Many central bank officials have been trying all sorts of conditioning narratives to convince us…
My podcast with Alan Kohler
Modern Monetary Theory (MMT) has been gaining more attention in Australia in recent weeks. I have been shifting my face-to-face speaking commitments slowly to on-line presentations. I will be announcing more systematic MMTed classes beginning via the Internet soon. And I will do some Live Youtube presentations as well. Last week, the well-known financial market journalist Alan Kohler used his weekly column in The Australian newspaper to discuss MMT – It’s Modern Monetary Theory time as the state steps in (March 23, 2020 – subscription required). Apart from his private corporate work in the financial markets (he writes a regular briefing and does an inflight business report for Qantas), Alan presents the finance report on the national broadcaster ABC nightly news program. He is also a regular columnist in the business pages. So he has high profile. I discussed my concerns with Alan’s representation of MMT in this blog post – It’s Modern Monetary Theory time! No, it always has been! (March 23, 2020). We made contact soon after that – I E-mailed him to tell him I had written a response to his column and he rang me and we arranged to talk further. On Wednesday last week (March 25, 2020), we spoke as part of Alan’s regular podcast – published at Eureka Report (which is a subscription business service). The 48-odd minute is also published here with some additional commentary.
First, I am grateful to Alan for giving me permission to republish the podcast interview on my YouTube account. I added some photos and some brief information but did make any edits to the audio. I usually would edit out the umms and aahs but because it was not my audio I chose to leave it as it was recorded.
Second, we did the interview by mobile phone (at my end) and that explains the different quality of the audio when shifting from Alan to me.
Third, as a follow up to the interview, in his lastest weekly column for The Australian – (March 28, 2020) – Accepted wisdom out the window as government takes control – he gave his reactions to our discussion.
There is quite a difference between the March 23, 2020 article cited above and Saturday’s article.
I think we are now making progress when we can have these sorts of conversations and widen understanding of our work.
Here is the podcast.
I want to follow up on the last part of the conversation.
In his article, Alan wrote that we do not want the RBA purchasing Treasury debt directly.
we don’t want to do that because we don’t trust politicians. They need to be handcuffed by the idea that all spending must be funded by taxes or debt. Otherwise where would we be? In the land of the Magic Pudding, that’s where.
But that is a fabrication designed to prevent politicians using unlimited cash to buy votes and entrench themselves in power.
The interesting question now is whether that fabrication will survive the virus or become one of its casualties.
And this is a very interesting question.
I have written about this in the past.
I use the term a ‘veil of ideology’ to describe the way that the neoliberal monetary myths distort the political process and compromise the quality of our democracies.
I have noted often that MMT is a lens (a perspective or framework) for achieving a better understanding of the way the fiat monetary systems operate and the capacities and options that a currency-issuing government has within that type of monetary system.
It exposes the monetary myths that are used to suppress those capacities and options.
I consider it renders the ‘veil of ideology’ transparent. Once we all understand the principles of MMT, a politician will no longer be able to hide behind claims that “there is not enough money”, or that “we have run out of money” to preclude policy action that might improve the well-being of the majority or protect our natural world.
To create a policy layer on top of that understanding we obviously exercise our value judgements and aspirations. So someone like me, who maintains collective, progressive Left values, will propose quite different policy interventions than a person who extols a world view based on neoliberal individualism.
Those value differences are out there. But by lifting the ‘veil of ideology’, MMT understandings make them more obvious.
A neoliberal politician in a world full of MMT understanding would have to explain why, for example, unemployment was necessary; whereas people with my persuasion would know it was highly damaging, wasteful and unnecessary.
The typical MMT critic that has come out of the wood work in recent months fails to make the distinction between the ‘lens’ and the ‘values’.
Even if they understand that distinction, it is not in their interests to explicate it to the wider public because then their own values will come into focus. It is better to keep people in the dark.
Some critics have been explicit about that in fact. There have been papers that have argued that there is utility in keeping the wider population uninformed and functioning under the false construction that their taxes pay for government spending and all that sort of lying, because it places a discipline on politicians, who because they are untrustworthy, would otherwise go wild in their spending.
These critics acknowledge the validity of core MMT principles but think they are to dangerous for people to broadly share in that knowledge.
