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Here is Episode 6 in our weekly MMTed Q&A series. This is the second-part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the central role that employment buffer stocks play in Modern Monetary Theory (MMT), a point that is often missed by those who think it is just a job creation program and of secondary (and dispensable) importance to the ‘banking’ aspects of MMT. As you will hear (and see), the Job Guarantee is an integral part of MMT and that status is derived from the elemental insights that MMT offers about the way a currency works. If a person thinks the Job Guarantee is an unnecessary add-on to MMT, then they haven’t understood the basics of MMT. It is as simple as that. Point of clarification: Bill writes, "If a person thinks the Job
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Here is Episode 6 in our weekly MMTed Q&A series. This is the second-part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the central role that employment buffer stocks play in Modern Monetary Theory (MMT), a point that is often missed by those who think it is just a job creation program and of secondary (and dispensable) importance to the ‘banking’ aspects of MMT. As you will hear (and see), the Job Guarantee is an integral part of MMT and that status is derived from the elemental insights that MMT offers about the way a currency works. If a person thinks the Job Guarantee is an unnecessary add-on to MMT, then they haven’t understood the basics of MMT. It is as simple as that. Point of clarification: Bill writes, "If a person thinks the Job
Topics:
Mike Norman considers the following as important:
This could be interesting, too:
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Here is Episode 6 in our weekly MMTed Q&A series. This is the second-part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the central role that employment buffer stocks play in Modern Monetary Theory (MMT), a point that is often missed by those who think it is just a job creation program and of secondary (and dispensable) importance to the ‘banking’ aspects of MMT. As you will hear (and see), the Job Guarantee is an integral part of MMT and that status is derived from the elemental insights that MMT offers about the way a currency works. If a person thinks the Job Guarantee is an unnecessary add-on to MMT, then they haven’t understood the basics of MMT. It is as simple as that.Point of clarification: Bill writes, "If a person thinks the Job Guarantee is an unnecessary add-on to MMT, then they haven’t understood the basics of MMT."
MMT is often taken to be only or chiefly the operational description of monetary systems based on institutional arrangements. including legal. But MMT means Modern Monetary Theory or, alternatively, Modern Money Theory (Wray), with the emphasis here on "theory." MMT purports to be an explanation of macroeconomics based on a new way of seeing, or "new lens." This lies in the assumptions, including methodological assumptions, and how they are developed into a systematic explanation, which is what a theory is.
MMT is not a formal axiomatic theory in emulation of physics but rather recognizes that the sciences — natural or physical, biological, and social — are similar but difference, hence, the different categories that affect not only subject matter but differences in subject matter that result in the necessity for difference in approach.
There are three fundamental categories of being — physical, life, and intelligent. The three categories of science investigate these ontological categories using methods appropriate to them to generate representative models, conceptual and mathematical. Conceptual models can also be formal since they follow the rules of logic including those of abstraction, e.g., set theory. Since social science is concerned with not only the physical and biological but also the intelligent, its methods must incorporate more than the previous two, e.g., different scales of complexity.
The theoretical part is the macroeconomic theory built the foundation of operational and institutional analysis of "the money system." MMT is a macro economic theory. The "holy grail" of macro is resolving the trifecta of optimal growth, full employment, and price-level stability. Economists is generally assume that this is impossible: only two of the three can be achieved simultaneously over time. MMT says no, it is possible.
MMT claims that the apparent contradiction between actual full employment and acceptable price-level fluctuation can be resolved using the MMT JG as a price anchor along with the other tools in the MMT toolbox.
The currency issuer uses its monopoly power to set the price of a single real good — a unit of unskilled labor. The government does this by offering a universal job guarantee at a fixed compensation, presumably a living wage.
According to Warren Mosler's White Paper:
- The price level is necessarily a function of prices paid by the government’s agents when it spends, or collateral demanded when it lends.
- In what’s called a market economy, the government needs to set only one price, as market forces continuously determine all other prices as expressions of relative value, as further influenced by institutional structure.
This implies that if the currency issuing government sets the price level of any real good, this acts as a price anchor since the rest of prices adjust automatically to this benchmark through market adjustments, given the overall framework adopted.
The MMT JG is therefore one of the lynchpins of MMT as a macroeconomic theory, along with stock-flow consistent accounting based on double-entry bookkeeping and functional finance as opposed to so-called sound finance.
Ignoring this misses the contribution of MMT economists in drawing on the past and synthesizing previous knowledge into a new approach to macroeconomics by innovating. This is an aspect of the dialectics at the basis of free inquiry and informed debate. MMT did not fall from heaven. MMT economists hammered it out over close collaboration.
Bill Mitchell – billy blog
MMTed Q&A – Episode 6
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia