“What I am asking you is whether you believe MMT’s order of the trifecta would be FE>PS>production?”
The MMR crew had a conversation about the order of importance of these three policy goals:
- Full Employment
- Price Stability
“The present study argues instead for a different view of the proper goals of monetary policy. Its use to stabilize an appropriately deﬁned price index is in fact an important end toward which efforts should be directed—at least to a ﬁrst approximation, it should be the primary aim of monetary policy”
It seems to us MMT thinks FE>PS>production. Here is Tom Hickey on this same topic:
“I have never heard the MMT economists address this, and I am not well versed enough in macro and the MMT professional lit to give any sort of definitive answer. Basically, the PK-MMT approach is demand-driven and NAD drives production and investment. This is the basis of the sectoral balance approach and FF to adjust NAD to the ability of the economy to expand to meet it at FE while also maintaining PS. Based on this I would say, maintaining NAD at the appropriate level optimizes production (uses of available resources including human resources (FE). Then the issue become maintaining PS as well. But as I say, that is my take, which may not adequately summarize theirs.”
Tom’s always gracious and smart. The title of this piece is meant to be an attention-grabber rather than a slam on you, Tom. I thought it was a good, provocative quote to get a debate going.
What do you think?
(Update: I’d like to apologize to Tom Hickey. I did not mean to offend him and I did. The short warning at the end was not enough. Tom, I am sorry. )