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The Job Guarantee and the MMT Core Series

letsgetitdone's picture

This is an introduction to a series of 16 posts I began in reply to a number of posts by John Carney at the CNBC blog and Cullen Roche at Pragmatic Capitalism, and discussions replying to them. The posts by Carney and Roche criticized the MMT Job Guarantee (JG) proposal. They did so by calling into question whether the JG would be effective in achieving Full Employment (FE) and Price Stability (PS), and also by calling into question the MMT goals of "Public Purpose", and "FE with a living wage" as appropriate. The critics proposed that “Full Productivity” (FP) and PS be goals of MMT, and that “prosperity” be the higher level goal. They also proposed that MMT concentrate on description and avoid policy prescriptions, and that it deal only with “facts” and not with “theory.”

The first 13 posts in this series refute these proposals, and also discuss the question of the appropriate hourly rate for the JG program. They also discuss various fallacies of composition inherent in many of the objections made to the MMT JG program, the issue of whether an FE or an unemployed “buffer stock” is more in line with public purpose, and also the issue of whether it's possible to deal only with “facts” and not with “theories.” In the 14th post I introduce the idea of the MMT Knowledge Claim Network (KCN) consisting of Social/Value Gaps, Knowledge Gaps (problems), Descriptive Knowledge Claims, Prescriptions, and Narratives. I also argue that the MMT KCN is a fused fact-value network with important value commitments, that it was developed holistically by its originators. that it is not focused on descriptive aspects of economics alone, that it offers explicit value claims, and that it's normative aspect is clear.

I also argue that many of its practitioners, offer policy prescriptions rather than simply concentrating on the way the world is right now. I also note that the social/value gap, problems, and prescriptive aspects of the MMT KCN are progressive and Second New Deal oriented, and that is why many people who are persuaded by parts of the descriptive aspect of MMT want to do what they can to place these aspects into a secondary role and drive them out of the KCN altogether.

In the 15th post, I offer my view of the current components of MMT in its five categories of knowledge claims as preparation for concluding 16th post in the series, which answers the questions I posed at the beginning of the series; namely:

-- What is part of the MMT core right now? and

-- how ought we to change it in the future?

Since I finished the series, its importance as a resource was underlined by new posts from Cullen Roche and Mike Sankowski (Trader's Crucible), and by Cullen's revision of his earlier paper on MMT which is now an introduction to a new approach called “Monetary Realism.” Here's Cullen on MMT and MR.

”As many of you now know, the divide within some of the MMT thinkers has grown fairly substantial. The schism over the Job Guarantee revealed several points of disagreement that lead to vastly different conclusions than those espoused by the primary MMT thinkers. Several commenters and vocal proponents of MMT have made it clear that my positions are not those of the MMT economists and founders and are in fact something different. I won’t do the developers of MMT the disservice of pretending that my ideas are completely in-line with theirs. That would only serve to confuse those learning MMT and could undermine the efforts of the MMT developers.

I feel that the core operational aspects of MMT are among the most important ideas in the world and my goal here has always been to help promote those ideas. Because I believe in those ideas I will not stop promoting them. So I’ve been working with Michael Sankowski, Carlos Mucha (who most of you probably know as reader Beowulf) and several others to help formulate our thinking. I’ve also been in detailed talks with Warren Mosler over the last several weeks hashing out some differences. It’s safe to say that we have his blessing even though he’s not 100% in agreement with all we’ve concluded.”

I'm not sure I agree with the claim that Cullen, Mike, and Carlos have “Warren's blessing” beyond his wishing them luck in pursuing their orientation, which I also have done. Certainly, Part Seven of my series doesn't indicate to me that they have his blessing in the normal sense of this term, and I also think that no group that departs from the core value of “public purpose” as the goal of Government economic policy would ever have his full blessing.

”Importantly, I want to be clear that I do not view Monetary Realism as a competing idea to MMT. Rather, it is merely the form of Mosler Monetary Theory that I wish to promote (without confusing readers into thinking that I am promoting the exact MMT ideas and prescriptions). After all, Warren is still the father of the theory and it’s incredibly important to note that he is, by far, the most influential thinker in this offshoot of MMT. If anything, I hope that by focusing on the operational realities of MMT via Monetary Realism that I will bring even greater credibility to MMT and its operational realities. The fact that we have differences regarding prescriptive uses, in my opinion, gives the idea even greater credibility. But in the end, it should be clear who gets the credit for these ideas – Warren and the other developers. Monetary Realism is merely standing on their shoulders.”

