Friday, May 11, 2012

The Job Guarantee is a Description of a Prescription, like Much of Macroeconomics

While recognizing that most of this blogosphere discussion has passed me by months ago, I thought I'd share my perspective, redundant though it might be.

"Can you have MMT without a Job Guarantee?" The question phrased this way is a bit too ambiguous for my taste... I view the job guarantee as a description of a policy prescription. I agree with those who consider the job guarantee description to be integral to MMT, but I believe actual policy recommendations (prescriptions) can always differ by individual.

MMT describes the current economic system as it is and the policy space available to national governments. Any attempt at a full description of macroeconomics as viewed through the lens of MMT that lacks a description of employed versus unemployed buffer stocks would in my opinion be incomplete, as shown by the gaping black hole in this [partial] table of policy examples:


A full description of the economy (as you might find in a good macroeconomics textbook) should discuss both the agreed upon and the controversial pros and cons of each policy choice. For example, even mainstream macroeconomics textbooks discuss their own versions of the difference between being on a gold standard and not, the choices for social safety net implementations (such as unemployment insurance), etc. Yet there are plenty of advocates for going back to a gold standard and/or completely removing the safety net -- so there is no universally agreed upon policy choice in any of the above examples.

In a sense, to not describe all the relevant policy choices in the context of discussing a particular policy-related topic would be to advocate for the remaining choice(s). Thus, while I have some [small?] reservations and concerns about the job guarantee myself (despite my giving it the benefit of the doubt overall), I'm doing my best to communicate the pros and cons of each choice (including points of controversy) as I build content on EconViz.org.

To address a possible objection -- yes there are policy choices not on the above list that don't warrant description of each policy choice (e.g., "should government provide puppies for everyone?"). But MMT has shown all the above examples (and others) to be highly relevant to the goals of national governments.

Educational resources that represent fields of knowledge such as MMT or mainstream macroeconomics generally distill the most important descriptions from both the history of that discipline and the work of the current professionals within that discipline...

It's my understanding that all current MMT-affiliated professional economists consider the employed buffer stock to be a superior policy choice to the unemployed buffer stock, thus it's no surprise that they highlight the JG the way they do in the econoblogophere (a much more informal medium than academic papers). I think they have every right to express opinions along the lines of "you'd be crazy to know about this policy option [JG] now available to most monetarily sovereign nations and not to advocate using it" in the same way that mainstream economists express individual opinions about the gold standard, minimum wage laws, etc. And I think it's perfectly valid for any individual who discusses the economy in the light of MMT to judge that the "cons" of the JG concept outweigh the "pros" -- as long as that person is explicitly acknowledging both buffer stock options and describing the detailed reasoning behind his or her conclusions.

In case I haven't been clear enough, this is my personal perspective. I make no claims that this post is consistent with the way MMT professionals view this topic.

4 comments:

  1. Very good post

    "even mainstream macroeconomics textbooks discuss their own versions of the difference between being on a gold standard and not, the choices for social safety net implementations (such as unemployment insurance), etc. Yet there are plenty of advocates for going back to a gold standard and/or completely removing the safety net -- so there is no universally agreed upon policy choice in any of the above examples. In a sense, to not describe all the relevant policy choices in the context of discussing a particular policy-related topic would be to advocate for the remaining choice(s). "


    Yes. Its quite odd isnt it that there is no bufferstock of employed persons ever discussed. Well not odd, but it certainly shows a political bias.

    TINA to NAIRU in the minds of Mankiw and Co

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    1. Thanks, Greg.
      I'm never clear on the mix of "innocent fraud" versus not-so-innocent among the mainstream. I tend to assume many don't understand the big picture well enough to know better, though there's a chance that's naive of me.

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  2. hbl,

    If you don't mind .. I have bored two people with this online and will bore a third one :)

    Non-convertible is not standard terminology. In fact convertibility is standard usage in official legal communication. So one hears of current account convertibility and capital account convertibility.

    I understand non-convertible in the mmt context means absence of "official convertibility" to gold or currency of the member asking for conversion but since there exists market convertibility the standard usage is that currencies are convertible.

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    1. Thanks, Ramanan. I'm guessing most people who would have read this post are primarily familiar with the MMT terminology, but I'm still glad to be aware of the distinction.

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