“What I am asking you is whether you believe MMT’s order of the trifecta would be FE>PS>production?”

“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:

  1. Full Employment
  2. Price Stability
  3. Production
The MMR view of this would be: Production > FE > PS.   (Feel free to chime in, C&C!)
The mainstream operates under: PS > FE > Production. We can be sure Price Stability is in the #1 position; this is expressed by Michael Woodford in his monumental work.

“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. )

Comments
  • Dan M. March 29, 2012 at 8:39 am

    ME>FE>ES>Production>PS

    ME = My Employment :)
    ES = Environmental Sustainability

    Savers have lots of flexibility to protect themselves from inflation. The unemployed in a bad economy do not have nearly the flexibility to protect themselves from misery.

    I’ll go ahead and post an Austrian’s priority to save them the trouble:

    “Society does not exist. We are only individuals interacting freely. We are always at full employment because if people wanted to work they would bargain to get a fair price for their time. Production as a result of bartering or exchange for gold is simply a debt-fuelled bubble driven by the fed. Further, to put “importance” on one of these things implies that we have a government managing them in the first place, and since government is just a protection racket, not a legitimate entity (other than to deed the land I live on), the question is invalid on its face.”

    I kid…. kind of.

    • Dan M. March 29, 2012 at 8:41 am

      Correction:

      Production as a result of ANYTHING BUT bartering or exchange for gold.

    • KainIIIC March 29, 2012 at 8:47 pm

      That sounds just like ‘em! You forgot a few things though, like how the Fed printing all this money will lead to hyperinflation! And the usual ones like taxation = theft, praxeology > evidence, etc.

  • paul (formerly paulie46) March 29, 2012 at 8:40 am

    Michael

    I’m voting for:

    1. Full Employment
    2. Price Stability
    3. Production

    • Dan Kervick March 29, 2012 at 11:33 am

      No need to rank them. It’s macroeconomics, not a horse race.

      • paul (formerly paulie46) March 29, 2012 at 12:52 pm

        Agreed

        • PeterP March 29, 2012 at 6:57 pm

          +1.

          MMT can do both FE=PS (this is JG), and minimizing the JG buffer leads to maximizing production. So MMT is FE=PS=Production.

          • Michael Sankowski March 29, 2012 at 7:52 pm

            Well, I disagree with the idea this ranking is immaterial to thinking through macroeconomics.

            The MMT idea does focus on price stability and total employment more than production. It’s Wrays book title.

            This is not to say this is wrong, or that Wray was wrong to focus on those ideas as leading to a “superior” economy. For example, the mainstream fully believes price stability leads to better economic outcomes, and therefore focuses much of its attention on price stability.

            Even in the example you give PeterP, it’s clear the FE and PS criteria are more important, because then MMT can focus on minimizing that buffer stock with fiscal stimulus.

            • Tom Hickey March 29, 2012 at 8:52 pm

              Michael, beowulf makes a good point regarding metrics. Policy decisions are based on metrics applied to models. MMT emphasizes employment as a key metric, for example, because there is abundant data available. Inflation indexing is a lot more speculative, selective, and difficult to verify.

              There is no single metric for production per se. Production is an economic concept that involves many factors and measures. As I understand it (admittedly cursorily) the Cambridge capital controversy pretty will undercut the notion of a macro production function similar to the micro. “Production” is rather controversial among economic theories. But the general idea is understood and the controversy is essentially about supply side approaches that address production directly and demand side approaches that address production in terms of the circular flow.

              There are two separate issues here. The first is the macro theory. It deals with production, distribution and consumption in aggregate in a time series, monthly, quarterly, yearly, etc. The priority of macro is maintaining circular flow at as optimal a level as possible. This trifecta operates together and macro is about removing the friction that inhibits flow. Thus macro necessarily begins with > production > distribution > consumption > as fluid system functioning in terms of fluid dynamics. It is an open system.

              What MMT macro deals with is the flow of the domestic private economy in terms of production, distribution, and consumption in an open system with input and outflow to and from government and the external sector. FE and PS must be ancillary to this. MMT as a PK theory focuses on maintaining effective demand in the face of demand leakage both in the domestic private sector but also govt. and the ROW. So in this sense, production comes first, before FE and PS, which are effects of the flow.