Because we apparently have reached a point in history where we hate dictators and eulogise the benefits of democracy (à la Churchill in the Commons on November 11, 1947 – “democracy is the worst form of Government except for all those other forms that have been tried from time to time”), but don’t want the politicians we elect to have the flexibility to advance our well-being.
Or in simpler language – “because we don’t trust politicians”.
This has been a long standing view.
Remember the famous quote from American economist Paul Samuelson in the interview he did for the film – John Maynard Keynes: Life, Ideas, Legacy – where at the 52:50 mark into the film, he said:
I think there is an element of truth in the view that the … the superstition that the budget must be balanced at all times … aah … Once it is debunked … takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have … aah … anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by … aah … sometimes what might be regarded as myths into behaving in a way that long-run civilised life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year … in every short period of time. If Prime Minister Gladstone came back to life he would say ‘oh, oh what you have done’ and James Buchanan argues in those terms. I have to say that I see merit in that view.
This amounts to a world where the elites can manipulate the fiscal capacity of the state to advance their own interests (procurement contracts at will, bailouts when they mess up, etc) but if we want to do something about unemployment or poverty then the rest of us has to be held in this fictional world that appeals to our instincts of fear and uncertainty.
And, of course we then are encouraged to distrust politicians and so it goes.
My view is that once we expose these myths, more sensible political discourse can take place.
And if we do not like our government – that is they go crazy with their spending capacity – then we throw them out of office (in Australia, every three years of so).
They can hardly destroy the nation in three years.
I also think that if the standard of political dialogue was improved, higher quality candidates would seek election and push out the time-serving careerists who dominate all political parties.
It is an extraordinary world where we accept a deception because knowing the truth might require us to act differently (become more politically engaged and demand quality political behaviour).
I don’t accept that proposition.
Tomorrow, I will have more to say on the latest fiscal stimulus (an extra $A70 billion) – which means we are up to about 7 per cent of GDP.
Still more is going to be needed and the intervention needs to be designed differently. That will be tomorrow.
That is enough for today!
(c) Copyright 2020 William Mitchell. All Rights Reserved.
This Post Has 35 Comments
Today’s blog beings up a point I have made here before.
Many experts and laymen(people) are afraid that unlimited spending will always tempt politicians into over spending, leading to inflation, and then not acting to control the inflation. But, instead to spend more.
I have suggested that this is a real worry. That at sometime in the future (if MMT becomes the dominate economic theory) Gov. spending will be at the max. that doesn’t cause inflation. This level will become the *Normal* sending level. Why would the Gov. ever want a lower level of spending, given there is no inflation yet?
In this situation there can be a new crisis exactly like the current coronavirus crisis. More spending would be needed. Would it cause inflation,? maybe.
. . At this point the nation is back to where we think we are now. That is new spending or additional spending needs to be paid for with taxes or at least real borrowing.** Would the politicians do one or the other, or would they just add to the deficit in a big way?
I have suggested that the core MMTers discuss this and find something that would be *self-limiting*. Ideally, something like the “automatic Stabilizers” were supposed to work in a recession. Failing that then maybe a super-majority being required in Congress to increase the deficit beyond some defined percentage of the GDP (real GDP not including income from selling stock shares, etc.). And the most important a larger super-majority for emergency super big deficits.
.** . Real borrowing is borrowing at fairly high interest rates. Or some such thing. [Or a really crazy idea of making the Gov. sell gold in a big emergency if the Gov. wants to *increase* the deficit and not tax someone.] Note, there will always be a deficit, always! So, the deficit can only be increased or decreased.
Obviously, I’m no expert, which is why I leave it to the core MMTers to figure it out.
Steve, it is the lack of resources caused by either sanctions or govt decisions like in Zimbabwe that causes inflation.
What inflation-targeting advocates have argued for is an extremely low rate of inflation. For example, the European Central Bank has a 2% target, or to keep inflation in fact just below 2%, and typically what is called for is inflation in the low single digits. In developing countries, targets have ranged from 4% to 8%. So these are targets for inflation that are very low compared to broad historical experience.
These days, very low inflation and indeed the threat of deflation in some countries have raised all kinds of issues about this inflation targeting approach.