And Cullen also goes on to state that he has revised his introduction to MMT, so that it is now an introduction to MR. In that paper, he also has added “innovation” and “growth” to the goal structure of MR, and also stated that: “The core value of Monetary Reality is transparency of the global monetary system.” He also states that a new web site is being created to promote MR. Two posts have also appeared at the Trader's Crucible web site here and here, announcing the new development.

My take on MR is that even though it tries to minimize the differences between MMT and its “offshoot,” these are at the core of the two systems and that if they were not there would be no MR. If MR proponents still accepted 'public purpose” as the highest level goal in their KCN, and had not replaced it with “prosperity,” if they had not replaced FE with FP as a key second-level goal, then there would have been no split.

The replacement of FE as a goal indicates that MR doesn't consider a job at a living wage as a right of every individual. That is a huge difference between the two approaches that cannot be minimized, as the MR adherents are trying to do.

Beyond these explicit differences there is the further implicit difference that the MMT commitments to public purpose and to FE are commitments to greater equality in American and global society. The abandonment of FE and the JG suggest that the MR proponents are much less concerned about social and economic justice than are the MMT founders and others who practice the MMT approach. In a time when democracy is threatened by plutocracy throughout the world, that difference between the two approaches is fundamental and will shape their future development.

In the future, I'll try to clarify further the differences between MMT and MR and illuminate some of the foundational problems of MR that are already apparent.

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Ralph6Musgrave's picture
Submitted by Ralph6Musgrave on

Letsgetitdone, In relation to JG, MR, etc you cite a large number of possible objectives: "full employment" "price stability" "public purpose" "full productivity" "prosperity" “innovation”, “growth”. And most bizarre of all, there is the objective of MR proposed by Cullen Roche, namely "transparency of the global monetary system", whatever that is.

What on Earth is wrong with the most fundamental and basic objective of ANY FORM OF economic activity? Personally I’d define that as “maximising output per hour within environmental constraints, while providing work for as many people as possible who want work”. Though others might have a slightly different definition.

E.g. if a JG system raises employment without reducing GDP per hour, then it meets the latter objective. Or if it raises output per hour while total hours worked remains constant, then it also achieves the objective (though JG is far more likely to achieve the former than the latter).

letsgetitdone's picture
Submitted by letsgetitdone on

Hi Ralph,

What on Earth is wrong with the most fundamental and basic objective of ANY FORM OF economic activity? Personally I’d define that as “maximising output per hour within environmental constraints, while providing work for as many people as possible who want work”. Though others might have a slightly different definition.

Where I start is with the value of "public purpose." Because MMT as an approach is about what the Government ought to use its currency monopoly for through its monetary and fiscal policies. I think that in a democracy it ought to use those policies to fulfill public purpose. So then the problem is to specify what we mean by public purpose.

The dimensions "full employment" "price stability" "full productivity" "prosperity" “innovation” “economic growth” may all be viewed as dimensions of public purpose. Other dimensions might be universal health care availability, equality of economic opportunity, equality of educational opportunity and others that are slipping my mind right now.

Once dimensions are selected, then formulating the MMT knowledge claim network (KCN) ought to proceed by prioritizing the dimensions. This can be done rigorously using methods like the Analytic Hierarchy Process (AHP) to develop ratio scales of priority. No one's doing that now, of course.

Speaking more loosely, I think all of these dimensions are pretty important, but I think that "full productivity" is the least important of these goals right now and nowhere near as important as FE with PS. Now Cullen and the other MR folks may be able to get me to think differently if they explained what they mean by "full productivity" and find a credible way to measure it. But right now I have little idea what they even by this term unless it's the highest output per labor hour possible given the current state of technology, because they have simply not gotten around to saying what they mean, much less measuring it.