              The second issue is policy making, which uses macro modeling and current data to anticipate future conditions and needs. Here the relevant data and key metrics establish practical boundaries. Theory and models are useless without relavant data and key metrics to provide empirical grounding wrt to actual conditions. Here a lot of things come into play, and it is really rather pointless to argue about which metrics come before others or have priority over others. Practically speaking, decision makers have to go with the best information they have available. However, employment and inflation rate are hugely important politically so they figure strongly.

          • Cullen Roche March 29, 2012 at 8:58 pm

            Nonsense. Their own research shows that the JG doesn’t optimize production. So you’re misrepresenting MMT and the research they’ve already done.

            • PeterP March 29, 2012 at 9:55 pm

              “optimization” is a meaningless concept, because the result depends on the utility function you are maximizing and everyone has its own. I therefore said nothing about optimization and neither says JG.

              • Cullen Roche March 29, 2012 at 10:26 pm

                You said “maximizing production” so it’s semantics. Regardless, the Fullwiler simulation proves that you’re wrong.

                • Tom Hickey March 29, 2012 at 11:03 pm

                  IIRC, “maximizing” is the Fed’s policy mandate from Congress.

  • Dan Kervick March 29, 2012 at 9:15 am

    It’s seems to me that these kinds of ordinal rankings of policy goals are unnecessary since they don’t correspond to genuine policy alternatives.

    Everyone should support the ideal of an economically thriving society that provides the ability of all of its citizens to share in the society’s economic success as both participants and beneficiaries.

    And I think everyone accepts some some measure of price level stability and predictability is needed to prevent distortions and disruptions in the everyday processes of making contracts for future delivery of money, since such contracts are inherent in the financing process that makes a thriving modern economy hum.

    MMT argues that we can achieve the goal of full employment without sacrificing the goal of price stability, and so takes issue with a long mainstream tradition that argues there is an inherent tradeoff between the two.

    MMT also argues that the ability of the government to produce its own financing instruments from scratch, rather than borrow them, means that government can directly hire willing workers whom the private sector is not employing, and put them to work doing something productive and socially beneficial. This process does not involve any crowding out, because it does not take financial assets away from others who might use them differently or more productively. It does not take labor resources away from others because it hires only those people that the private sector has not employed and who are looking for work. It does not generate price instability, because the hired workers are doing something productive, and therefore the newly created monetary assets are only monetizing additional output, rather than chasing after existing output.

    So I think the theme of MMT is that we don’t have to prioritize these goals due to built in trade-offs among them. We can have them all, and only some bad economic theorizing is preventing us from realizing that fact, and driving us into making invidious Sophie’s choices and unnecessary prioritizations among complementary -not competing – outcomes.

  • FDO15 March 29, 2012 at 9:53 am

    I gather that MMT would argue FE and optimizing production are interconnected. I don’t think that’s right though. A government could employ all of its citizens picking up trash, but that doesn’t mean that nation would necessarily produce anything that actually improved living standards.

    MMR seems to be concerned with the 96-99% while MMT is worried about the 1-4% who are unemployed and they’re willing to sacrifice lower potential living standards for the 99% in order to make sure that 1% has a job.

    • Dan M. March 29, 2012 at 10:07 am

      Head of nail, meet hammer.

    • Dan Kervick March 29, 2012 at 12:22 pm

      That’s incorrect. MMT argues that there is no reason to neglect the task of employing the unemployed when doing so will not harm, and will in fact even improve, the lives of those who are already employed.

      Remember that MMTs critique of the current way of doing things is based on the idea that those current ways of doing things are based on faulty macroeconomic theories, and that those theories lead us to make unnecessary and sub-optimal social policy choices, in effect choosing economic underperformance over high economic performance. MMT sees the decision to leave large masses of our people unemployed as a massive economic waste that is hurting us all, not just the unemployed themselves.

  • Tom Hickey March 29, 2012 at 10:25 am

    Mike, if that is what you took away from what I said, then either you misunerstood me or I did not make myself clear. First, let me reiterate, I am not an economist or financial type, let alone an expert in MMT. Secondly, let me make clear what I intended to say.

    MMT builds on top of the PK analysis of production, as Scott has said. This is demand-driven rather than supply-driven. MMT uses the sectoral balance approach and functional finance to plug demand leakage and maintain production at a level at which there is no output gap in that available resources are employed, including human resources. That means close to FE.

