It doesn’t matter what you call it, if it works for these universally accepted aims of a JG, it will be a JG.”

    No, the MMT JG is very specific. It is a government program that offers minimum wages to all the unemployed.

    The New Deal was an instance where the government employed its fiscal capacity to promote economic growth (with is supported by MMT) but it was not a JG program.

    If you define that JG is everything, well, then every economic theory support JG. But JG is not every kind of policy. It is a very specific one.

    Also, JG is not a logical conclusion. It is one of many alternatives for a modern government to promote a specific agenda (full employment and low inflation). There are other alternatives and other agendas that a MMTer could support.

    In a sense, you are more or like acting like a mainstream neoliberal, when they claim that economic opression not only good and unavoidable, but it is also a logic conclusion. They claim that you are illogical of you don’t agree with them.

38. Thanks, all, for the lively discussion.

    The idea of a zero-net immigration policy being all that is needed for our economic needs is interesting. There is also the view, though, that the economy should serve society, rather than vice-versa, which would justify policies that are not necessarily economically efficient, but serve a broader human purpose. A liberal might take that to mean allowing generous approaches towards refugees above the zero net level, while a nationalist might wish to ban immigration altogether for cultural reasons. I would much rather have this sort of conversation on the political arena that couching what are essentially moralistic policies in pseudo-economic jargon.

    Given that MMT is descriptive, do you find yourselves baffled by those who accept the analysis but reject its prescriptive derivatives? For example, I’ve come across several libertarians, one writing for the Huffington Post no less, who have bougt what MMT says, but regard that as a justification for Austrian economics. I mean, given that Austrians want free banking with a competing free market of currencies and no taxation, do you see this as yielding nothing short of catastrophic consequences?

39. I think Andre is right to divide MMT into ‘descriptive’ and ‘prescriptive’ categories. And that the Jobs Guarantee falls under the prescriptive area. I mean its fairly obvious that no country in the world has a Jobs Guarantee program that is what MMT would say meets the standard at this time, and that fact alone says that is prescriptive. As far as a JG, MMT says what could be, and what should be, and why it would be better- but not what actually is existing at the moment.

    There are other prescriptive parts of MMT also. Things like the government not ‘borrowing’ in its own currency or paying interest on that borrowing if it does. That national governments should issue their own currency, and not peg it to a commodity or other currency. That governments should try to avoid borrowing in other currencies. That the farce of ‘independent’ central banks should be disposed of.

    Obviously there are alternatives to the Job Guarantee- we in the US have been living one of those alternatives all my working life. And the points MMT makes about government spending with a fiat currency and how that actually is accomplished and what is involved there do not at all disappear in the absence of a Job Guarantee.

40. Yes, Jerry Brown, that’s exactly what I’m saying.

    Vabadus:

    “you find yourselves baffled by those who accept the analysis but reject its prescriptive derivatives?”

    Yes, I do myself baffled. Cannot speak in the name of others.

    “I mean, given that Austrians want free banking with a competing free market of currencies and no taxation”

    Well, it is a political choice, and it isn’t related to MMT’s descriptive part or the prescriptive part supported by most MMTers. I mean, Bill Mitchell himself advocates for public banking and no private banking at all, and he advocates sometimes, in some circumstances, for higher taxes.

41. “There are other alternatives and other agendas that a MMTer could support.”

    There isn’t Andre. If you do not support the Job Guarantee, then you are just a pump priming Keynesian that will cause a wage price spiral and collapse just like in the 1970s.

    In other words that approach has been tried and has already failed – leading to Monetarism and neoliberalism.

    Mark Blyth calls this the ‘bug’ in Keynesian thinking. The Job Guarantee fixes the bug – and it is the only thing that will do – because it is automatic, instant and spatial in nature. It is an automatic stabiliser that stabilises the monetary circuit *and* the real circuit – leading to price stability *and* full employment.

    Bill has been very clear about the centrality of the Job Guarantee

    “The reality is that the JG is a central aspect of MMT because it is much more than a job creation program. It is an essential aspect of the MMT framework for full employment and price stability.”

    Every generation that discovers MMT seems to think they can do without the Job Guarantee for some reason. Quite why that is I don’t know.

42. “I don’t agree with Neil on the necessity of having taxes high enough to have a JG pool operating everywhere. That it be substantial over the whole country should be enough.”

    If you exhaust the buffer you cause inflation. Given the relative immobility of labour how is the anchor going to work when you have run out of people in a location that has several competing businesses chasing the labour? Instead you get a wage price spiral which then starts to leak out.

    The mechanism by which the Job Guarantee constrains wages is that at the lower end there is always somebody on the Job Guarantee a private sector firm could hire instead of you if you ask for a pay increase.

43. Andre:
    No, the MMT JG is very specific. I am speaking somewhat more loosely than usual. But no more loosely than MMT academics occasionally. That speaking practically “Spending targeted at the unemployed to employ essentially all” = Job Guarantee, I got from Wray.

    The New Deal was an instance where the government employed its fiscal capacity to promote economic growth (with is supported by MMT) but it was not a JG program.

    No, the jobs programs, the WPA, PWA, CCC, NYA etc were the model and inspiration of the MMT JG. Not a perfect model, but clear enough to call them “essentially a JG”. They needed to be just a bit bigger to get to true full employment, to be a perfect JG. Note that the “Keynesian” Fiscal to promote growth to employ people is not the FDR, New Deal, JG, MMT, Keynes, WPA way – employing people first and letting growth be whatever it is is the MMT etc order of causation.

    Neil’s and my point is that these alternatives are illusory. The alternatives either do not accomplish the goals implicit even in the shared vocabulary and concepts of all economics or are “essentially a JG” by another name.

    Boiled down, MMT solves the problem of employing people – by employing people!
    Whodathunkit??!! Amazing!
    Our point is the slightly more difficult one of noting that there is no other way to employ people, except by employing people.

    Quibbles with Neil:

    I am not denying that that might not be helpful sometimes. But I am trying to pound in the centrality, the essentiality of the no-frills “essential JG”, under whatever name, to MMT, where I think we agree completely.

    Given the relative immobility of labour
    Labour is not that immobile. People commute to work and have been for millennia. An hour’s commute (the standard maximum time since Neolithic times) can take you a long way these days.

    how is the anchor going to work when you have run out of people in a location that has several competing businesses chasing the labour? Instead you get a wage price spiral which then starts to leak out.
    Not really. So wages are bid up in some place where labor is in high demand. That is going to happen in reality. A few prices might be higher, particularly rents. But national economies are quite integrated enough to avoid general price spirals. There might be some real reason for there to be a boom in, for labour to be so expensive in that area. The problems would be self-correcting, not self-reinforcing, which is what is needed for a spiral.