This is part of a whole neoliberal approach to central banking. That is, the idea that the economy is inherently stable, it will inherently reach full employment and stable economic growth on its own, and so the only thing that the macro policymakers have to worry about is keeping a low inflation rate and everything else will take care of itself. Of course, as we’ve seen, this whole neoliberal approach to macroeconomic policy is badly mistaken.
The whole neoliberal trend in macroeconomic policy. The essential thing underlying this, in my view, is to try to reduce the power of government and social forces that might exercise some power within the political economy-workers and others-and put the power primarily in the hands of those dominating in the markets. That’s often the financial system, the banks, but also other elites.
The idea of neoliberal economists and policymakers being that you don’t want the government getting too involved in macroeconomic policy. You don’t want them promoting too much employment because that might lead to a raise in wages and, in turn, to a reduction in the profit share of the national income.
So, sure, this might increase inflation, but inflation is not really the key issue here. The problem, in the neoliberal view, is letting the central bank support other kinds of policies that are going to enhance the power of workers, , and even sometimes manufacturing interests. Instead, they want to put power in the hands of those who dominate the markets, often the financial elites.
Have I got it wrong? I thought Bill and all other core MMTers have said that the constraint on deficit spending by a Gov. with a fiat currency (and the other requirements) IS INFLATION. Is this not what they have said?
So, Pat, you would be right if you had said Hyperinflation. Maybe that is what you meant.
Just like when I said in my\the 1st reply here ‘inflation’, I meant “too much” inflation. Inflation over 2%, maybe over 8%. I did not mean over 150%. Although *maybe* that would be possible someday if the Gov. kept increasing the deficit as a percent of of the GDP by 4% a *year* for several *decades*. Maybe.
Please note that I mean starting from 4% of GDP a year, after 10 years the deficit would be 44% a year. After 10 more years it would be 84% of the then current GDP. Etc for a few more decades. And yes I know it would be higher I’m just too lazy to calculate the exponential growth curve. At 4% it doubles every 72/4 = 18 years.
Steve_American, you write: ‘automatic stabilisers were supposed to work in a recession’
Even in our neo-liberal states, in a down-turn, money taken out of the economy through taxes falls, and money put in through existing welfare schemes increases, so there’s your automatic stabilisers, albeit denuded and insufficient. But you seem to have forgotten, though Bill frequently reminds, that a Job Guarantee Scheme, with a socially inclusive wage, underpinning private wage levels, is an essential plank of MMT. It is an automatic stabiliser – as private sector confidence improves, people would move from JGS back to private sector jobs, providing what was on offer was above the minimum JGS standard of pay and conditions. It is not a universal benefit system which is quite obviously not stable in comparison.
the latest fiscal stimulus (an extra $A70 billion) – which means we are up to about 7 per cent of GDP
You mean the Govt’s deficit will rise to 7% of GDP?
Possibly. But, probably not, if we consider that much of the stimulus will go into the hands of those who will spend it quickly into the economy and boost taxation revenue in the process. If it doesn’t, and ends up in hands of the wealthy, who likely won’t be so quick to spend it, it will add to the deficit and so shouldn’t be called a stimulus in the first place.
Investors also gladly accept this deception because central banks have given them risk-free arbitrage since the crisis.
If only working people would know the free money the top-of-the-town have been getting, money creation would become democratic overnight.
Great to hear the message in Australia is getting through.
Speaking of the “untrustworthy politician” spending all the money reminds of this quote from joker in the dark knight:
“all you people care about is money. This city deserves a better class of criminal, and I’m gonna give it to them!”
Seems like the inflation worry is still people recasting the “budget constraint” in different terms. The whole benefit of mmt is that it enables you get past “the money” to see that it is the real resources that matter.
What else could the real resources that a country has be used for? Is the current government happy with what all it’s citizens are doing with their time?
One of the best quotes I’ve heard that fits with mmt came from John Howard – namely “the best form of welfare a government can give someone is a job”. This is precisely what a job guarantee scheme would be doing!
For what it’s worth, the video didn’t work, nor was there any audio. I turned on the captions so at least I could read the conversation.
“They need to be handcuffed by the idea that all spending must be funded by taxes or debt. ”
And we can do that. I’ve had some success with Right of Centre people by saying that MMT allows them to implement a Balanced Budget. All they need to do is remove the spending auto-stabilisers (including the Job Guarantee) from the Treasury books and pay them directly from the Central bank.
