Home > Main > MMT and the Jobs Guarantee

MMT and the Jobs Guarantee

January 2, 2012

Senexx!  You got my attention with your comment!

My take on the Jobs Guarantee?  It’s not what I consider to be “core MMT”.  Nowhere in the description of the money creation process is there anything about moderating demand through keeping people employed.

I agree with Cullen Roche on this topic.  I’d imagine our friend Edward Harrison has similar views.

I found Ralph’s post and responses about Malcolm Sawyer’s problems with MMT to be very good.  I have many of the same problems, yet I am a full-throated supporter of what I will call “Core MMT”.

My problems with the Jobs Guarantee are what lead me to create the TC Rule.  I also fully support beowulfs implementation of a variable tax holiday.

Yes, I do think the ELR price anchor is far superior to using unemployed as a price lid.  I’ve been working on something on the natural rate of interest for many months now (you haven’t seen it) and I am coming to the conclusion full employment is the only way we can observe we have hit the barter economy ideal of matching supply and demand.*

I also have many problems with it. I think it’s near political suicide, and the implementation of it is a problem I have not seen addressed well.

I went on a driving trip through the United States this summer.  I drove from Chicago to Long Beach California.  It’s hard to imagine how vast the United States is unless you do a drive like this.  A highlight of the drive was on what is called “The Loneliest Road in America”.

There were unemployed people everywhere, in the smallest towns on desolate roads. How can we get these people to the ELR?  It’s a huge problem

But in any case, I’ve thought exactly the same thing Scott wrote about MMT getting changed by people like me and Cullen and Steve Randy Waldman many times: It’s great news MMT is getting out into the world and getting changed by people who like it and challenged by people who do not like it.

MMT is an idea with “legs” as they say, and part of that process means change.

*You all know me by know, and know my obsession with being able to tell if something works or not.  When I see Paul Krugman lamenting the path of modern economics, I know the exact reason why economics can’t learn.  The feedback links of theory and empirical evidence aren’t strong enough to be toss out the trash ideas due to the way economics as a broadly based philosophical line of inquiry thinks about the world.

In short, they are poets when they need to be technicians, and technicians when they should be poets. .

Re: Barter economy.  I know they never existed. I am just pointing out a logical inconsistency of someone using a barter economy framework, slapping on money, and then assuming we’re at full employment constantly.  It’s about the least productive line of thought you could have, because it ignores demand nearly entirely.

Categories: Main
  1. January 2, 2012 at 2:36 pm

    Politically I’m sympathetic and I agree that Sawyer presents great political arguments (and there is a couple things out there by Wray and Mitchell that refutes a lot of the argument but I don’t think it is adequate – I’ll tease it out one day)

    However what you acknowledge is the argument is politics which is exactly what I put it down to politics vs. economics – with a quick critique of the Beowulf proposals – given that you say JG “…price anchor is far superior to using unemployed as a price lid.”

    I’ll end in the words of Warren Mosler that I’m sure you’ve seen – there *will* be a buffer stock, it’s just a matter of pick one? gold, fx, unemployment, etc (sic)

    • TC
      January 2, 2012 at 8:30 pm

      Hi Senexx,

      I agree the JG is a good idea and a superior buffer stock. I just think the JG isn’t related to the fiat script creation process.

      It’s more “Operational MMT makes deficit spending a non-issue. Since the JG is the most moral way to anchor prices, MMT makes the JG possible.”

      This isn’t exactly correct, but it’s closer to what I see as the truth than saying “The JG is a necessary component of MMT.” I can fully imagine using the TC rule or something like it to stimulate the economy, while using the unemployed as a buffer stock.

      • beowulf
        January 2, 2012 at 8:50 pm

        “I just think the JG isn’t related to the fiat script creation process.”
        Right, there are conservative deficit hawks that support workfare as a replacement for welfare (workfare is operationally indistinguishable from a JG, except conservatives like one and hate the other and liberals are just the opposite). The trouble is that deficit hawks would offset the fiscal loosening of JG spending with fiscal tightening elsewhere in the budget with regressive spending cuts or tax hikes.

        First win the debate on the fiat script creation process (and a variable rate version of the EXISTING payroll tax holiday provides the clearest cut argument) and then it will be much easier to make the case to “replace welfare with workfare” in a way that doesn’t step on economic growth (you don’t have to be Frank Luntz to see that there’d be more votes in Congress for “workfare” than for a “job guarantee”).

        • TC
          January 2, 2012 at 10:07 pm

          Workfare. See what we’ve been missing w/o beo in the mix? Workfare is easy to understand compared to “Employer of last resort” and doesn’t scream “Comrade Obama” like Job Guarantee.

          Heck, with branding it Workfare, the JG has a real political chance. I bet you could pass that long before people accept spending isn’t an issue.