    Every generation that discovers MMT seems to think they can do without the Job Guarantee for some reason. Quite why that is I don’t know.
    Because there is always a stage of half-learning. Because there is a natural desire to improve on what you have learned. I too thought that BIG style handouts might be better than a JG for the first month or so I was learning MMT. But this “improvement”, like most of the “improvements” to Keynes after the 1950s is actually a step backwards into the very ideas that Keynes or MMT refutes.

44. Jerry Brown: You bring up some very helpful comparisons when you list MMT prescriptions like “That national governments should issue their own currency, and not peg it to a commodity or other currency. That governments should try to avoid borrowing in other currencies. That the farce of ‘independent’ central banks should be disposed of.”

    It is a basic MMT point, clearly descriptive, that a national government always does issue their own currency. They may peg it to another currency or any of the other usually silly things, but the underlying reality is the currency, which is nothing but government credit (or debt) and is almost always driven by taxation. The say “gold standard” is something that you put on top of the underlying reality of government currency = government credit. “Dollars aren’t valuable because you can get gold for them. Gold is valuable because you can get dollars for it.” (Lerner) That is the opposite of the commodity theory view.
    The MMT “prescription” amounts to: stop this pointless bullshit.

    That is roughly the sense in which I am saying the JG proposal is more descriptive than prescriptive. (Of course I’m aware I’m going out on a limb.) The JG part of MMT describes a reality – the reality behind the concepts and vocabulary of economics – people work for a living, which means they are trading their labor with each other, organizing the division of labor for both shared and individual purposes. For there’s always a 90-95% or whatever “JG”: 90-95% employment- or there is a revolution or revolutionary reform like the New Deal.
    But on top of this groovy utopian cooperative, governments often behave psychotically, corruptly, at the behest of the wealthy, or even more usually out of ignorance, may make demands of citizens which are absolutely logically impossible for them to fulfill- by not having a JG.
    The MMT prescription is again: stop this idiotic bullshit. Sabotaging cooperation is entirely destructive, obscures the underlying reality.

45. Yes, I think most people are aware that Bill Mitchell considers the Jobs Guarantee to be an integral part of MMT. He has already convinced me why it would be important and why it would be very useful. But the fact is we don’t have a real JG anywhere at the moment. That does not mean that the rest of MMT descriptions of how the economy works right now are incorrect. And it doesn’t mean that other half-way programs would not or could not improve things.

    Neil Wilson, wouldn’t you agree that trade within a nation (say state to state in the US) is likely to dissipate a lot of that regional excess demand that might lead to inflation? And even with a Job Guarantee, certain localities could run out of available labor especially in harder to trade service type jobs. Or in industries where required infrastructure and capital investment make it very difficult to compete. And so what if labor, which is the asset owned by me, experiences some of the increases in value in certain regions that other more tangible assets regularly do? That is capitalism and that is supposed to be how it works occasionally.

46. Some Guy, I see your point (and agree it is true) that nations actually do issue their own fiat currencies even when they pretend not to. Although not so sure about the Eurozone thus far, your point is shown whenever countries find themselves in some terrible war or other crisis. Still skeptical about the JG being a description of current government policy though.

47. Dear Some Guy and or Neil
    My expierience with MMT is to have read the New Economic Perspectives blog for several weeks several years ago which led me to reading a book by Warren Mosler. Then something happened, I forget what, that led me to read the MMT responses to Jared Bernstein’s questions for MMTers, which led me here several weeks ago.
    I have not take a position on the job guarantee because it seemed to me to be just one possible way to use the power money. Furthermore I do not work with economists I work with “mist” or if you want to put in Englisch mistfits. It has not been neccessary to take a position on the job guarantee, as I have never had to explain something so specific to anyone before.
    But now I have to ask myself if I really do need to learn WHY a job guarantee is necessary for government spending not to end up being inflationary, or to prevent other negative economic side effects.
    But of more immediate concern is what would I say to someone who would ask me the question,
    what do you do with people who are unemployable due to their lack of proper socialization. I am much more likely to be asked that question than to be asked will MMT cause inflation with out a job guarantee. After all in many countries on this planet addicts of one kind or another are a at least 5% of the adult population. Sure addicts should be treated. But there is often a period of years before such people will admit that they have a problem that needs treatment. Furthermore addiction is only one of the problems that can make it difficult to employee someone. So I guess what I am driving at is are there people, who having not been convicted of an overt criminal act, do not deserve a job?
    Obviously it would be a matter of time before most unemployeed people commit an overt criminal act.
    That leads me to say that a country needs an income guarantee whether or not one works. But then the mistfits will hit me over the head with the claim that if you subsidize not working with an income that someone could live on lots of people would chose that option. The assumption that they make is that a country can not afford to have lots of people consuming with few producing. But is that really true considering that it seems that people are being replaced by machines.
    Can you explain to an Anthropologist or Archeologist how the job guarantee would work in general and how it would work with people are chronic underperformers if not non performers?

48. Curt, the thing about a Jobs Guarantee is you have to show up for work and at least put in the time. And you probably should be able to be fired from the job if you are not meeting the minimum criteria. What happens when someone is not able to meet the minimum criteria due to mental or physical health conditions or just plain laziness is a separate issue that need not be covered under a Job Guarantee program.

49. Dear All (and Some Guy at 2018/03/11 at 3:37 am)

    The following interchange contained two errors:

    Well, MMT was a term invented by Bill Mitchell
    No, I believe it was invented by a blog commenter, at Warren Mosler’s site IIRC.

    The term Job Guarantee to describe public employment creation initiatives goes back a long way and was not ‘invented’ by me nor a blog commentator on Warren’s WWW site.

    The resurrection and inclusion of the term in the MMT literature does indeed relate to my work.

    When we started to develop what has become known as Modern Monetary Theory (MMT) around 1994 and 1995, my US MMT colleagues (Warren, Randy, Stephanie etc) used the term Employer of Last Resort (ELR) whereas I originally called the concept – which I developed in my Honours year at University (1978) – the Buffer Stock Employment (BSE) framework. The BSE terminology followed directly from the concept of buffer stocks of employment being used to stabilise the price and exhaust the quantity supplied (that is, create full employment).

    Early on in MMT history, the two terms were interchangeable. I used BSE, the US colleagues used ELR.

    Two things happened. First, I objected to the use of the term ELR because it was derived from the central bank’s capacity as Lender of Last Resort and I considered applying a term that was about the provision of inanimate reserves to human labour was not appropriate.