Anyway, these are some of the thoughts occurring to me after reading your comment.

reslez's picture
Submitted by reslez on

Perhaps it's utterly cynical of me, but I presume Roche/Sankowski are positioning "MR" as a corporatist-friendly alternative to MMT proper, the better for selling subscriptions to their forthcoming "investor education" website. The financial glibertarian audience they need to cultivate would choke at a job guarantee. The most Roche/Sankowski propose is a payroll tax cut, which is great. If you have a job.

Note that I take as read both are utterly sincere in their convictions and honestly believe "MR" is a superior alternative, as far as it goes. I'm merely pointing out their views will be easier for propertarians to swallow.

There's a difference between explicating an ideal system which includes a job guarantee versus saying the best we can ever do is a payroll tax cut, so let's ignore the unemployed and accept joblessness and despair as a feature of our system. It's not only unjust, it's wrong on the economics.

Any conceptual framework that writes off 10-20% of the working population is a hideous miscarriage. How is that "productivity"? No. Its rightful place is the dustbin.

letsgetitdone's picture
Submitted by letsgetitdone on

But I'd probably also say that Cullen, Mike, and Carlos are probably looking for an MMT-like narrative that makes it harder for people to label them as "radical leftists," "socialists," "communists" or other nonsense names. I think they have heavy "political" and "marketing" concerns, and believe that the American political system is highly resistant to change, and that the corporate order will hardly be dented by OWS and other movements of dissatisfaction with the present system.

I'm not sure they'd restrict themselves only to payroll tax cut policy. One or two or maybe all of the founding three may well be very happy with state revenue sharing, and lots of infrastructure and innovation/ technology stimulus money as well. Also, they all may be interested in paying off the national debt using proof platinum coin seigniorage. Carlos Mucha brought this idea to all of us. But all three have been opposed to my extension of it to $60 T coins that would, essentially, fill the public purse and pressure Congress to spend money on progressive things much more easily.

Nor do I think they want to lose 10% of the employable population to the UE buffer stock. I think they're probably thinking that a vigorous stimulus program could lower the U3 UE rate, and maybe even the U6 rate to 5% or less without recourse to a JG. At that point they'd probably write-off the millions who'd still be without full-time employment as an acceptable cost to avoid putting too much pressure on ideas like "individualism", the "free market," calvinism," and other such bunkum.

Ralph6Musgrave's picture
Submitted by Ralph6Musgrave on

Letsgetitdone, I think there is a problem with MMTers taking on themselves to decide what constitutes “public purpose”. This is that they are interfering with, or riding roughshod over the two main existing systems we have for deciding what to produce or how to allocate resources.

One of these systems is the free market. And consumers will rightly object if MMTers try to interfere with consumers’ freedom to spend their money the way they want.

The second main system is the democratic process. That is “the people” or consumers at election time decide what proportion of GDP should be “non free market”: i.e. what proportion of GDP should be allocated to public spending, and how that should be split as between education, the military, etc etc.

There again, consumers / citizens will rightly object if some small group start interfering with the latter democratic decision.

I thus think that any JG system should allocate JG employees in line with the above decisions taken by citizens / consumers. E.G. if the latter have decided that GDP should be split 50:50 between private and public spending, and that public spending should be split evenly between education, the military and health, then JG labour should be allocated to the latter activities and in about the above proportions (i.e. ½, 1/6, 1/6, 1/6).

Of course to some extent the “dimensions of public purpose” that you cite are already incorporated in what I called the basic objective of economic activity. In particular I would cite "full employment" "price stability" "prosperity" “innovation” “economic growth”. But where MMTers come up with an objective which is NOT INCORPORATED in the “basic” objective, I think it is then that MMTers start riding roughshod over the wishes of the citizenry.

letsgetitdone's picture
Submitted by letsgetitdone on

I agree that Public Purpose ought to be determined through political democracy. I think, also that democracy trumps the market, and that insofar as we use the market as an allocation mechanism, we should only do so because that is consistent with public purpose as the people view that.

In addition, I think "Public Purpose" is a normative concept, and that as citizens of a political system, MMTers are free to argue their views on what the "public purpose" is and to argue for these views in the public square, hoping that the public will agree with their construal of "the public purpose, rather than the Austrian one, or the MR one, or the neo-liberal one. However, I think the standard everyone should keep in mind when evaluating economic policy should be public purpose as they understand it. That way we can use our differences and our criticisms to improve our understanding of public purpose as we go forward.