    However, the private sector virtually never employs everyone that is willing and able to work. The MMT JG mops that up. So maintaining optimal effective demand through sufficient purchasing power to consume all production at an optimal output level is the goal. That goal means that the private sector is ideally always employing to the max that is its able to make a profit from. Production is first!

    Some people seem to think — erroneously — that the primary solution that MMT offers for FE is government hiring. That is a total misrepresentation of MMT macro, which is a demand/income-driven approach to production, not some socialist theory based on government intervention in employment, as some people seem to think.

    • Michael Sankowski March 29, 2012 at 8:14 pm

      Tom,

      I am even more sorry now that I’ve read all of your comments. Sorry.

      I should have titled this post differently, and pulled a different comment from you.

      Mike

  • Dunce Cap Aficionado March 29, 2012 at 10:41 am

    Tom,

    “Some people seem to think — erroneously — that the primary solution that MMT offers for FE is government hiring”

    Sure, of course That Which Shall Not Be Named is not the ‘basis’ of productivity in MMT and the vast majority of employment is demand driven, but the solution (the one and only, the base case and something that is described as ‘central’ to the theory) to filling the gap when demand is too weak to get us to FE, is government hiring. Right?

    “However, the private sector virtually never employs everyone that is willing and able to work.”

    I think we can all agree true %100 employment is not possible, even with a hypothetically optimal buffer stock. That’s why Mr. Sankowski uses something like 4.5% UE as the targeted goal in the TC rule- that’s my understanding.

    ” The MMT JG mops that [the 'excess' unemployed] up. So maintaining optimal effective demand through sufficient purchasing power to consume all production at an optimal output level is the goal”

    And if the JG is implemented while production is in decline, what keeps production from continuing to fall? What happens to the ‘optimal effective [level] of demand’?

    Best Regards,

    DCA

    • Tom Hickey March 29, 2012 at 11:54 am

      “And if the JG is implemented while production is in decline, what keeps production from continuing to fall? What happens to the ‘optimal effective [level] of demand’?”

      One of the points of MMT, derived from Minsky, is that credit money creation is pro-cyclical and govt money creation is counter-cyclical. Under capitalism market economies are prone to cyclicality do to financial instability, according to Minsky. The way to smooth the cycle is to regulate finance to reduce imprudence pro-cyclically as animal spirits rise, especially systemic risk, and for government to expand its deficit counter-cyclically and shrink it pro-cyclically to maintain the optimal level of effective demand necessary to prevent an output gap from opening.

      The JG is not about closing the output gap although it contributes (relatively minimally) to NAD. It is about closing the involuntary unemployment gap due to an opening output gap. If the output gap can be kept narrow counter-cyclically then the UE residual will be small and the JG limited. The MMT economists foresee JG employment as low throughout the cycle, expanding somewhat counter-cyclically and shrinking pro-cyclically. But wit appropriate fiscal policy there would never be high UE, as there is now. Warren is on record as saying that he could close the present output gap substantially in a month through fiscal. He would do this chiefly with tax cuts and block grants to states supplemented by the MMT JG.

    • Tom Hickey March 29, 2012 at 11:56 am

      “I think we can all agree true %100 employment is not possible, even with a hypothetically optimal buffer stock. That’s why Mr. Sankowski uses something like 4.5% UE as the targeted goal in the TC rule- that’s my understanding.”

      Right. MMT proponents consider that as just a variation of the natural rate, NAIRU and Tayor rules.

      • Michael Sankowski March 29, 2012 at 9:01 pm

        This is one of the problems with the TC rule – it doesn’t easily allow the unemployment rate to move lower than the target rate.

        Still, if you can’t find a job for an extended period when the unemployment rate is 4%, the problem isn’t the economy.

        It’s probably something like psychological problems or some form of mild mental illness. I work with lower income workers frequently, and my experience with them is they need much more than a just a job.

        • Tom Hickey March 29, 2012 at 9:35 pm

          This is an issue that is generally inadequately addressed in economics. There is significant structural unemployment in this sense. Sociologists are aware of it. See Daniel Little, Culture or jobs?. Based on this analysis, an ELR could go a long way toward addressing “cultural” UE by providing an entry point into the system and training, instead of subsidizing the problem out of guilt or just ignoring it figuring it will go away.