    Second, Britain experienced the outbreak of mad cow disease (Bovine spongiform encephalopathy or BSE) in 1996, which rendered my BSE acronym somewhat dubious.

    There was some usage (by Randy for example) of the term Public Employment policy, but I decided to use replace the BSE terminology with the Job Guarantee terminology and I started using that language in public presentations and academic papers from then on.

    After a while, we (the original MMT team) all agreed either formally or implicitly to unify the terminology as so it became Job Guarantee – late 1990s. The Americans still occasionally lapse back into ELR but rarely these days.

    I hope that helps.

    best wishes
    bill

50. Neil,

    “There isn’t Andre. If you do not support the Job Guarantee, then you are just a pump priming Keynesian that will cause a wage price spiral and collapse just like in the 1970s.”

    No, I’m not. MMT acknowledges other forms of guaranteeing full employment AND price stability even without a JG program. Do your research. And it is not Keynesian policy.

    “The Job Guarantee fixes the bug – and it is the only thing that will do”

    Is it? Why? Who says so? You?

    I believe that the JG is the best way to do so, but not the only one. I believe most MMTers would agree with me, but I cannot talk for them. I guess you are the only one claiming that JG is the unique solution.

    For example, let’s suppose we take the US, UK or Australian government as they are, making just two modifications:
    – some kind of institution or law that strictly controls public wages and prices, so that they are carefully controled by the central government;
    – ‎you allow for big or illimited budget in some areas or public agencies. It means that some public agencies will be able to spend how much they want, without restraint. However, the wages and prices they will be able to offer are fixed (by the strict control), hence they will not actually be able to spend an infinite amount of money. However, they will be able to employ anyone willing to accept such wages.

    With that arrangement, you could achieve both full employment and price stability even without a JG program. It is not a JG program, just big budget with public price controls. This is just one example. A full scale war is another.

    MMT is a bigger concept than the JG policy. It explains how money (and the whole economy) actually works. With that kind of knowledge, you don’t need to restrain yourself to one kind of policy (JG). There is plenty of room for many other forms of inovative policymaking.

    I would call someone a MMTer if he or she knows how modern fiat money works (that it is not like gold, that taxes drive currency, that the government is not like a household etc) even if he or she doesn’t agree with the JG program. I don’t see a contradiction in there.

    If you claim that the JG is the only way to go, you are thinking small…

51. If you define “Job Guarantee” as any policy that establishes (1) fixed public prices/wages and (2) big or unlimited budget, than I would agree with you that MMT foresee that such JG is the only way to keep the specific agenda of both full employment and stable prices.

    What I am disputing here is that this is not the definition of a JG Program, and also that this is not the only legitimate agenda (if such a thing exists at all).

    If someone claims that solving environmental problems comes first than full employment, who am I to say that he or she is wrong or that he or she is not an MMTer? I am just one voter, one citizen, one social/political brain and mouth, and not more than that.

    One day the Chartalist Theory will be mainstream and we will have liberal MMTers, anarchist MMTers, facists MMTers, green MMTers, conservative MMTers, monarchist MMTers and so on. Yes, an absolutist monarchy is not incompatible with MMT theory. MMT is a theory about how money works. What you do with that is not MMT, it is political ideology.

52. Dear André (at 2018/03/11 at 11:24 pm)

    You are welcome to call anything whatever you like whether there is an existing body of knowledge that calls it something else or not. But that won’t change things much.

    Neil Wilson is correct that what the founders of MMT (including myself) have deemed to be the body of theory and practice they advocate includes the concept of an employment buffer stock as an integral component.

    As Neil says it ‘fixes the bug’ that the Phillips curve opens up for conventional ‘Keynesian’ (heterodox) theory. You demand to know “Who says so?”. I say so. That has been the core of my work in this area of research and theoretical development for decades. The Job Guarantee solves the ‘missing equation’ problem of macroeconomics and is core to what we call MMT. It is one of the things that separates MMT from other Post Keynesian macroeconomic approaches.

    As Neil noted “Every generation that discovers MMT seems to think they can do without the Job Guarantee for some reason.”

    Over the 14 years I have been writing a blog and thus presenting my academic work in a more accessible format, this discussion has recycled several times. It has led to some people who in their rush of enthusiasm claim to be devoted MMTers then denouncing the approach a few weeks later once they realise what the body of work involves.

    Then the cycle turns as more people ‘discover’ our work.

    As I said, you can call something MMT as you see fit. But without the Job Guarantee stability framework embedded, what you think is MMT is not the genuine article.

    best wishes
    bill

53. Haha well, that settles the point

54. “the thing about a Jobs Guarantee is you have to show up for work and at least put in the time.”

    Probably unexpectedly you’ve stumbled across the key point of the system. In crypto-currency terms the Job Guarantee is a ‘proof of burn’ system. You have to give up permanently some of your finite lifespan and in return you will be issued with some currency so you have access to the output of somebody else’s finite lifespan.

    It’s putting your own time out of use for yourself that is the key sacrifice required so others will accept that you have contributed as they have.

    The Job Guarantee: it’s about time.

55. To Neil, Jerry, and Bill
    1st Jerry and Neil,
    Both of you used the phrase of putting in the time to describe the job guarantee that seems to imply that putting in the time is what gives the system its legitimacy. But in the atomized world that we live in if you have the money in your pocket no one is going to question how it got there. So I guess I do not understand why putting in the time helps bring stabiltiy to the system. The crypto currency analogy goes over my head.
    2nd to Bill,
    You mention the Phillips curve. I did a quick read of the wikipedia entry on this. My understanding of what I saw was that Phillips claimed that a relationship between rising wages and inflation could be modeled. But since then the idea has come under fire because no model up to now has done a good job of showing how this relationship works. So my first small question is why is there a need to meet an objection that can not even be modeled? But more imporatantly is, why is it even neccessary to say that one does not want to create inflation? Is an economy with no inflation not just as absurd as an economy with say 50% per year? To value the claim on resources that comes from an hour of work ten years after the work was done the same as if the work was done yesterday seems absurd to me. However much that labor is devalued over time seems like a subjective matter until it reaches levels perhaps greater than 100% per year, which is even still subjective but I understand the planning headaches that it would cause for a project that would take several years.