Since that is inside the MMT “black box” of the government sector it changes nothing in MMT terms, but it forces the politicians to be “controlled”. They then have to target taxation to release resources before they can “spend” and use them – other than the Job Guarantee people who are free to use.
What Right of Centre people can’t have is their unelected wonks controlling monetary injections into the finance sector and the banks. The wonks are the central bank need to be handcuffed as well – and preferably carted away completely.
‘because it places a discipline on politicians, who because they are untrustworthy, would otherwise go wild in their spending.’
I suppose that is one reason why, certainly in the UK, there is a perception that the Tories are more trustworthy (in the fraudulent sense) with spending. The Tories have a natural break on spending which is ‘vested interests.’ As the recent Tory budget shows, when eventually they are prepared to spend it is a form of spending that doesn’t touch the interests of their class which are: maintaining asset bubbles, private health care and outsourcing.
So the public are conned by thinking they are being prudent whereas in reality the entrenched interests are held onto.
What is so interesting is that the “objections” to MMT are moving up the logic chain so rapidly.
It began with, “Look, the government doesn’t have any money that it hasn’t taxed or borrowed!!!”, to “Alright, it *can* create and spend the money out of thin air… but it’s inflationary!!!”, to “OK, so the govt can just create the money, and that doesn’t necessarily create any inflation, but… we can’t trust our politicians not to go wild with the chequebook, so we have to lie to each other!!!”.
We’re getting there!
Neil, this is brilliant!
And the beauty is that all the while that the IFS and OBR twonks are nitpicking over the minutiae of marginal amounts of Treasury spending to maintain balanced budgets, we’ll have full employment and a thriving economy!
Would there be a sticking point with private sector savings though? You’d need to get the Treasury to accept that any budget deficit that may persist is just the savings of the middle class and the wealthy, so that they wouldn’t seek to erode it entirely.
A good approach would be abolishing the private pension industry completely, and replacing it with a substantial increase in the State Pension. This would reduce budget deficits, because people would feel more confident to spend and not have to save so assiduously for their old age, but you’d have a fight on your hands to persuade the establishment to allow it. (Of course, there may not be much of a private pension industry left, after CV19 has destroyed its investment base!)
Best, Mr S.
“You’d need to get the Treasury to accept that any budget deficit that may persist is just the savings of the middle class and the wealthy, so that they wouldn’t seek to erode it entirely.”
The savings level is automatically balanced by the Job Guarantee injection and the other auto stabilisers. Always remember once the Job Guarantee is in place we have full employment and that means the traditional rules of economics can apply.
There’s another angle that you can use with Right of Centre people in that eliminating the ‘money’ argument allows you to show that taxing the rich doesn’t help because there is no supply of what the left want to buy anyway.
All the green deal stuff is all very well, but exactly where are you going to get all those extra roofers from to put up the solar panels? Builders can’t get roofers to put roofs on and people in wheelchairs don’t make great roofers.
Getting the debate onto “what is the alternative use you are proposing for this resource” works in both directions – since if you want to sack public workers you then need to explain who is going to hire them and for what purpose first. “We can’t afford it” is no longer an argument.
Paul Samuelson, in aligning himself with old time religion, appears to have forgotten the admonition of another pious Paul:
“They perish because they refused to love the truth and so be saved. For this reason God sends them a powerful delusion so that they will believe the lie and so that all will be condemned who have not believed the truth but have delighted in wickedness.” (2 Thessalonians 2: 10-12, NIV.)
The argument Alan Kohler gives: “… we don’t trust politicians. They need to be handcuffed by the idea that all spending must be funded by taxes or debt.” seems crazy to me. We don’t trust politicians with money, but we trust them with the police and court systems? How can these two things fit together?
Also, wearing our economist hats, we see the government asking “How much should we spend?”
But take those hats off, and the government’s question becomes “What should we do?” What does the nation need that it has not got? If a government takes care of those real resource needs, and the voters think that their votes are fairly bought thereby, then where’s the harm in leaving those politicians in power, even with their spending? If a government botches the requirements for good lives, then I hope the voters will notice.