      • January 3, 2012 at 8:19 am

        It’s fully related. Without an automatic nominal price anchor you will have extreme fluctuations in the dynamic system.

        It’s rather that JG makes MMT type spending (or tax cuts) stable because it allows private sector malinvestment to unwind naturally and prevents poor quality operations from existing.

        There is more to life than money. Unemployment is a modern curse In the system we have created ‘What do you do’ is a sign of social status. To create a system where that is your social status and then systemically prevent them from working is immoral.

        Similarly the JG provides more than just a money anchor. It provides a quality anchor as well. Crap jobs on slave wages 80 hours a week 100 miles away should not exist. The JG competes with the private sector on quality. If you want to make money out of people then the jobs have to be near where those people live, sensible hours and conditions and decent pay. Or you will not be able to hire staff.

        That halts the chase to the bottom in its tracks and reverses the decline in the wage share – which along with the rise in private debt is the reason we’re in this mess in the first place.

        Let’s remember in all of this that each unemployed individual is a person, and that person is suffering because of a loss of social status. Their entire world has been turned upside down. They are dying on the inside.

        In the words of Jarvis Cocker (from the song Common People).

        “You’ll never live like common people,
        you’ll never do what common people do,
        you’ll never fail like common people,
        you’ll never watch your life slide out of view,
        and dance and drink and screw,
        because there’s nothing else to do.”

        • TC
          January 3, 2012 at 2:16 pm

          I don’t know if this is the case Neil – I don’t know if we’d see huge fluctuations in the price level.

          for example, imagine we used the TC rule as a guide for fiscal policy and set interest rates at zero. We wouldn’t see huge fluctuations at all.

          I am not saying this is superior to the JG, or even that the TC rule is all that great.

          But I can easily see how we could have stable prices and lower unemployment with something like the TC rule.

          This is great:

          “Similarly the JG provides more than just a money anchor. It provides a quality anchor as well. Crap jobs on slave wages 80 hours a week 100 miles away should not exist. The JG competes with the private sector on quality. If you want to make money out of people then the jobs have to be near where those people live, sensible hours and conditions and decent pay. Or you will not be able to hire staff.”

          I really like the take on quality.

          But…this then brings up a point – why should the government subsidize people living in the middle of Utah? I don’t see the benefit of providing someone with a decent job out in the middle of Wyoming, when there isn’t anything else out there that can make money but a few oil rig jobs.

        • January 4, 2012 at 2:27 am

          “why should the government subsidize people living in the middle of Utah?”

          Nobody is being subsidised. The JG ‘pays’ for itself via quantity expansion/maintenance of the economy by eliminating the aggregate demand deficit.

          And anyway the answer is equally flippant – because that’s where they live.

          We have already been through several cycles of everybody congregating physically in one location in history and the issues with that are very clear – an increasing split between the haves and have nots and an increase in the level of poverty.

          With modern technology, a service economy and service robots starting to show that we genuinely do have a Paradox of Productivity the work should be encourage to go to where the people are.

          Oil isn’t going to get any cheaper and burning it moving bodies from point to point is a very silly use of a precious resource.

    • TC
      January 2, 2012 at 8:56 pm

      I don’t “entirely” agree my opposition to the JG is political. It’s more about the problems of implementation. The government is great at some things – like fielding an army and making roads. It’s not so great at deciding what to do with 5 million people across the United States- this is something the market can do far better.

      And I am fully on board with “there will be a buffer stock”.

      I’ve been commenting over at Ralph’s place about the JG a bit too.

      • Clonal Antibody
        January 2, 2012 at 9:19 pm

        TC,

        I hate saying this, but please read up on the history of the WPA — the real history, not the right wing dissing of it. The WPA at its peak employed 3 million people – they were employed, but they were still counted as unemployed in the official statistics – this non counting forms the basis of many of the right wing criticisms of the WPA — they look at the official unemployment figures, and tack on the 3 million, and say that the WPA decimated job creation, when in reality the WPA also created jobs in the private economy by increasing AD.

        The WPA employed road workers, construction worker, artists, musicians, writers, actors – you name the profession, and they were employed. And there was no, and I repeat no encroachment on private employers. None. This was because the WPA paid the going (average) wage for the type of work the worker was employed in, not the lowest possible or minimum wage. However, the workers could work no more than 60% time. If they wanted to earn more, they had to get private sector jobs, often at a lower hourly wage.

        • TC
          January 2, 2012 at 9:48 pm

          Clonal,
          :) I’ll check it out.

          It seems impossible this didn’t result some encroachment on private sector jobs. During the depression this encroachment isn’t a problem for me. What I am far more worried about is when the economy rights itself and is doing well after a few years – then what happens? how do you tell what needs to be done?