    This morining I did remember when I first read of the jg, I thought hmmm right now we have people going deep in to debt in the USA getting additional education to make themselves more competitive in the job market so that they will have less chance of being unemployed. A situation has been created in which there is an educational arms race among the population that young have to run even before they start their long 8 to 5 rat race (not counting commuting time). A job guarantee would seem to be a tactic that would reduce the percieved need to take part in this spiraling educational arms race.
    Furthermore the social conditioning of our societies creates a demand among the populations in which almost every one wants to be in the top 20% of wage earners if not the top 1%. But of course not everyone can be in the top 20%. A system which guarantees a job, which does not require a large inverstment in education, at a reasonable wage, might be a way of reducing compition for leadership position jobs. The situation that I imagine would be one in which the bricklayer would say to the construction engineer yes you make twice or maybe even three times what I make but I do not have to bring my job home with me. And I did not have to spend nearly a decade with little or no income doing lots of math in a school to get a job that initially paid less than what i make. By the time we are 65 you will have a nicer life than I do, if you live that long.
    These are reasons why I view the job guarantee if a favorable light. But in a world filled with lying cheating people I am at the same time skeptical. Of course maybe the jg is the first step in creating a world filled with caring tolerant people.

56. “But in the atomized world that we live in if you have the money in your pocket no one is going to question how it got there. ”

    If that’s the case why does anybody resent the rich?

    I can explain that. They didn’t give up the time to earn their income – which buys the output of somebody else giving up their time. Same with those seen as being on ‘welfare’. Also the reason why retirement ages continue to go up in a world that is automating – other people are only prepared to grant you so many years off on ‘welfare’ in return for a lifetime at work. Therefore as life expectancy goes up so does the retirement age.

    Money buys you other people’s time. The question you have to ask yourself is why should they give up any of their finite life for you. Why shouldn’t they just produce enough for themselves and their friends and colleagues, then stop and enjoy ‘leisure’?

    Your money is worthless unless it is backed by time.

57. I have heard bill describe mmt as a lens to view the world.
    Or a description of the world as it is. Mocking those who wish
    for a mmt system by stating it already exists.
    As the world does not contain anything like a job guarantee as prescribed
    by Bill it seems logically contradictory to see the advocating a JG as inherent
    to an mmt analysis.
    A lens to see the future is a crystal ball.

58. Dear Neil,
    When I say in this atomized world no one is going to care how the money got in to someone’s pocket I mean that if someone goes into Pizza Hut or Jiffy Lube people are not going refuse their money even if their name is Tony Soprano or Ted Bundy.
    Therefore it does not seem to me at the moment that time is a crucial ingredient for the JG to gain acceptence. At the moment I think the way it would gain acceptence would be that it was tried somewhere and lots and lots of people could link results back to the policy and that lots of people liked those results. And that those who did not like the results would be unable to to pull the wool over they eyes of those who liked it and convince those that like the program that the program was an unpopular economic disaster.
    Now if the job guarantee is needed to prevent potential hyper inflation caused by pump priming fine.
    If that is a true statement I can not say. I like some aspects of the JG for other reasons. Besides if a government creates enough money to prevent a recession, let alone a depression, and it causes 10%
    inflation per year big funnky deal. Even if it cause 10% inflation per month big funnky deal. I do have some skepticism as to now a job guarantee would work in practice. The best way to find out what the results of a jg would be would be to try it.
    If Americans can not get the program started why not the Russians. The Russians would just have to ignore what the Rubble was selling for on the initernational market. It is irrelevent. They have lots of people and even more in terms of resources. If it could work it should work in Russia no matter what the world does to try to stop it. Wait………what about capital flight. If this policy makes Russians so rich that they try to buy up London and Andalusia would it destroy Russia? After all a very progressive income tax and high taxes in general are crucial to creating a sustainable society so all these rich Russians do not buy Yachts the size of US aircraft carriers. The Russian people might resent the Russian government taking a good chunk of the money that they got from the Russian government in the first place. Many of them would certianly try to keep the money that they got from being taken back in to the system that they got it from in the first place.

59. According to descriptive MMT, what other ways are there, if any, of controlling inflation besides taxation? I am having trouble understanding how it would be possible to work out, as if with mathematical precision, an ‘ideal’ tax rate and form of taxation just to control inflation.

60. Vabadus, as far as my personal reading of MMT (which even Neil concedes allows one to occasionally stumble to a correct conclusion, if only unexpectedly), these are the main ways demand induced inflation could be decreased. One would be by increasing taxation. One would be by reducing government spending. And a combination of these first two is by increasing what are called ‘automatic stabilizers’ which automatically adjust both spending and taxation according to the state of the economy. The Job Guarantee would act as a large automatic stabilizer policy, but there are others already functioning to some extent in most economies. They include things like unemployment insurance and welfare payments and (arguably), progressive income taxes and sales taxes where the tax take increases as the economy grows and decreases as the economy shrinks. I can think of other possible automatic stabilizers but apparently we are not discussing MMT unless Bill says so.

    In any event, if the automatic stabilizers in the economy are strong enough, they would very much reduce the need to tinker with tax rates with super-duper mathematical precision and timing.

    Some associated with MMT point out that monetary policy in the form of regulating which financial activities the private sector is allowed to engage in could limit demand side inflation. It is probably worth noting that MMT does hold that interest rate policy, which is a lot of what is called ‘monetary policy’, is not a reliable way to influence inflation.

61. Vabadus,
    This is what Bill wrote above;

    Neil Wilson is correct that what the founders of MMT (including myself) have deemed to be the body of theory and practice they advocate includes the concept of an employment buffer stock as an integral component.
    As Neil says it ‘fixes the bug’ that the Phillips curve opens up for conventional ‘Keynesian’ (heterodox) theory. You demand to know “Who says so?”. I say so. That has been the core of my work in this area of research and theoretical development for decades. The Job Guarantee solves the ‘missing equation’ problem of macroeconomics and is core to what we call MMT. It is one of the things that separates MMT from other Post Keynesian macroeconomic approaches.

    Well since the Phillips curve deals with inflation and rising wages, which I guess might would occur if there was not a group of unemployed people so desperate for work that they would accept lower wages instead of no wage, it would follow that Bill is claiming that the job guarantee not only does not cause inflation it hinders it. I don’t remember anymore what his explination is. I guess that it was not important enough to me for it to stick in my head. Did it have something to do with flattening the swings of the business cycle? In any case a job guarantee is not a tax.

