by Good summary of MMT that anyone should be able to understand.Richard Murphy (as I understand his position) does not think that a job guarantee is required to ensure full employment, while MMT economists claim that it is essential. This needs unpacking.It is generally agreed that full employment is of the highest priority socially, politically and economically. ("You are against full employment? Really? Why?")In the US, the Humphrey-Hawkins Full Employment Act mandates it, while the UN General Assembly Declaration of Human Rights enshrines it as a right.However, there is disagreement among economists and policy makers over the definition of "full employment."MMT economists propose a strict definition in terms of a universal unconditional job offer for those willing and able to work at a
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Richard Murphy (as I understand his position) does not think that a job guarantee is required to ensure full employment, while MMT economists claim that it is essential. This needs unpacking.
It is generally agreed that full employment is of the highest priority socially, politically and economically. ("You are against full employment? Really? Why?")
In the US, the Humphrey-Hawkins Full Employment Act mandates it, while the UN General Assembly Declaration of Human Rights enshrines it as a right.
However, there is disagreement among economists and policy makers over the definition of "full employment."
MMT economists propose a strict definition in terms of a universal unconditional job offer for those willing and able to work at a living wage in the society. MMT economists hold that this provides a buffer stock of employed in contrast to the buffer stock of unemployed under the current policy determined by the assumptions of NAIRU for controlling inflation.
The question then becomes is there any other way of achieving actual full employment along with sustainable growth and stability of prices rather than a notion of full employment that is defined down such as under NAIRU?
If there is one that provides a remedy for inflation while maintaining sustainable growth and relative price stability as MMT economists claim the MMT JG does, then the MMT JG is not "essential" to MMT.
I have not seen a case made for an alternative to the MMT JG to achieve actual full employment consistent with maintaining sustainable growth and controlling the stability of the price level within reasonable limits.
Proponents of a UBI argue that this is a solution. But MMT economists responds by claiming that a UBI would be inflationary.
A targeted basic income guarantee might, but this would involve idling people that might prefer to work and likely would if given the opportunity, thereby disadvantaging them and also idling available resources that could be brought into use, which is inefficient (wasteful) and also reduces effectiveness.
The way I would put it is similar to the way that Randy Wray explains the claim that "taxes drive money." He holds that MMT assumes taxation is a sufficient condition to drive a currency, but not that it is a necessary condition. The same can be said for the MTT JG. It is a sufficient condition to achieve actual full employment defined as work for all that can and wish to work, but that it is not a necessary condition for this.
The questions become 1) is there a necessary condition that is operative and is there at least one other sufficient condition. Affirmative claims require rigorous justification, of course.
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Richard Murphy | Professor of Practice in International Political Economy at City University, London; Director of Tax Research UK; non-executive director of Cambridge Econometrics, and a member of the Progressive Economy Forum