          And even if I accept the JG as being feasible, it doesn’t change my view on the connection to core MMT.

          Plus, somehow your comments made it past the spam filter!

      • Clonal Antibody
        January 2, 2012 at 9:29 pm

        I should also add that the way the WPA did it, workers skills were kept intact or enhanced. If you were an engineer, you were hired for work as and paid as an engineer. I you were a writer, you worked as and got paid as a writer. If you were fresh out of school , you may have worked in one of the programs of the National Youth Administration.

        The JG cannot be on one size fits all program.

        • TC
          January 2, 2012 at 9:49 pm

          This is a good point and one that is totally missed by the founders of MMT. For me – or anyone in the top 50% of the income distribution – to take a minimum wage job would be a joke and cost more than it pays.

  2. beowulf
    January 2, 2012 at 8:32 pm

    I went on a driving trip through the United States this summer. I drove from Chicago to Long Beach California. It’s hard to imagine how vast the United States is unless you do a drive like this…

    You should write more about what you saw. Have you read Jack Kerouac’s “On The Road”? Its a fictionalized account of driving cross-country in the late 40s (an interesting time, we were a poorer country but with higher hopes since WWII spending had just blasted the country out of the Great Depression). If you haven’t read the book, just wait for the movie later this year. Nevertheless, the closing paragraph is pretty awesome.

    http://en.wikipedia.org/wiki/On_the_Road_%28film%29

    “So in America when the sun goes down and I sit on the old broken-down river pier watching the long, long skies over New Jersey and sense all that raw land that rolls in one unbelievable huge bulge over to the West Coast, and all that road going, and all the people dreaming in the immensity of it, and in Iowa I know by now the children must be crying in the land where they let the children cry, and tonight the stars’ll be out, and don’t you know that God is Pooh Bear? the evening star must be drooping and shedding her sparkler dims on the prairie, which is just before the coming of complete night that blesses the earth, darkens all the rivers, cups the peaks and folds the final shore in, and nobody, nobody knows what’s going to happen to anybody besides the forlorn rags of growing old, I think of Dean Moriarty, I even think of Old Dean Moriarty the father we never found, I think of Dean Moriarty.”

    Happy New Year TC.

    • TC
      January 2, 2012 at 10:08 pm

      I just bought Dragon dictation and going to see if I can’t just record my impressions. I should have done that with the trip to coast rica too.

      I used to love that book back in College days. I wonder how it holds up.

  3. January 2, 2012 at 8:43 pm

    I agree that 100% employment is a noble goal. But isn’t it a better goal to just get enough people employed to get the economy working again? Going for 100% at all times puts the economy at risk of becoming dependent on the JG for good. It takes over private sector resilience, since ensuring everybody has a JG job offer ensures that nobody takes a private sector job unless it’s for a premium above the JG wage. This prices out many small businesses for labour, and probably most startups. A better program would be something that gets private sector hiring again, not discourages it.

    • TC
      January 2, 2012 at 10:21 pm

      Agreed here. Clonal says it won’t be a problem with a properly structured plan – and the WPA plan of full wages, but only 60% of work, seems like it might work ok.

      It wouldn’t price out small businesses, wouldn’t crush startups.

      I’ll have to read and think a bit on it. And frankly, I’ve been thinkng about that natural rate of interest for so long, its nice to get it out at least a little bit.

  4. Dan
    January 2, 2012 at 9:36 pm

    It doesn’t have to be 100%. I think Bill Mitchell acknowledged that there would be hold outs (he had another term). Not everybody needs to be in to set the floor price. The program need not be a big government program. It could be administered locally. And, yes, you could go out into the boondocks to find unemployed people and give them something to do – even it were to dig Keynesian holes to fill back up. The county farm agents probably know who they are and where they are. Where there is a will there is a way.

    Does it really matter if JG is integral to MMT in one guy’s mind and not in another’s? What really matters is whether it’s a good idea.

    Pardon me for butting in.

    • TC
      January 2, 2012 at 10:29 pm

      Glad you joined the discussion.

      The reason I chimed in with about the JG was due to Senexx, and I’ve also thought for a long time the JG seems slapped on to MMT. I am very glad this issue has come up – it’s a critical conversation for MMT.

      I do not think the disscussion is about “its a good/bad idea”, but rather it’s not linked to the operational descriptions of money in the economy.

      I think this is a great point “The program need not be a big government program. It could be administered locally” I sometimes look at things like the post office, and see a program that works great for a few hundred years. It’s still working pretty well, and it’s a huge program.

      It’s local and national at the same time – and it works.

  5. Clonal Antibody
    January 2, 2012 at 10:22 pm

    TC :

    This is one of the reasons I would prefer a BIG, and get rid of the minimum wage. The BIG would make sure that nobody starved and nobody went without a roof. The BIG could take the form of “Food Stamps” and a “Housing Voucher.” For everything else, you work.