    So Vabadus I hope that gives you a direction to look in to find a possible alternative to taxation to control inflation. I did happen to notice that no one has found it important or interesting to comment on my assertion that inflation is good, inflation is grand. It attrits the value of labor performed in the past. It rearrainges the value of other things that increase in value faster or slower than the overall rate of inflation. What is the problem?
    I remember when I was in college a long time ago someone running for political office was at our university. He said deflation was good. Just think If you make $5 an hour now and you save $5 and there is deflation and you wait just 2 years when you go to the movie theater not only will you be able to buy you ticket with that 5 dollars you will be able to buy your popcorn too. If the government is doing its job we should not live in a world with inflation but a world with deflation.
    I thought that that was a quite convincing arguement back then. But then as I got older I came to realize that we live on a finite planet. For all practical purposes we live in a finite universe. Nothing can grow indefinately. It is unlikely that humanity can have indefinite economic growth. Ok if we have a technological breakthrough that provides an unlimited supply of free non polluting energy we might be able to be in a position where we humanity could solve any problem that it faced. But without that condition we can not have real economic growth forever. If we had behaved prudently we could have survived with out discomfort for a very long time. It seems to me that it is already to late to start behaving prudently. Yet maybe there is some combination of of starting to behave prudently at some point and technoligical breakthroughs that will prevent a planetary train wreck. I am not betting on it though.

62. Neil Wilson

    “If that’s the case why does anybody resent the rich? ”

    For me, I “resent” the rich because they don’t pay their share of tax, rather they spend a small part of it making sure that we keep following the path of increasing inequality, with the inevitable societal problems and consequences that we should know well from the last couple of centuries. That events like Charlottesville could happen in the XXI century is their bloody fault.

    Obviously, that certainly doesn’t apply to nearly all the rich, which isn’t easy to define in the first place.

63. Bill: I do not dispute your account of “JG”. But Andre & I were talking about where “MMT” comes from.

64. Andre:If you define “Job Guarantee” as any policy that establishes (1) fixed public prices/wages and (2) big or unlimited budget, than I would agree with you that MMT foresee that such JG is the only way to keep the specific agenda of both full employment and stable prices.
    Good! Then we agree on the essentials, we’re mainly quibbling over semantics.

    What I am disputing here is that this is not the definition of a JG Program,
    Well, that is just wrong, according to published MMT work, it is the definition! I’ve been saying for a long time that while MMT academics are often criticized for offering too few details of the JG, the real problem is that they listen to the criticism and offer too many, so the core proposal and its functionality is obscured. This proves my criticism was on target!

    For the two key phrases in what you describe as “not a JG” are “fixed public prices/wages ” & “However, they will be able to employ anyone willing to accept such wages.”
    That is a JG program, for those are the two key, defining parts of a JG. It is not even necessarily to qualify that with “loosely speaking”.

    and also that this is not the only legitimate agenda (if such a thing exists at all).
    If someone claims that solving environmental problems comes first than full employment, who am I to say that he or she is wrong or that he or she is not an MMTer?

    Sure, there are other legitimate agendas. Let environmental problems “come first”. But everyone has a right to say that that “he or she” is quite wrong and confused if they think the two aims conflict. For that is utterly preposterous and backwards. On the contrary, full employment is a necessary precondition to optimally solving environmental problems.
    In other words, the idea that environmental problems will be solved quicker – if we have fewer people working on solving environmental problems – is ludicrous.

65. Neil may be too modest to mention it, but there is a long interview with him on Youtube where he explains his ideas on JG at length. I won’t post a link, but if you search Youtube for
    “How would a Job Guarantee work: A conversation with Neil Wilson – Joe Firestone”
    it should come up.

66. Dear Some Guy (at 2018/03/14 at 7:59 pm)

    The term MMT was spawned on this blog rather than Warren’s. I had been using the term modern money (along with Randy et al) and at some point I just decided to formalise the terminology of what we were doing into MMT. There was some discomfort among my other original MMT colleagues at the time about the ‘theory’ tag but it has stuck.

    best wishes
    bill

67. “Sure, there are other legitimate agendas.”
    “On the contrary, full employment is a necessary precondition to optimally solving environmental problems.”

    Alright, let me give another example of agenda: world domination. For some people, it is a legitimate agenda, and it comes first than unemployment. Actually, some permanent unemployment may be useful to achieve world domination. For others, it is not a legitimate agenda. Nonetheless, a “neutral theory” that restrict itself to explain world phenomena would not touch in such issues, because such theory would be ideology free.

    Maybe I am confusing the term “chartalism” with “MMT”.

    As I see it, “chartalism” is just the recognition that modern fiat money is driven by taxes, that it is not like gold, that a government does not work like a household and etc, and it restrains itself to explain world phenomena. Chartalism understandings could be employed to achieve any kind of agenda – it is ideology free.

    On the other hand, as Bill said, “MMT” is a term defined by a selected group of people, including Bill himself. If I could understand right, according to what Bill just said, a specific agenda and the JG are integral part of “MMT”. Hence, MMT would be “Chartalism” with some additions.

    “Well, that is just wrong, according to published MMT work, it is the definition!”

    Well, I don’t know. As I see it, JG was supposed to be a government program, with unlimited budget, that pays minimum living wages for anyone willing to work in such program (mostly the unemployed or people who otherwise would work for less than such wage in the private sector).

68. For me the MMT JG theory and how it formulates an optimum level of fiscal
    stimulus as the preferred desires of savings are both hangovers from classical
    economics .The shadow of ‘free’ markets at equilibrium.
    There is no missing macro economic equation.There is no sweet spot.
    THe economy is dynamic and interactive full of conflict and cooperation.
    Between and amongst both capital and labour.
    INflation is inevitable .A JG could not have stopped the inflation resulting from
    an oil cartel quadrupling the price of oil in a year. Saving desires are shaped by income
    more than preferences..

69. “Chartalism understandings could be employed to achieve any kind of agenda – it is ideology free.”

    There is no such thing as ideology free. People who say that are pushing an ideology. The reason for dropping the ‘political’ from ‘political economy’ was to hide the ideology behind it – which is to pretend there are ‘universal laws’ governing social interaction.

    Simply saying chartalism implies an ideology of the way money is, and a power authority that controls it. Quite a few bitcoin fanatics reject that power structure. The anarchists certainly do.

    You do things to achieve a goal. The goal of MMT is full employment and price stability within an independent nation of people operating a mixed economy – such that the nation of people can take that road even if others choose not to.

    You really have to share that goal for MMT to make sense in toto.

70. “According to descriptive MMT, what other ways are there, if any, of controlling inflation besides taxation? ”

    One of the interesting things about MMT is that it shows you that you can ignore the money. Forget about it for a moment.

    Then the reality becomes clear. You get inflation because two entities are trying to do two things *at the same time* and you need a way of stopping that. Price competition is one way – there’s an auction until one entity gives up.

    But there are other ways. For example if you have the construction of a hospital competing with the construction of a casino, you can delay the construction of the casino by withholding planning authority until the hospital is complete. That uses power to avoid a conflict of resources in a time period, and instead forces them into a sequence – hospital first, then casino.

