by My view is that changes in structure in the labour markets that started in the 1980s – but kicked into gear in the early 1990s – explain the structural breaks in the behaviour of the developed economies that took place in the early 1990s. The advantage of these changes has been the decline in inflation. Although neoclassical economists attribute this change to the switch to inflation targeting (as will be discussed in Section 2.5), I do not think we can assume away the changes to the labour markets. The disadvantage of these changes has been the persistent sluggishness in developed economies. (Note: This is an unedited section of a manuscript that discusses MMT and the upcoming recovery. Although most people focus on fiscal policy stories when discussing MMT, labour market analysis
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My view is that changes in structure in the labour markets that started in the 1980s – but kicked into gear in the early 1990s – explain the structural breaks in the behaviour of the developed economies that took place in the early 1990s. The advantage of these changes has been the decline in inflation. Although neoclassical economists attribute this change to the switch to inflation targeting (as will be discussed in Section 2.5), I do not think we can assume away the changes to the labour markets. The disadvantage of these changes has been the persistent sluggishness in developed economies.
(Note: This is an unedited section of a manuscript that discusses MMT and the upcoming recovery. Although most people focus on fiscal policy stories when discussing MMT, labour market analysis offers a much greater contrast to neoclassical thinking. The section following this one delves into that aspect more deeply,)This is an important post for understanding MMT. Should-read.
This section is inspired by the book Full Employment Abandoned: Shifting Sands and Policy Failures, by Bill Mitchell and Joan Muysken. That text is an advanced academic text, and examines the history of employment policy from a MMT perspective. This section cannot hope to cover the historical analysis of labour markets in Parts I and II of that book. The third part of the book discusses topics that are more widely associated with MMT, and which I will cover elsewhere in this text. If a reader wants a formalised academic textbook that is an introduction to MMT, Full Employment Abandoned is one possibility....
At this point, discussion of MMT is largely focused on fiscal and monetary issues. However, the thrust of MMT as a macro theory is achieving actual full employment.
MMT analysis purports to show that it is possible to reconcile the trifecta of optimal growth (full real resource use), actual full employment (universal job offer) and manageable inflation (price anchor).
MMT economists claim that no other macro theory explains how this is possible to achieve within existing socio-economic frameworks and contemporary institutional arrangements.
Bond Economics
Labour Market Structural Changes
Brian Romanchuk