Distrust of government has been relentlessly hammered into our heads since Reagan and Thatcher took office. What we’ve forgotten, to our peril, are the Enlightenment principles upon which democratic government is founded and is, in turn, to promote. These principles are elegantly and succinctly stated in the Preamble to America’s Declaration of Independence. “We hold these truths to be self-evident, that all men are created equal, that they are endowed, by their Creator, with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed. That whenever any form of Government becomes destructive of these ends, it is the Right of the People to alter or abolish it, and to institute new Government, laying its foundation on such principles, and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.” As MMT is the value-free lens through which we should view economics, I submit that democracy, as set forth in America’s DOI, is the value-laden lens through which we should view government. Once government is seen through this lens, it becomes impossible to distrust the very instrument we called into being to ensure our welfare. Only perverse forms of government, hijacked to serve special interests as opposed to the public interest, deserve our distrust and active opposition. Accordingly, we come to realize that democratic government, like money, is created purely by the exercise of collective will, by FIAT. First, the people call government into existence, and then government calls money into existence. Being so intimately interconnected, might MMT and democracy–the former value-free, the latter value-laden–be sold more effectively together as a package?
That is the key.
Taxing real resources to be moved and used elsewhere without causing bottle necks.
If it creates unemployment the JG wage has to be sufficient and ready to employ people.
You could easily make an arguement those in power have known this all along.
The reason why the myths were created in the first place.
a) Banks to be used to allocate the skills and real resources.
b) By doing that the skills and real resources stay with the top end of town. Private healthcare is a fantastic example of this.
Package it up and it is called self imposed political constraints.
In the days of gold standard/fixed exchange rates every currency unit spent into existence by domestic governments had the capacity to reflux on their central banks!
Bond issuance was vital because it turned obligations due on demand for obligations with predictable repayment schedules.
Isn’t politicians spending to benefit their mates and influence election results (eg. sports rorts) what they’ve ALREADY been doing for decades now? At least if everyone understands MMT, they will have to provide adequate public services and public infrastructure as well. I don’t really care what else they do, as long as they do that; the inflation rate can do the rest.
They live in fear of inflation, so isn’t that the discipline element. They don’t want their (and their buddies’) wealth devaluing, so the inflation rate becomes their primary focus, and we can stop the ‘we can’t afford spending on public anything’ rubbish.
I am only just getting familiar with MMT and found this a very interesting and helpful interview. One thing that Bill mentioned a few times is that inflation is caused by lack of resources in the economy, with the only resource mentioned in the podcast being labour. If that is the case, shouldn’t inflation and unemployment basically have an inverse relationship? When unemployment is low, inflation is high? But, for example, in 1986 we had relatively high inflation of 9%, but our unemployment rate was also over 8%. Then you look at 2019 and inflation is a low 1.6% but unemployment is also a (relatively) low 5.2%.
Lack of resources are real resources and could be anything depending on what you are trying to do.
Say you want to build a house then what skills and materials do you need to build it. It gets interesting when the government needs to build a million of them then think of what skills and materials are needed. Then super interesting when a government announced an Apollo project and wants to go to the moon for the first time.
You can’t just throw blips on a balance sheet at the NHS or the police it will solve nothing as it takes years to skill humans up to become nurses and doctors and the police. When the Tories announced the police budget a third of the budget was for recruitmemt.
Blips on a balance sheet you can never run out of. skills and gold needed for the electrics inside an MIR scanner you can.
So when a government announces a spending plan or tax cuts the size of the deficit is irrelevant it is what it is after the fact. Instead government should look at it and ask are there enough skills and real resources to absorb the spending created without causing inflation.
MMT’ rs say we should balance the economy not the budget.
Healthcare is very interesting.
Because, as soon as you realise the only constraint on government spending are the skills and real resources to get the job done. Not the Blips on a balance sheet, as the virus has shown clearly.
Then why do we allow private healthcare to steal both skills and real resources away from the NHS. Just so rich people can be first in line for treatment.
Taxing private healthcare to free up skills and real resources for the NHS is not very effective. Doing away with private healthcare is the correct solution but not a popular answer.
These are the debates we should be having once people understand how the monetary system operates in reality.
I thought the inflation problem is really caused by supply shortages and supply shocks, not excess money. It’s not too much money chasing too few goods…a better saying would be too many people /businesses chasing too few goods.
What happens at an auction when 4 people want to buy 1 house? the price goes up!
Why did the price of bananas skyrocket in Aus a while back? not enough bananas due to cyclones!