  6. beowulf
    January 2, 2012 at 11:44 pm

    Everyone thinks the govt is too big (and it doesn’t matter that state and local govt is a bigger hassle on a day to day basis than the federal govt, its all blamed on Washington). Any argument to make it bigger will automatically be looked at with suspicion. Besides, the federal govt’s unique selling proposition is its bottomless checkbook and not its human resources acumen.

    The political effort it would take to create (or recreate) a government agency called the “National Youth Administration” would be approximately the same as tripling EITC benefits. Except for one you’re re-fighting the battle every year for annual appropriations while the other keeps rolling along year after year until the tax code is reformed (which is to say, far far in the future).
    That’s why amateurs ask for federal spending and the pros ask for federal tax credits. The best way to muck out the barn, to be sure, is zeroing out the $1.3T in existing tax expenditures in order to fund a negative income tax system. Failing that, just remember any sort of new tax credit has a much easier ride than any sort of new spending program.

    • Clonal Antibody
      January 3, 2012 at 9:57 am

      Beo,

      I agree with you here. Hence my comment on the BIG vs JG. Your EITC concept should work well here. However, the moralistic right will have kittens over giving an EITC to an unemployed person! Therefore my comment on the form the EITC may take for those earning less than a specified amount. May be a certain percentage could take that form (I am obviously thinking that the food and shelter could be heavily subsidized. – after all many cities and towns had/still have rent control – a form of enforced subsidy from the property owner to the renter)

      • beowulf
        January 3, 2012 at 10:20 am

        Or create A BIG system (clearly scaling up the Alaska Permanent Fund would be the simplest approach), and then if people start complaining about the unemployed getting a check (for its part, Alaska doesn’t have a work requirement), that’d be the optimal time to set up a workfare system. :o)

        http://www.pfd.state.ak.us/

  7. gf
    January 3, 2012 at 9:58 am

    A JG clearly needs to be tried.

    That is the only way to ever find out if it works and what the unintended consequences are.

    The rights’ objections should be ignored as we have been following their failed policy the last 25 years.

  8. PointandFigure
    January 3, 2012 at 12:58 pm

    I waver on the JG due to concerns about efficiency and wonder if direct government spending to create the some of the jobs being covered by the JG would be more effective (i.e. infrastructure, research, clean up) that would result in a private sector hiring increase or increased utilization of existing labor in response to the public sector demand. I would rather see something along the lines of an education guarantee combined with traditional unemployment. Traditional unemployment as a “buffer stock” needs revamping but JG or nothing (in terms of compensation support) seems like a form of selling oneself into slavery. Taking any job offered under the JG at minimum wage doesn’t necessarily result in a more skilled, trained, happy labor force, nor does it address the issue of wage slavery. I also see some forms of existing public sector employment as a diluted version of the JG program being proposed.

    • January 5, 2012 at 3:10 am

      “I waver on the JG due to concerns about efficiency ”

      Exactly how efficient is it having 14% of the population being paid to watch crap badly made programmes on TV and spend money while getting more unhealthy and depressed?

      Plus you don’t want the JG to be efficient. You want it to be effective.

      If the public sector ever gets to be efficient then there would be no opportunity for the private sector to profit. After all the public sector always has a lower cost of capital and an infinite supply of it.

      If the private sector sees JG people being ‘inefficient’ then they have the obvious solution. Pop down the bank, explain the business plan, get the money, hire the staff off the JG, make them more efficient and pocket the difference.

      JG is the shop window for hireable people who can do stuff. Hire them and make a profit.

      • TC
        January 5, 2012 at 5:31 am

        It’s not at all. But much of that problem could be solved w proper fiscal deficits.

        Best,

        Mike

        Sorry so short! I am on my iPhone!

      • PointandFigure
        January 5, 2012 at 11:58 am

        Neil, it’s absolutely not efficient. I was not in any form against the JG, just what I had interpreted as it being mandatory rather than optional for those who would actual experience a reduction in standard of living from the minimum wage associated with the JG. I had preferred a menu of options for the unemployed to provide them with a choice of traditional unemployment, the JG which I compare somewhat to the Civilian Conservation Corps, or an expanded and empowered Job Corps program which I found to be superior to the CCC (eligibility extended to all ages). Fortunately my concerns were completely misfounded as Randall Wray, Scott, Pavlina, obviously Warren, Bill Mitchell already considered these and have addressed and are currently working to analyze and improve their proposal in every conceivable way. I was wrong due to ignorance of their complete body of work. My fear was a Fitzhughian JG program, and I was wrong. Thankfully I now have a better understanding and am all aboard in terms of my support and am working to get a more thorough understanding of the proposal so that I am prepared to answer the questions I am certain to receive for concerns similar to the ones I had.

        http://www.cfeps.org/pubs/wp/wp9.html

        http://e1.newcastle.edu.au/coffee/pubs/wp/2005/05-09.pdf

        http://prezi.com/wkqco-muy29e/costing-the-job-guarantee/

        Basically I didn’t read the damn work put into all of this.