    Similarly you can offer in fill contracts. You put nice to have public facilities – like converting the central reservation of motorways to higher grade barriers – on the shelf at 10% below market price. You won’t get any bids while the private sector is building casinos, but once that activity dies away people short of work will take your offers and the market price moves lower.

    And thirdly you can outright ban the competition. For example increasing taxes won’t help create any more doctors. There are only so many people that can be doctors and all of them are in play. Wielding the Holy Power of Taxation will fail to cause doctors to arise fully formed from the primordial soup. So you need to look around and ask what the doctors are doing. Quite a lot of them are in private medicine providing services to people with money ahead of people with serious illnesses. So you simple ban private medicine in a nation to move the resources to the public sphere where they can be allocated by need, not ability to pay.

    And then there is limiting the bank’s ability to lend money by proscribing what money can be created for. No more share buybacks (for example).

    Taxation is a very imprecise weapon. It’s far better to choose a more precise weapon to free up capacity for public use, and of course its very important you use up all the spare capacity first – hence the Job Guarantee.

71. “There is no such thing as ideology free.”

    Well, I disagree.

    For example, I am being ideology free when I claim that “the gold convertibility was endend in the US in the 70s, when the Bretton Woods agreement ended”. It is just a description of something that happened.

    Anyone with any political inclination would agree with that, from extreme left to extreme right, including communists, fascists, anarchists, monarchists and so on, because such claim is an objective fact. The US stopped converting gold. Just the insane or the ignorant (who don’t know what gold convertibility is) would dispute such claim.

    Of course, I would agree if you say that we can never be 100% sure whether anything is an objective fact. I mean, in philosophical terms, I cannot even be 100% sure that I exist. But getting down-to-earth, the end of the gold standard is as truth as anything can be in practical terms.

    However, when someone claims that “society should aim to go back to the gold standard as soon as possible”, or the opposite, “society should never go back to the gold standard again” , or worse, “money is neutral so it doesn’t matter whether we adopt the gold standard or not”, then people are prescribing political alternatives, which follow some agenda. Any alternative is NOT ideology free.

    If chartalism stops at the descriptive part, it would not be ideology inclined. If it goes further and embrace some agenda and some prescriptions, it will necessarily get ideological.

    I may be wrong, but that’s how I see it.

72. Andre:Well, I don’t know. As I see it, JG was supposed to be a government program, with unlimited budget, that pays minimum living wages for anyone willing to work in such program (mostly the unemployed or people who otherwise would work for less than such wage in the private sector).

    What is the difference between the two proposals? What merits different terminology for them? I don’t see much difference at all. Of course, any JG must be at the minimum wage. The only genuine difference I can see between your two descriptions is the phrase “living wage”. That is largely a political matter, not really appropriate for the level of generality we are talking at.

73. @ Nicholas
    “A Job Guarantee would probably resolve stagflation automatically because if workers demand nominal wage rises that are incompatible with employers’ desired profit margins and the productive capacity of the economy, employers would resist the wage rises, and the workers would either drop their unreasonable demands or they would quit and be replaced quickly by people from the Job Guarantee workforce”.

    This strikes me as dirigism carried to the point of dictatorship. That aside, is there no realisation at all of what this prescription would entail in the real world? Insofar as the last vestiges of power still left in the hands of organised labour are concerned, it would decisively extinguish them by turning the recipients of the job guarantee into an army of scabs at the disposal of the state, wherewith to bludgeon recalcitrant workers into submission.

    Anything more likely than this idea to reinforce the direst suspicions about the JG could scarcely be imagined.

74. “Richard Murphy …doesn’t explain why. He seemed almost hostile to merely posing the question”.

    Entirely characteristic of Richard Murphy. He doesn’t debate, he pontificates.

75. Neil Wilson,
    I watched your almost 2 hour long interview with Joe Firestone. I now understand your position better.
    I see why you place the importance on giving time that you do. But I think that a better explination of how the job guarantee could be legitimized is to stress that we (society) knows that those who work under this program do valuable WORK for society because they have a BOSS that certifies that they do valuable work for society. If a person working with in the jg program is not doing valuable work for society his boss will reasign him/her. And that person’s boss also has a boss who also has a boss on up to the central committee or the president or chancellor or congress who have people who are charged with overseeing the work that government agencies do and issue reports on the quantity and quality of that work to their central committee, or president, or chancellor, or congress.
    As for the income guarantee, I can see why you would see it as stealing. I do think that it is the proper solution though for those people with social or psycological problems that would just be a disruption in the work place. It should not be a lot of money, or people will be encouraged to become free loaders on workers.
    I did not live through the depression but my parents and grandparents did. I heard enough stories about doing without that I think many liberals have lost sight of how little money a living wage is. A living wage is black tea, oatmeal, yougurt, and a piece of fruit for breakfast. It is some carrots, and some bread or potatos, and a slice of cheese for lunch. it is some rice and beans with zuchinni and some cottage cheese for supper. Once a week it can be pancakes for breakfast, a BLT for lunch, and rice with fish, or meat with a veg for supper. A living wage is sharing a bedroom in an appartment that has other people sharing bedrooms. There would be no money for vacation. If you want a vacation you will hitchhike and sleep under bridges. Medical care for adults should also be the most basic. Cancer treatment would be a good pain reliever.
    The only purpose of this basic income would to be to give people the opportunity to live without committing a crime so that they can stay out of jail and prison. Of course children would need to get some extra consideration. But people living on basic income should be discouraged from having children.
    Now I can certianly understand if some African Americans would cringe at reading my discription of what a basic income would consist of knowing the history of how government policies in the USA have often been used to abuse them in the past. If most African Americans had white bosses it would not be all that hard to imagine a program in which a dispropottionate number of African Americans were labled unemployable and regulated to the the basic income guarantee program. That is where your idea of central funding but local administration for the job guarantee comes in. If the program of the job guarantee and a basic income guarantee are locally administered then since the USA is still a largely segregated society African Americans should be administering these programs among themselves.
    But I still have some skepticism about the ultimate success of the program because job creation is requires social coordination. It is by nature a top down process not a bottom up process. Those at the bottom do not have the access to the information inputs to understand what work in what quantities will be required to have meet social needs. Yes it is true you did say that it would be a collaborative process between the job seeker and an agent of society. But it is obvious to me that the agent of society (in Germany it would be an official in the Arbeits Amt (Labor Bereau))will have much more say in the decsion than the job seeker.
    Another thing about the jg. If Putin takes my advice and implements first in Russia and everyone can see that it is a good idea. It should be implemented on a world wide basis. But at the current time there is no central world wide goverment to fund the project. Nor should there be a central world wide goverment. But what there could be, is 10 regional, somewhat contintental governments.
    I am THE EXPERT for deciding how the world should be divided up. We can start off with the western hemisphere. Regional Government number one would be Canada, the USA, Mexico and the central American Countries down to but not including Panama, and maybe the UK. Region number two would be the countries of South Amercia and the Carribean, not counting Puerto Rico. Then as we move on the EU would be number 3. Arab speaking north Africa and the Saudi Penisula would be number 4. Sub Saharan Africa number 5. Turkey, Iran, Iraq, Syria, Lebanon, Azerbaijan, and maybe Paksitan and Afghanistan number 6. India, Sri Lanke, Nepal and Buhtan number 7. The ASEAN countries along with Australia and New Zealand number 8. China number 9. Finally Moldovia, the Ukraine, Russia, the Stans, along with Korea and Japan would be number 10.
    Each of these new countries would have their own government that would be largely responsible for financing the job guarantee in their area. But since jobs require an imput not only of time but also of resources there would probably need to be some level of internaitional horse trading to make sure that each of these 10 governments gets the resources that it needs to be able to fullfill the jg for its citizens. Each of these 10 governments will have a motive to make sure that all of the other governments are reasonably successful because a failing government will cause waves of refugess washing up on other borders.
    Do not take that the wrong way. I am not opposed to immigration. I am opposed to to much immigration. Iran should not have to house millions of Afghan refugees. Turkey should not have to house millions of Syrian and Iraqi refugees. The international community should be taking extensive efforts to prevent failed states. Of course if you listen to what our government leaders are saying they do take vast efforts to prevent failed states. But I bet if we all knew exactly what they are up to we would see that their policies are directed towards creating failed states for geo strategic and business purposes. See Naiomi Klein’s book Disaster Capitalism.
    My word for my vision of the new world order is not the united nations but the New Financial League or NFL for short. That is a name that most Americans should understand.