What happen when we don’t have enough doctors? the price of getting a doctor goes up!
“What happen when we don’t have enough doctors? the price of getting a doctor goes up!”
Technically it doesn’t. That’s a very key point. Mainstream economics thinks all resource conflicts are resolved via auctions with the highest bidder winning and everybody else bidding doing without.
That isn’t the case. There are other resolutions available. One is that the job simply doesn’t get done. The doctor position doesn’t get filled and the workload is then de facto reallocated to those in work who have to do more. That’s how the UK runs the NHS with 60% staffing levels on some wards.
The other is that alternative bids are banned. Which means that whoever is supplying the service has to take the price on offer, or get nothing. This is actually how government can force prices down to the price it wants to pay. Sometimes it hides this with clever tricks. Section 106 planning agreements in the UK being a case in point – forcing the developers to build infrastructure ‘for free’ if they want planning to build something else.
Or a police family and army family given a house with very low rents. London weighting being another.
Sure I take your point about how a supply shortage is resolved. My point would be better put as
to get from “not enough” doctors to “enough” doctors we have to increase the price/rewards/incentives/etc of being a doctor. This is inflation pressure.
I would also imagine that even if you controlled the price of a doctor – the price pressure would spill into other professions that could substitute for a doctor.
Another example – why do you think a job writing computer code pays so well? because not enough people know how to do it, compared to how many people and business want it done.
Interesting how TV news commentators constantly refer to “tax payers money” that the government is spending on saving the economy. Do they really think for one moment that this could be true.
“to get from “not enough” doctors to “enough” doctors we have to increase the price/rewards/incentives/etc of being a doctor.”
You don’t. Hence why there is a 10 to 1 demand for medical school places. From that we’re paying doctors too much!
It’s very possible to say if you want to be a doctor and you want to live in this country, then the price is X. And the state can do that with pretty much everything that matters if it wants to. Similarly it can control access to alternatives to force things into a channel.
The point is that by its power over the law and the rules the government has far more tools at its disposal than merely an auction bid. They are not unlimited or all powerful of course, but they are there.
$A70 billion. Isn’t that cute, a rounding error in what is being proposed for America. I’m being sarcastic, but sometimes it is funny to consider what those incomprehensible numbers mean. Back when Bill Gates was really rich (in the late 90s) there was what is now called a meme about how much had to be lying on the ground for it to be worthwhile for Gates to stop walking and pick it up. The last I checked years ago it was tens of thousands of dollars. Then when something hit a Trillion dollars during the Obama regime, there were various ways to help people visualize that.
“One Trillion Dollars $1,000,000,000,000 – If you spent one dollar per second, in a day you would spend $86,400. Over the course of a year, your spending would come to more than $31.5 million. At that rate of spending, it would take you over 32,000 years to spend one trillion dollars. (A trillion = 1000 billion.)”
At a $1,000 a second it would take just 32 years to spend a trillion dollars. Can Democrats or the Australian (even after looking at a list I can’t figure out which party are the BIG spenders. I’m guessing all of them. Please tell me which one is which, that chart I found didn’t help.) do that?
“Hold my beer.” I’m sure they are going to give it a go.
“It’s very possible to say if you want to be a doctor and you want to live in this country, then the price is X. And the state can do that with pretty much everything that matters if it wants to”.
But ., but…, how does whoever just “says” this decide what is the value of X?
*Who* decides? On *what* criteria?
There seems to be an unstated assumption that that value is ascertainable in some magical sort of way, by some god-like omniscient “authority”. Where does that authority reside and what would be its Delphic credentials entitling its word to be unquestioningly believed-in by everyone?
As posited, this smacks to me of cloud-cuckoo land.
*Who* decides? On *what* criteria?
We do – via the ballot box.
Pretty much all wages are set administratively by a process of probe and feel. You don’t think Linekar is actually worth what he gets paid surely. His agent just asked for a number and the Beeb agreed to it.
To put it another way, government can get away with paying whatever it can get away with politically. The 750,000 people now working for the UK NHS for nothing being a case in point.
The 750,000 people working for the NHS for nothing are most probably doing that because they feel it is the ‘right’ thing to do to try and help out during a crisis. And more generally, to try to care for the sick. You can’t build an economic argument that the government can set prices based on that. It isn’t a decision based on money in the first place.