Peter Cooper: Heteconomist

Modern Monetary Theory (MMT) offers an understanding of sovereign (and non-sovereign) currencies that is applicable to a wide range of economic systems, including capitalist and socialist ones. Irrespective of the personal political preferences of its proponents, the theoretical framework in itself is neutral on the appropriate balance between public sector and private sector activity, or the relative merits of capitalism and socialism. In contrast to neoclassical theory, which starts from...

With Modern Monetary Theory (MMT) making inroads in the public policy debate, some New Keynesians have transitioned from ignoring or dismissing the approach to engaging with it. This is healthy for both sides. There has been a tendency, though, to make “we’ve known it all along” type statements. A comprehensive response to the “nothing new” claims is provided by Bill Mitchell in a recent three-part series of posts (part 1, part 2 and part 3). My focus here is narrower and concerns a view...

Of the various criticisms leveled at a combined ‘job or income guarantee‘, ones appealing to fairness usually go along the lines that it would be unfair for healthy individuals outside the workforce to receive an income while others are occupied in jobs. In considering this objection, a number of points come to mind: 1. the arbitrariness of exempting the wealthy from any expectation that income of the able-bodied be conditional on labor-force participation; 2. the range of options that...

Things have been pretty quiet around here this year. The temptation to embed music videos or insert other snippets of creativity has been resisted because, well, heteconomist has not really paid its way with the requisite quota of economics posts that would ostensibly justify it. Increasingly economics seems to be not only a lost cause but rather beside the point. In any case, with remarkable self-discipline any straying off topic has been put on hold until the Christmas/New Year period,...

As is well known, Marx and the classical political economists before him made a distinction between productive and unproductive labor. Marx’s distinction somewhat differed from Smith’s. For Marx, labor is productive when it is: (i) directly productive of surplus value; and (ii) exchanged directly against capital. I remain unsure how applicable the distinction is to a state money system. Some of my misgivings are explained in an earlier post. The uncertainty has held back an attempt to...

There is sometimes an inclination in the west to depict China or the former Soviet Union as state capitalist rather than socialist or communist. At a time when China is going from strength to strength on certain macroeconomic criteria, some may wish to deny that this could have been achieved through socialism or communism and so instead claim China to be capitalist. At the same time, some may wish to distance notions of socialism or communism from what is perceived to be going on in China...

In some recent posts, a job guarantee has been considered within the income-expenditure framework. One post in particular suggested a possible conceptualization of the dynamics of the model. It was shown that these dynamics are consistent with the model’s steady state requirements. Demonstrating this took a fair bit of algebra, which may have obscured for some readers the simplicity of the actual model. Much of the algebra was only needed for the specific purpose of verifying that the...

The first section of the previous post outlined basic steady state relationships in a simplified economy with a job guarantee. There are various ways of expressing the same relationships that shed light on what is going on in the model. Here, a few ways of thinking about the levels of total income and job guarantee spending are noted.  Two Reference Points The presentation in the previous post was guided by a desire to have all key expressions share the same denominator. The common...

A job guarantee would be a standing offer of a publicly funded job. Spending on the program would adjust automatically and countercyclically in response to take-up of positions. The likely feedback between spending on the program and activity in general is interesting and can be considered within the income-expenditure framework. In what follows, the standard model is modified to find the steady state levels and compositions of income and employment and other key variables. Attention then...

The following is mostly intended as background for a possible post (or posts) on quantity effects of a job guarantee in which the standard income-expenditure model is taken as a base. It is desirable to work from as simple a starting point as possible as the exercise can complicate pretty quickly. To minimize unnecessary complications, the base model will be presented in highly abbreviated form. This will not cause anything important to be lost because it is always possible to switch back...