76. Robert says:
    Thursday, March 15, 2018 at 7:29

    This strikes me as dirigism carried to the point of dictatorship. That aside, is there no realisation at all of what this prescription would entail in the real world? Insofar as the last vestiges of power still left in the hands of organised labour are concerned, it would decisively extinguish them by turning the recipients of the job guarantee into an army of scabs at the disposal of the state, wherewith to bludgeon recalcitrant workers into submission.
     
    Anything more likely than this idea to reinforce the direst suspicions about the JG could scarcely be imagined.

     
    This seems a fair point. The only thing is, with a well-run JG scheme in place, you’d have full employment by definition, and therefore stagnation would be unlikely, hence no stagflation. (You might have pure inflation though).
     
    On the subject of inflation, I think someone, somewhere asked what an MMT-aware government would have done about the inflation caused by the oil shock of the 1970s. That’s another good question. I don’t think the JG would be enough in itself to control that sort of inflation. It might have helped, somewhat. Governments like the UK could probably have helped the real economy by cutting fuel duties drastically (since we know they didn’t actually need the revenue from those). And even perhaps have subsidised the cost of fuel to end-users, using freshly-created money.
     
    However, that might have led to other kinds of inflation.

77. Robert, Mike Ellwood: This scenario is not at all what happens with a JG, “what this prescription would entail in the real world”. Do not forget that what the JG does is replace an unemployed buffer stock with an employed buffer stock. The things you fear happen – but WORSE – in a society without guaranteed jobs.

    Insofar as the last vestiges of power still left in the hands of organised labour are concerned, it would decisively extinguish them by turning the recipients of the job guarantee into an army of scabs at the disposal of the state, wherewith to bludgeon recalcitrant workers into submission.
    Again, JG workers are less willing to scab than the unemployed, because they have a job at a living wage, already. And in all likelihood, the size of the JG buffer stock is smaller than an “equivalent” unemployed buffer stock, so there are more people to break strikes etc in the non-JG world.

    This is is proved by history – worldwide- by the strength of labor unions during the postwar full-employment era, as compared to now.

    Relevant history from the USA’s New Deal work programs:
    “In October, 1933, Hopkins knew that with winter coming on the unemployment problem was bound to become more desperate and he believed that the only decent solution was a huge work program. Aubrey Williams and other aides were urging him to propose such a program to the President but Hopkins felt sure that it would be turned down. He knew that Roosevelt would be under fire on this not only from the conservatives: organized labor was strongly opposed to a program of governmentally “made” jobs.”

    . . . Both men, experts in public administration, were able to give Hopkins an abundance of facts and figures and he was able to absorb them ; but he still did not know how to sell the idea to Roosevelt who was concerned about the attitude of organized labor. Williams reached Hopkins in Kansas City by telephone to announce that he had just seen Dr. John R. Commons in Madison, Wisconsin, Dr. Commons was one of the country’s greatest authorities on all matters pertaining to labor [also, a forefather of MMT] and, when he heard what was on Williams’ mind, he dug into his voluminous files and came up with a clipping dating from 1898 of a statement by Samuel Gompers in which the father of American organized labor advocated precisely the form of work program then suggested. Gompers called it “The Day Labor Plan.” That was just what Hopkins had hoped for. … Thus, when Hopkins learned what Gompers had said, he knew he had the persuasive argument that Roosevelt needed to overcome the labor leaders’ objections to the work relief program.”

    Robert Sherwood- Roosevelt & Hopkins: An Intimate History, Grosset & Dunlap (1948) p 50-51

    So this sort of objection was raised before, was a concern of labor leaders back then. But their concerns melted away as the work programs started to bring back a healthy economy and thus strengthened, not weakened the labor movement.

    Finally, note the last clause about “if workers demand nominal wage rises that are incompatible with employers’ desired profit margins and the productive capacity of the economy”. If workers demand raises beyond the productive capacity of the economy – asking for more than one hour of work in return for an hour of work – then no policy can make them achieve this wage rise. And profit margins cannot stably go below zero. At best, one group of workers would become a “labor aristocracy” at the expense of another group. That’s progress? The problem with inflation is that it “upsets calculations”. Everybody has to run in place in order to stand still. This makes it much harder to see where the lines of both the minimal “stand-still” demands and the “beyond the productive capacity” demands are.

    IMHO the right way to look at the JG is the opposite of such labor leaders’ fears: Rather, a JG fulfills the old anarchist IWW dream of “One Big Union” that everybody is in: Nobody is refused the opportunity to work at a decent, living wage. Even more abstractly, the “fraternité” in the even older liberté, égalité, fraternité”.