          • Michael Sankowski March 30, 2012 at 9:09 am

            Exactly.

            I work with people making about 1.5 to 2.5 the minimum wage. These people have so many problems, I don’t even know where to start. Some of them could be fixed by money, but then if they were capable of making more money(in general), they would be making more money. And these workers are “quality” compared to the dudes who my mom sat on jury duty for last week. 2 roofers, 40 years old, one badly beats the the other with a flashlight (while the guy was sleeping!). Both were making $10/hr – above minimum wage.

            As you get into lower wage workers, the quality of the employee just gets so much lower. And giving them a job is only one of many things they need, and probably not the most important.

            So I see a government run JG where workers are working for the government as a mental health program. And yes, there are massive benefits to having a job, but my take is some large number of the JG lifers would not be employable by anyone, and probably wouldn’t show up for the JG consistently enough.

            • beowulf April 1, 2012 at 12:37 am

              “So I see a government run JG where workers are working for the government as a mental health program. ”

              That’s actually the strongest imaginable case for the JG.

              • Greg April 1, 2012 at 8:39 am

                Well put Beo

                It would probably be relatively cheap too. Considering how expensive good mental health is.

              • Tom Hickey April 1, 2012 at 1:16 pm

                As someone with some experience with the homeless, there is a lot of wisdom in that, beo. The problem is whether to institutionalize someone or let them fend for themselves on the street since they are not a danger. The first deprives a person of freedom and the second is unrealistic. A special section of a JG program could go a long way to dealing with this.

                I have occasionally tried to give work to people like this, and some even are willing to work free, just to have something to do. But they just just don’t do anything for business. In addition, many are erratic and need more than just a job if they are to cope over time.

            • Greg April 1, 2012 at 8:43 am

              You are soooo right Mike. Poverty is not just a money thing, but it is probably mostly a money thing. Or at least its a thing that while it may be true that giving the person money wont help, someone will have to spend money on something to alleviate it. There are resources that must be brought to bare on the problem, some goods some services, but these will cost someone some money.

              • Tom Hickey April 1, 2012 at 1:27 pm

                Greg, sociologists have shown that poverty is a complex issue that is seldom only about money, or even mostly about money. This is a common misconception in economics. There is a strong cultural component, and it results in structural problems for a society and its economy. Structural poverty is a waste of resources that could become available but are languishing because the problem is not being approached effectively. And a well-designed JG could go a long way in addressing it. See Daniel Little, “Culture of jobs?” at Understanding Society, Mar 28.

    • Tom Hickey March 29, 2012 at 11:59 am

      “Sure, of course That Which Shall Not Be Named is not the ‘basis’ of productivity in MMT and the vast majority of employment is demand driven, but the solution (the one and only, the base case and something that is described as ‘central’ to the theory) to filling the gap when demand is too weak to get us to FE, is government hiring. Right?”

      Wrong. The chief tool is fiscal policy to plug demand leakage and restore effective demand to close the output gap in production. The MMT JG is a mop up operation that is designed to employed otherwise unused resources AFTER fiscal policy has addressed the demand issue that is limiting production.

      • Dunce Cap Aficionado March 29, 2012 at 12:51 pm

        Tom,

        Thanks for your responses! Its nice to be able to interact intelligent and informed people. I’ve never seen the JG described as such ‘small change’ before but that’s likely my own fault.

        My last question to anyone, not just Tom Hickey, is- if the JG is such ‘small change’ that it merely mops up the last few (probably) basis points of unemployment, why is it CENTRAL to MMT? This is really a question of personal opinion to me, I see a JG as a non-starter in the political environment here in the US and I don’t think that will change for quite some time, so I would never want to see it tacked on to proper fiscal policy that would close the vast majority of the gap, even if I thought it was part of the solution.

        • Tom Hickey March 29, 2012 at 1:25 pm

          “My last question to anyone, not just Tom Hickey, is- if the JG is such ‘small change’ that it merely mops up the last few (probably) basis points of unemployment, why is it CENTRAL to MMT? This is really a question of personal opinion to me, I see a JG as a non-starter in the political environment here in the US and I don’t think that will change for quite some time, so I would never want to see it tacked on to proper fiscal policy that would close the vast majority of the gap, even if I thought it was part of the solution.”