      • Clonal Antibody
        January 5, 2012 at 7:54 pm

        Neil,

        On the “Public” vs “Private” issue, Jim )’Reilly had a good article – The ‘Private Sector’

        The “Private Sector” is a very popular term that’s embedded in our politics and in mainstream and not so mainstream economics. Those of us seeking a better world, though, need to banish it from our discourse as it communicates so little while hiding so much.

        The “Private Sector” is widely understood to be the “sector” that operates outside the government. But which industries actually do so? Are Lockheed Martin, Northrop Grumman, or Boeing in the “Private Sector” when the bulk of their business comes from government? Or the banking industry whose business model of high leverage couldn’t exist without government deposit insurance or a government lender of last resort we call the central bank? All of finance is tightly integrated with government and it’s highly dubious to consider it private. Witness the unsurprising speed of the recent public bailouts of these “private” firms. How about the railroad industry of the past, the key driver of the 19th century economy, which crucially depended on public land grants? Or the automobile industry which wouldn’t exist without public roads? The entire socioeconomic system of mass production capitalism, in fact, is integrally dependent on government and wouldn’t be long for this earth if it lived solely through “private” means. We can easily imagine the unemployment and purchasing power calamity that would ensue if the US government terminated its massive injection of purchasing power from military spending, research, and “entitlements”. Or if the European states ended all spending.
        .
        .
        .
        .

  9. Clonal Antibody
    January 3, 2012 at 3:02 pm

    TC :
    Plus, somehow your comments made it past the spam filter!

    More than two links will send comments to the spam filter. In this series, no links

    • Clonal Antibody
      January 3, 2012 at 3:24 pm

      Sorry – I should say if I put any link in as an embedded link (a href=””), it appears to send it to spam heaven – I just put in a comment – it is awaiting moderation because of that.

  10. Clonal Antibody
    January 3, 2012 at 3:20 pm

    TC :

    TC,

    Nick Rowe is again peddling the IGBC at John Carney’s — see Do We Owe Our Debt to Ourselves?

    Nick Rowe, an economist at Carleton University in Ottawa, Canada, says Krugman has it wrong.

    “Sorry, but that’s just plain wrong. The economically illiterate rube who thinks that the national debt is a burden on our children or grandchildren is basically right,” Rowe writes over at his blog, Worthwhile Canadian Initiative.
    .
    .
    .
    .

    John Carney goes on to ask

    Is there something special about intergenerational burden transfer that I’m missing?

    • TC
      January 3, 2012 at 9:26 pm

      I just saw that today, and didn’t have time to comment yet.
      .

      It reminds me of this classic:

      The other is my hobby horse about “solvency vs. debasement” – he forgets about demand for savings. I find that funny because he’s the guy who said economics starts with adding demand there, when I showed the no Ponzi is impossible to know and therefore adds in magical thinking into economics.

      I think there is one more problem and its really fundamental. Money is free to create and destroy at any time – at least it’s nearly free. It’s much like a technology we can “invent or uninvent” at will.

      Theres more – his math is correct, but the starting point is flawed beyond redemption.

  11. beowulf
    January 3, 2012 at 4:56 pm

    “I’ve been working on something on the natural rate of interest for many months now (you haven’t seen it) and I am coming to the conclusion full employment is the only way we can observe we have hit the barter economy ideal of matching supply and demand.”

    To copy a part of that Wynne Godley article I linked to at Mike Norman’s:
    “should an economy ever reach stationary equilibrium, all stock variables as well as all flow variables would be constant; and that if all stock variables, including government debt, were constant, government receipts would have to equal government payments… There is an obvious shortcoming… it applies only to a closed economy. This defect is easily remedied by adding exports to government expenditure (injections) and imports to taxes (leakages).”

