The Job Guarantee and the MMT Core: Part Two
January 6, 2012 - 3:54am ET
MMT and Public Purpose:The Normative Component
I ended Part One by saying that Warren Mosler's reply to Cullen Roche is nearly a decisive argument that the Job Guarantee (JG) is a core component of MMT, provided, of course, that one accepts that full employment with price stability is an important component of “public purpose” or “the general welfare,” and that also one thinks that the Government's fiscal policy ought to fulfill the public purpose. Since all the MMT founders and many later MMT adherents like myself agree with this, it's not surprising that we think that the JG is a core component of MMT.
But what if one either doesn't accept “public purpose” as a normative standard guiding Government monetary and fiscal policies, or thinks that full employment with price stability is either not a means that should be used to accomplish the public purpose, or thinks that another means can better accomplish public purpose and still lead to full employment and price stability? Then one's verdict on whether the JG is a part of the MMT core will be different.
For example, Cullen objects to the full employment goal because he doesn't:
“. . . believe the JG is the optimal usage of these monopoly powers and in fact could come at substantial long-term cost. Instead, I think there are better options which can also lead to price stability and full employment.”
In the post, or his replies to commenters he doesn't say anything about “public purpose,” but he reveals that he disagrees with the goal of full employment with price stability and thinks instead, that the Government's monopoly over the currency should be used to provide
“. . . the gift of time and the ability to live a fuller and more meaningful life via the prosperity that innovation and productivity create?”
And he also goes on to say that he thinks creating “full productivity” will also achieve full employment and price stability as a side effect, and that we have a moral responsibility to become enormously productive and increase living standards for our children and future generations, and he thinks Government spending to accomplish that should have a higher priority than Government spending to create a JG buffer stock.
Also, he's worried about the long-term real costs or risks of the JG as indicated in this comment:
“You guys see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones dinner. Very little, aside from great parenting and education, was handed to me in life. My psychological development through having to earn things has been a building block that no govt program can ever provide. Ever.”
It's easy to make fun of this statement, or to criticize it rather bluntly, as I did at Cullen's site. But here I'd rather point to the larger issue. There may be side effects of the JG program we can't anticipate now; but we know what the effects of an unemployed buffer stock are on society. And Cullen's conjecture, based on his interpretation of his own experience that there is value in experiencing unemployment, which we will lose if we implement a JG (even if that value may not be apparent to others who have had the experience of unemployment and its corrosive effects), even if true, doesn't on the surface seem to suggest anywhere near the individual and social costs that we know are caused by unemployment.
Those of us who feel this way, may be wrong, but I think opponents of the JG have to do better than to just voice vague fears and anxieties about future real costs. They have to produce at least some cogent negative arguments about why we should expect side effects of the JG that are more serious than the costly realities due to unemployed buffer stocks we see right now, and also they have to produce alternative policies that appear less risky than the JG proposal.
Why Not try Both?
So, it seems that the JG, assuming it is the best way to get full employment with price stability is very likely to be a component of the public purpose and therefore a core component of MMT. However, even assuming that the JG is such a core component, that doesn't mean that a goal of maximizing productivity should not also be viewed as a core component of MMT. As a number of commenters on Cullen's post have pointed out, the Government can afford to both pay for the JG and also for efforts to increase productivity. Nor are these components of public purpose competitive. So, why not try to enormously increase productivity and also implement an FJG?
There is a measurement problem, here. The current most common measure of increases in productivity, increases in GDP per labor hour, is laughable as a measure of real productivity gain, and I think it is enormously difficult to arrive at a good way to measure such gains, since doing so would involve measuring the non-monetary value of economic, including Government outcomes. But, if the measurement problem could be solved, then as productivity gains are made, the employment conditions of a JG buffer stock can easily be changed by raising JG wages to pass through productivity gains to whole labor force.
Since 1970 most of the productivity gains have been distributed by neo-liberal economic/political regimes to the wealthy, greatly increasing the inequality gap and clearly threatening democracy itself. But a JG program in concert with an emphasis on increasing productivity could fix that, if we can find better ways to measure productivity gains than we have now, and use those measures to help shape JG programs.
Peter Cooper's JIG Adds Freedom
Above, I said that I find the MMT argument for JG as a core component nearly a decisive one, provided, of course that one accepts that full employment with price stability is an important component of “public purpose” or “the general welfare,” and that also one thinks that the Government's fiscal policy ought to fulfill the the public purpose. However, as part of the general debate over the JG, Peter Cooper has proposed a JG, supplemented by a Basic Income Guarantee (BIG), as a better alternative than the JG alone, because net/net it would increase personal freedom since people could choose either JG or BIG based on their needs, while still fulfilling the requirement of having an employed buffer stock as an automatic stabilizer.
I think this idea is promising. It has received vigorous discussion over a number of days at Peter's site. Dan Kervick objected to it on numerous grounds. And in a comment I made on his objections, I summarize my views on Peter's proposal, which he decided to call “JIG”. Here's my comment.
The nub of it is that neither the private sector nor the Government is infallible in its judgments about which jobs and roles produce value, and which do not, or about which individuals are producing value and which are not in their individual activity. So, why should we rely completely on either the market or the Government to make these judgments?
Why shouldn’t we accept instead that individuals who would rather be free from working either for the private sector or for the Government still have the right to a decent living and free health care? Are they not human beings? Is there no possibility that people who make such a choice will not use the time they gain to contribute value to society, or that they might do so in the future?
I think there are some people who would use the time provided by choosing a BIG option to innovate and create outcomes of great value to society. Neither private sector nor Government authorities can be trusted with power to make all the decisions about which activities are valuable and deserve decent monetary compensation in return.
Ordinary people have to have some of the power to decide for themselves what they'd like to do and still be able to remain alive and in good health to do it. That is an increase in individual freedom that our modern economies, including the US, can afford, and it may provide a better core component for MMT than the JG alone.
In Part Three, I'll review John Carney's objections to the Job Guarantee.
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