78. Some Guy @ 11:58 is correct. ‘Labor’ in a situation with a Job Guarantee would be helped by that Job Guarantee.
    Historical point- labor unions are always among the leaders in support of government policies that increase minimum wages, that increase worker safety, that require overtime and holiday pay rates, and all manner of policy that benefits workers in general- not just union workers. Despite the chance that each policy victory in these categories diminishes the perceived benefit for workers in general to join a union.
    As far as fears about government using JG employees to systematically break strikes -which is what I assume the word dirigisme refers to in this context- well, a national government already has that power to intervene if it desires to use it without any JG whatsoever, and a JG would not make that power any easier to use. For the reasons ‘Some Guy’ states, it probably makes it more difficult to use. And definitely more difficult for a private company to hire scabs.
    A Job Guarantee at a living wage as proposed by MMT would mostly eliminate the possibility of needing to take just any job, no matter how degraded, offered by some private corporation in order to meet the needs of life.

79. The distinction between the “descriptive” and the “prescriptive” elements making up the body of a given theory seems to me to be a valid and useful one to make. And inevitably any theoretical construct will contain both. The propounder(s) of the theory will always at some point move on from analysis of “what is” to prescription of “what ought to be”.

    Concerning modern monetary theory, rightly so characterised by Bill though deprecated by his associates (one wonders what disturbed them about that word…):- the distinction is however only useful up to a point, beyond which it breaks down. MMT analyses the operation of an economy which issues its own, fiat, currency and has a freely-floating exchange-rate against other currencies in the form of a stocks-and-flows model. This purports to describe – comprehensively – “how things are”. Indeed it goes further: it purports to have discovered how things must inevitably be.

    Among other things which the model requires for its operation is (as Bill makes crystal clear) acceptance that labour is a stock, the flow (or supply) of which can and should – as to its volume and direction – in common with all the other stocks and flows be acted upon. The role of government in the model is to be the primary actor, and the particular actions which it chooses to perform or refrain from performing (its political programme in other words) determine the ultimate outcomes of the system (allowing for external impacts).

    Whether MMT’s is the only possible and admissible way of depicting the real world is, of course, just as debatable as whether that of any rival economic school is; every student must make up his or her own mind. Personally, MMT’s seems very persuasive to me but (I’m sorry) I can’t accept it as being the last word on the subject, disposing for all eternity of any alternative exposition. Even in the physical sciences nothing is ever settled for ever but only for the time being. In the social “sciences” that is an infinitely less tenable position to adopt.

    Only in the sphere of religion does doubt or outright dissent become inadmissible. And I have wondered from time time to time whether MMT was not in danger of turning itself into a religious sect, complete with an unchallengable credo and with its own quota of “unbelievers” (including sympathetic ones) consigned to outer darkness.

80. @Some Guy
    “The things you fear happen – but WORSE – in a society without guaranteed jobs”.

    Yes, of course. But they don’t *have* to! They didn’t during the era when all Western governments had full employment as a policy aim. You can say – as some have in this thread – that that is a JG by another name, that it’s just semantics. (That would have been my own position in fact; and extremely inefficient it was because historically viewed it was bedevilled by the class warfare ideology then prevalent within significant sectors of the labour movement).

    But Bill (as I understand him) rejects that position outright. For him the effective management of stocks and flows demands that there be no unemployment or underemployment because these are intrinsically volatile and unpredictable – “ungovernable” if you will. Ungovernable factors (other than the external ones, which just have to be reacted-to) are not compatible with the management of stocks and flows which demands predictability and precision.

    Unfortunately for that model, humanity is by nature intrinsically ungovernable. It is wayward, feckless, capricious, by turns sentimental and bellicose, etc, etc… I wouldn’t wish it otherwise, personally (robots are useful, but in cold reality hardly lovable).

81. ‘IMHO the right way to look at the JG is the opposite of such labor leaders’ fears: Rather, a JG fulfills the old anarchist IWW dream of “One Big Union” that everybody is in: Nobody is refused the opportunity to work at a decent, living wage. Even more abstractly, the “fraternité” in the even older liberté, égalité, fraternit锑.

    “Dream” is the mot juste. Utopias invariably turn into dystopias, as Marx’s did in the Soviet Union and Saint-Just’s did in Pol Pot’s Cambodia. Because inherently they predicate the *ultimate* perfectability of mankind, which will never come about (thank goodness!).

82. “it purports to have discovered how things must inevitably be.”

    Well, I guess it purports to have discovered how things should be if the aim of the economy/society is to achieve full employment and price stability. (Maybe that is what you meant).

    What bothers me is that:
    1) full employment and price stability is not the only legitimate agenda out there. There are many other agendas that actually conflicts with this one.
    2) ‎even if such agenda is “The Legitimate One”, I find it difficult to believe that the only solution is a JG program, unless you define “JG program” in an extremely broad way that encompass anything.

    However, JG is not “everything”. Although it is a very broad concept, not very detailed, it has specific features.

    As we can see from L. Randall Way text below, it separates the JG program from “traditional programs” – hence, JG is not “everything”, as it is not the same thing as a “traditional program”. Actually, he even express some kind of doubt (“But I could be wrong”) wheter such traditional programs could actually deliver some results, acknowledging that there is a chance that they may be a substitute for the JG.

    “All the traditional programs-whether supply side or demand side-are still available to try to pump up the private sector. For reasons I will discuss (…), I am quite skeptical of the ability of such policies to achieve anything close to full employment on a continuous basis.

    But I could be wrong. Even with the JG in place, we can give these supply side and demand side programs a try-if we really want to. If their supporters are right, the JG will shrink to a “vanishingly small” (…) size. Fine. We’ll see. I do not think they will work, and I think that we would end up with unacceptably high inflation long before we approached anything close to full employment.”

    http://neweconomicperspectives.org/2012/03/mmp-blog-42-introduction-the-the-job-guarantee-or-employer-of-last-resort.html

    MMT becomes idelogy driven when it claims that one political agenda is superior to others and that only one kind of program is the adequate one to achieve such agenda.

83. Hello Neil Wilson,
    Watched your youtube vid with Jo Firestone and really enjoyed your most informative perspectives.
    It occurred to me that to make a JG a reality (in Australia at least) we must light a people driven ‘political fire’ under the ALP to smoke out the currently dominant economic neolibs.
    I suggest that the key to bringing pressure to bear on the ALP is to convince the rapidly declining union movement that the JG is perhaps where their progressive future (and new membership) lies.

    Could you outline your thoughts as what role the union movement could play in implementing or administering a national JG.

    It appears to me that the industrial expertise of truly dedicated union operatives in addressing job placement/workplace conditions/social inequality would be an invaluable asset – not to mention the pressure that the union movement could exert on the ALP to initiate the JG program – and MMT!

84. P.S.
    Thanks to Mike Ellwood (March 14, 2018 at 9:29) for that Jo Firestone/Neil Wilson video reference.