    By definition then, matching supply and demand (and thus full employment) is impossible without accounting for exports and imports. US BEA estimated 2011 trade deficit at $564B, if the trade deficit were zeroed out with a cap and trade or revenue-neutral tariffs that would filled in more half of the trillion dollar output gap. That’s the biggest hole in MMT orthodoxy. Yes, the US has the operational ability to fill in that demand leakage with increased deficit spending but politically its very difficult to do so in a recession and absolutely impossible to do so during a recovery (in 2007, a $700B trade deficit and $163B budget deficit meant the economy was drained of $537B in net savings from the domestic private sector. That couldn’t end well…. and it didn’t).
    —-
    On another note, one way to control interest rates is to peg a bank transaction tax rate (on all payments via FRS) to interest rates, say at one-tenth the 3-month T-bill rate, 0.02% today so tax would have been 0.002%. If that wouldn’t put an anchor on interest rates, nothing will. Aside from the reduction in net interest outlays, Congress could spend as much as it wanted confident that the bond vigilantes would police themselves. They would have to constantly bid T-bills down to zero to keep from getting clobbered by the transaction tax. Bruce Bartlett explains the dynamic in his poison pen review a few years ago of Edgar Feige’s APT tax (taxes that drain money AND velocity apparently are like Kryptonite to quantity theory of money folks):
    “Since GDP equals the money supply times the turnover of money—what economists call velocity—a fully effective transactions tax will presumably reduce velocity. Consequently, it would be severely deflationary unless the Federal Reserve​ substantially increased the money supply to compensate. It also means that the tax base will shrink as soon as the tax is imposed.”

    http://www.humanevents.com/article.php?print=yes&id=7849

  12. January 5, 2012 at 12:20 am

    TC, are you ultimately saying that you do support a JG buffer stock and these are incremental steps that we can begin with TODAY to get there?

    • TC
      January 5, 2012 at 4:29 am

      Yes with reservations. I worry about implementation. I respect struggle and think it helps people to some extent. Cullen had a comment about how struggling through unemployment made him who he is today. And I know what he means – it can be good to need to scramble a little or a lot.

      Best,

      Mike

      Sorry so short! I am on my iPhone!

      • January 5, 2012 at 4:54 am

        “And I know what he means – it can be good to need to scramble a little or a lot.”

        That’s the 95 bones and 100 dogs argument. It doesn’t add up.

        Are we to say that the 5 losers in the Olympic 100m final are poor runners because they didn’t get a medal. That they are feckless and undeserving? And most certainly shouldn’t be fed or housed because they didn’t get a medal.

        The scramble should be the other way around – businesses scrambling for staff.

        Jobs can be eliminated if the price is wrong to balance a market. People can’t.

        • TC
          January 5, 2012 at 10:59 am

          Neil,

          It’s actually a bit different than that – at least for me it has been.

          I’d say some struggle creates personal strength. Not too much – let me assure I do not think a life of constant struggle is good. I’ve had what many people would consider to be a rough life (divorced parents at 14, dad dies at 15, a wonderful but alcoholic step father, parents who actively worked to stop me from going to college, undiagnosed ADD for 95% of my adult life), so I know what “too much” struggle can be.

          I started this blog 2 months after getting on ADD medication. Let me assure you the level of struggle and frustration of the prior 20 years of being pretty sharp but not able to put it together is something I don’t wish on anyone. The struggle was too much, and not helpful to me or to society..

          But that said, the times when I worked really hard for something and was up against the wall, well, those times made me stronger.

          I guess what I am trying to say is the optimal level of struggle for humans isn’t zero. Now, what to struggle on might be a different story.

        • January 5, 2012 at 1:11 pm

          The social pressure to be ‘of use’ should be sufficient.

          An individual’s struggle can be one of two things.

          - An elegant ascendency standing on the shoulders of others.
          - A scramble to the top of a pile of bodies, with the ones at the bottom suffocating.

          The first gets us all higher than we otherwise would be.

        • beowulf
          January 6, 2012 at 1:14 pm

          TC, you just reminded me of something I read by psychologist Jon Haidt…. and I see its online–

          When people older than thirty are asked to remember the most important or vivid events of their lives, they are disproportionately likely to recall events that occurred between the ages of fifteen and twenty-five. This is the age when a person’s life blooms—first love, college and intellectual growth, living and perhaps traveling independently—and it is the time when young people (at least in Western countries) make many of the choices that will define their lives. If there is a special period for identity formation, a time when life events are going to have the biggest influence on the rest of the life-story, this is it. So adversity, especially if overcome fully, is probably most beneficial in the late teens and early twenties……

          There is, however, a time limit on first adversity. Elder says that life starts to “crystallize” by the late twenties. Even young men who had not been doing well before serving in World War II often turned their lives around afterward, but people who faced their first real life test after the age of thirty (for example, combat in that war, or financial ruin in the Great Depression) were less resilient and less likely to grow from their experiences. So adversity may be most beneficial for people in their late teens and into their twenties. (p. 150)

          http://www.scribd.com/doc/23551224/Happiness-Hypothesis-Jonathan-Haidt

      • PointandFigure
        January 5, 2012 at 12:08 pm

        TC, you run a great blog and I’ll just say that life presents enough struggles on its own that we don’t need the system itself working against us.

      • January 5, 2012 at 5:41 pm

        In the short term I can respect the struggle of unemployment being character building but in the long-term it is character destroying. Thus the argument is nothing more than a fallacy of composition taken from a macro point-of-view.

