Thursday, December 29, 2011

Bill Mitchell addresses points raised by John Carney


Read it at billy blog

MMT is biased towards anti-crony
by Bill Mitchell

UPDATE

Warren Mosler's comment at Bill's on this post:
Bill, this post ranks with your best!
Remember fondly all the time we spent way back working all this out, writing the early papers, giving the talks in Newcastle, Sydney, and Canberra.
Let me add that it begins with the fact the currency is a (simple) public monopoly, and as we all learned, monopolists are necessarily price setters. And in a market economy, the monopolist sets one price and lets the other’s adjust.
At one of Mario and Marcs ‘post Canadian’  conferences, I decided to rename my talk at the last minute calling it something like ‘maximizing price stability in a market economy’ and went on to show how price stability is always via some form of buffer stock or another, and how the most stable and the deepest, most liquid ‘commodity’ gives the best results, with unskilled labor being the most stable, deepest and most liquid, etc. concluding that price stability is maximized with a jg policy. And (jesting) that you just have to accept full employment as a side effect.
Back to the monopoly thing, when govt has any other monopoly is knows to set price and let q adjust- telephone, electric, water, sewer, etc. etc.
But when it comes to the currency, not realizing its just an other monopoly, it tries to set q via its budgeting process, and paying ‘market prices’ and then trying to figure out the right q to net spend for full employment and price stability. Of course it’s chaotic and requires thousands of analysts to get it even a bit right. Think of running the other monopolies that way- the electric company setting how many kw it’s going to sell and letting the market decide price, for example- and it would be just as chaotic and disruptive.
Also, none of the recent publicity would have happened without your blog paving the way and establishing
a virtual MMT text book.
Best!
Warren

5 comments:

beowulf said...

I disagree with MMT orthodoxy that a Job Guarantee is either a necessary or sufficient condition. Fiscal policy can more easily be adjusted by tax policy and even those way out of paradigm economically could endorse a JG-- if its framed as the "workfare" replacement for welfare. To quote again conservative writer Peter Ferrara (no MMTer he, his latest book is “America’s Ticking Bankruptcy Bomb”):

“Suppose all aid to the able bodied was in the form of an offer to work. Report to your local welfare office before 9 am and you are guaranteed a work assignment somewhere paying the minimum wage for a day’s work... If you have children with no one to care for them, bring them with you and they will receive free day care… If you work a minimum number of hours you get a Medicaid voucher... These workers would continue to receive the EITC and child tax credits…

There would be no need to maintain and investigate eligibility requirements. If Warren Buffett wants to show up for a work assignment before 9 am, no big deal. Most importantly, this new system would effectively eliminate real poverty in America. Everyone would have a place to go where they could get an assured job...
(p. 9 of pdf)
http://tinyurl.com/73q5fze

Matt Franko said...

Beo,

This may go over to the "class" issue though.

I've been trying to understand Marxists and other left leaning folks lately, and the concept of "class" is pretty important to them looks like.

There are negative social connotations to the word "workfare" imo. A "JG" perhaps turns this on it's head, completely changes the whole framing. Depicts employment as not so much something to be competed for (with "winners" and "losers" chosen by elites) but rather, a basic right.

There is a lot of "in your face" in the phraseology "Job Guaranty". Like the guy in the clothing commercials on TV: "I guaranty it!"


"Guaranty" is a pretty strong word.

Just the phraseology takes the issue to the ideological level.

The phrase "Job Guaranty" is sort of a nice 2-word way of saying: "Look you MFing SOB moron NAIRU b--tards, not only do we disagree with your psychotic view of the world, but we advocate turning your whole deranged world upside down to not only "eliminate unemployment" but rather we will go as far as to actually GUARANTY everyone a job you a--holes."

But to your point I agree this perhaps wouldn't be the best political approach if you are trying to avoid the spiritual confrontation and simply be more pragmatic about getting people their incomes back soonest.

Although if you look Ferrara here does use the word 'guaranty' as in 'guaranteed work assignment' so perhaps there is a coming together starting to form...

Resp,

Dan Kervick said...

Bill has a further contribution to the debate up today.

http://bilbo.economicoutlook.net/blog/?p=17564#more-17564

Tom Hickey said...
This comment has been removed by the author.
Tom Hickey said...

Matt: I've been trying to understand Marxists and other left leaning folks lately, and the concept of "class" is pretty important to them looks like.

Marx is recognized as one of the founders of the science of sociology. Class is a hugely important concept in sociology, and for neoliberal economists to be in denial of it is astounding to people in the life sciences.

There is enormous amount of scientific research showing that people do not act as independent individuals when they are in groups, because of the various structural relationships among member of the group. These relationships includes various ways of categorizing members in terms of social status, political influence, and economic differences.

Society is not an aggregate of independent individuals. This assumption is one the level with that of markets starting with Robinson Crusoe and Friday trading fish and coconuts. These are simply false assumptions that undermine mainstream economics as a social science.

Mainstream economics models itself on 18th century classical physics instead of keeping up with additions to knowledge in the sciences more directly relevant to its data. It needs to get over this before Mainstream economists need to get over this before they end up driving the entire world economy over a cliff, if they haven't already. The results of this crisis are not yet in.