        I do acknowledge recognising this fallacy is the biggest hindrance to economics today (probably always has been).

        I’m assuming you recognise this fallacy too.

        Therefore your support for the TC rule and standard Keynesian pump-priming:

        much of that problem could be solved w proper fiscal deficits.

        is political. What can I get through Congress today?

        If you do have other “reservations” that you can put voice too I would like to hear them.

        • TC
          January 5, 2012 at 7:09 pm

          Sure I can see that as a reasonable way to look at my opposition to the jg.

          I am also strongly of the opinion that the jg isn’t enough on its own.

          At hockey practice with the boys so nothing long right now

          Best,

          Mike

          Sorry so short! I am on my iPhone!

  13. January 5, 2012 at 7:42 am

    TC :
    It’s not at all. But much of that problem could be solved w proper fiscal deficits.

    Yes! But not the whole problem :-)

    A hypothetical example (with made up numbers to simplify the argument) would be

    1) that with proper fiscal deficits (general aggregate demand stimulus), unemployment could be reduced to say 5% before inflationary pressure starts building up.

    2) from then on, additional deficits (in the form of general aggregate demand stimulus) could reduce unemployment, but that would come at the price of inflation (yes, I know, some think that a little inflation may not be so bad :-) but that’s beside this point)

    3) but with a JG in place, the people not hired by the private sector would be in employment instead of unemployment

    4) so there would be full employment along with price stability (which seems difficult to achieve otherwise)

    5) and a pool of JG workers has better condition and liquidity (job-readiness etc) than a pool of unemployed (there is no guarantee for this — rather it is an important design goal of the JG program)

    6) this in turn causes a JG pool to have better inflation fighting effects than a pool of unemployed

    7) and therefore, for an unemployment pool to maintain price stability more people are needed — say 5% — than for a JG pool — say 3%

    The above are pretty much just plain assertions — but I’ve tried to explain and motivate it (for example points 5, 6) in the MMT wiki: http://mmtwiki.org/wiki/Full_Employment_along_with_Price_Stability#Employed_Versus_Unemployed_Buffer_Stock

    (Feedback appreciated. Seems I need to add something about point number 7.)

  14. January 5, 2012 at 12:40 pm

    TC — I think I’ve been spam trapped (with my pro-JG comment — that’s quite an intelligent spam-filter you’ve got there :-) )

    Question (to all) from the anti-JG side of the fence though — may sound cynical (just pretend you don’t know me in the future):

    With a JG in place, maybe less people will care to educate themselves? Which then (presumably) prevents progress in society?

    (I think that this is one of the arguments John Carney put forth recently, and Cullen Roche too maybe — saying that there is a risk of economic stagnation etc).

    If people know that they can always get by on a basic but decent wage-and-benefit package offered by the government, maybe they will be content with that, instead of getting an education, or improving skills etc?

    Ok, this sounds like fear-based-progress — society advances because many people are scared of what could happen if they don’t get an education. Not a nice society perhaps.

    But still — try to think cynically, cold-heartedly and purely economically now — is there a point to this?

    Of course, Warren Mosler emphasizes now and then that JG should be seen as a transitional thing. Maybe skill improvement or retraining schemes should be included in JG?

    In that case, maybe the point about people not getting an education is moot?

    • January 5, 2012 at 12:41 pm

      Oh, now I see my spam-trapped comment — thanks!

      • January 5, 2012 at 12:42 pm

        Ah, it’s still awaiting moderation..

        • TC
          January 5, 2012 at 2:11 pm

          I think it is the links that trap comments. But you, clonal and beo tend to get them trapped far more than others.

  15. Clonal Antibody
    January 5, 2012 at 3:12 pm

    Also,

    Papadimitriou: To Solve Unemployment, Employ People

    In an op-ed in today’s LA Times Dimitri Papadimitriou makes the case for a direct job creation program:

    It’s unreasonable to expect private enterprises to solve these problems. Full employment isn’t an objective of businesses. … There simply isn’t any known automatic mechanism, in the markets or elsewhere, that creates jobs in numbers that match the pool of people willing and able to work. …

    At the theoretical heart of job-creation programs is this fact: Only government, because it is not seeking profitability when it is hiring, can create a demand for labor that is elastic enough to keep a nation near full employment.

  16. wh10
    January 5, 2012 at 6:54 pm

    I CAN’T WAIT FOR YOUR PIECE ON THE NATURAL RATE OF INTEREST!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1

  17. January 5, 2012 at 8:39 pm

    I am also strongly of the opinion that the jg isn’t enough on its own.

    No one says it is.

    It is no panacea/cure-all of all ills.

    The JG reaches loose full employment due to ultimately what will be a skills mismatch as outlined here.

    IDK where I said it now but I term your version/s as loose loose full employment.

    So ultimately your opposition to the JG is not opposition to the JG per se but opposition to the JG being implemented wholesale from the word go.

    Enjoy Hockey Practice

  18. Dunce Cap Aficionado
    January 6, 2012 at 1:55 pm

    Whether the ‘founders’ consider JG ‘core’ or not makes no difference to me.

    The inherent strength of MMT is its descriptive elements. I dare anyone to refute that. MMT is not widely known or accepted. I came from a more fiscally conservative mindset when I discovered MMT so it won’t surprise anyone that I ‘side’ with Cullen on this. I’m not full on anti-JG (I think a JG-lite would make a great safety net) but my view of this is what I consider ‘my prescription’ as I consider the JG a prescription in general.

    I write this because I hope that those who do support the JG can realize that, as a person with a fiscally conservative mindset, if I had been learning MMT and straight off the bat a ‘core element’ of it had been a massive program to employ via the government I may never have continued further down the rabbit hole, so to speak.

    I’m writing this here as opposed to anywhere else because I think TC has a great mindset for the goal of ‘marketing’ MMT. I’m writing this in the hopes that all those great minds out there who understand MMT and support the JG come to realize that if you present MMT with JG as a core element, on one level you have done yourself a diservice. Even if you think it is, there will be more converts and a quicker conversion if the marketing is done specifically with only the descriptive elements. And does that not, in the end, make it easier to implement the JG if that is your prescription?

    As an example- there was a commentor over on Cullen’s site today who stated that he had been reading the site for sometime, fully appreciated what Cullen had done and thanked him for his help in understanding MMT. He went on to explain that he can no longer support MMT because it has been made clear to him by the recent JG debate there that he had beend ‘duped’ by the ‘founders’ and went one to make all sorts of comparisons to socialism and even communism.

    That’s an extreme example (he’s gotta be old, a nutbag, or both). But its not an uncommon reaction (especially in a country like the US) to be adverse to something like a Jobs Guarantee at first sight. Even more so if the person does not already understand the descriptive elements of MMT. Please, everyone lets talk about the JG as a prescriptive element of MMT. And if that doesn’t cut it for you, call it a prescriptive element that currently is currently the only idea presented to acheive price stability. I fear that otherwise, we might shoot MMT in the foot before it gets a chance to do some real good.

    • TC
      January 6, 2012 at 2:11 pm

      DCA,

      This is a great point. The politics of the Job Guarantee are worse than just about any other economic proposal we could make.

      We’re losing Jay Carney! This is a guy who has an open mind to MMT. We’re losing him because of an insistence of purity on something non-essential.

      If we called it workfare, the JG might pass tomorrow.

  19. Dunce Cap Aficionado
    January 6, 2012 at 2:18 pm

    Well said TC, and in that vein I will henceforth only refer to it as workfare!

    Thanks for your great site, and I’m looking forward to your trendfollowing newsletter!

  20. January 6, 2012 at 5:38 pm

    This is not my interpretation but I see the following as the political interpretation of those anti-JG

    They support unemployment no matter the cost.

    It is not precisely true as I’ve shown in comments above as the TC rule and Beowulf proposals reduce unemployment within orthodox means.

    However the pro-JG crowd will see it as supporting unemployment no matter the cost.

    The argument is a little more nuanced than that.

    My understanding of Cullen’s argument and I’m not sure that I’m clear on it is that Full Production can/will lead to Full employment. Personally without a JG in place I find little merit in that argument but am open to find out about how we reach full production that leads to full employment.

    As Joe Firestone has begun to say, the two goals are not mutually exclusive but I’m yet to see how we can reach full production without first having “loose” full employment in place.

    • January 9, 2012 at 6:09 am

      There is a problem with Cullens argument though and its this;

      A properly operating private business seeks to do as much production with as few people as it can. So even if tomorrow everyone were employed in the private sector, within a few months/years (we would hope) someone would discover something which improved productivity enough that some employees became redundant/unnecessary. Its just a fact that the goals of private sector employers do not mesh with full employment. They cant. So let them employ who they need and let everyone else receive some sort of …….income support/job/whatever you want to call it …… from the *currency issuer*.

      Yes this support of the state is NOT *free* in every sense of the word free. However the support also, in some sense pays, for itself since this income gets channeled back through the economy and into private businesses hands.

  21. January 6, 2012 at 10:01 pm

    I made a slight error, full production should read “full productivity” – it doesn’t change the argument though.

  22. Dunce Cap Aficionado
    January 9, 2012 at 4:03 pm

    Just and FYI- Cullen wrote out a detailed post in his dicussion forum (likely because he got tired of his more politically charged readers) on his concerns with a JG.

    http://pragcap.com/discussion-forum?mingleforumaction=viewtopic&t=249

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