          The reason is twofold. First, MMT is the first attempt to show that actual FE (no involuntary unemployed) is compatible with PS. Macroeconomists regard this as “the holy grail” of macro, which most think to be impossible due to <Philips curve dynamics.

          Secondly, this implies a the possibility of a significant jump forward over existing policy in both efficiency wrt use of available resources and also effectiveness with respect to achieving policy goals (Fed mandate). Over time the “saving” from greater efficiency runs into the trillions in large economies like the US. Moreover, there are social and political considerations in addition to the economic ones. The public and politicians therefore hate both UE and price instability regardless of whether it is either inflation or deflation.

          The Fed’s mandate is to maximize production in order to maximize FE and PS. Monetary policy has not be able to do this using interest rate setting and now even special ops not usually resorted to. If this could be done though fiscal policy rather than monetary it would be a sea change.

  • Cullen Roche March 29, 2012 at 10:55 am

    Mike, is that a gasoline tank in your hand or what!?!?! :-)

    A big part of the problem here is terminology once again. MMT changes the definition of the meaning of FE to “no involuntary unemployment”. Mainstream economics uses a very different definition: “A situation in which all available labor resources are being used in the most economically efficient way.” These are VERY different views of the world. While I am not sure that FDO’s comment is exactly right it hits the nail on the head (thanks Dan) regarding one point – paying people who are involuntarily unemployed to pick up garbage is not necessarily an efficient way to employ people. Thus far there is very little proof that a permanent JG would prove to be an efficient way to employ people. At least I haven’t been convinced of this….

    I do presume that MMT believes FE and optimal production go hand in hand. But I honestly question whether this is even a goal of the JG. Warren has repeatedly stated that the JG might not even increase demand. The Fullwiler simulation proves that it’s not an optimal growth strategy. It requires something else like the TC Rule. So there’s an obvious contradiction in the idea that the MMT idea of FE will go hand in hand with optimizing growth. If MMT was really looking to optimize production then they’d lead with the TC Rule and follow-up with the JG. Again, MMT is inconsistent here (this “inconsistency” seems to be a recurring theme). But they lead with the JG. Hell Bill Mitchell explicitly states that a country doesn’t need to produce that which it can import from abroad. Imagine a world that took that view in aggregate! Talk abut a disaster waiting to happen. Mitchell makes it abundantly clear that production is a secondary concern to consumption so if we can just fill the consumption gap then all will be swell. Gosh, I wish it was that easy. Much of this explains why the MMT view on the foreign sector is wrong in my opinion.

    I should note – some have been inclined to accuse us of starting all of this due to the JG, but as you can see from the broadening and scope of these ideas, that’s very far from true. I guess it just took the JG debate to solidify the MMT view of the world in many people’s eyes….

    • Dunce Cap Aficionado March 29, 2012 at 11:01 am

      Speaking of which can we talk about the TC rule more often? I think its a great idea that is not put in the spotlight enough.

      • Cullen Roche March 29, 2012 at 11:07 am

        Anything that can take the heat off the world’s biggest nerd war ever would be great. Do you think there’s ever been a bigger disagreement that fewer people cared about? :-)

        • Dunce Cap Aficionado March 29, 2012 at 11:48 am

          You know, I was just going to agree and move on- but I’m gonna play Mr. Brightside- it really is amazing that so many people who have never even met each other can have such a drastic line in the sand argument over an extended timeframe on the internet and Godin’s Law having been observed (yet). Really speaks to the intelligence of those involved.

          • beowulf April 2, 2012 at 4:16 pm

            Ha ha, speaking of Hitler… JK Galbraith summed up his economic impact (i.e. rebuilding Germany and then starting WWII) thusly:
            “Having solved the problem of unemployment in Germany, Hitler then set about solving it for his enemies as well.”

        • Dunce Cap Aficionado March 29, 2012 at 11:55 am

          Should be “Godin’s Law hasn’t…”

        • Michael Sankowski March 29, 2012 at 7:42 pm

          lol! Take the keys away from that guy! :)

          It’s been something I’ve been thinknig about for a few days and wrote this post while I was a bit sleepy. Then I had to run early in the am off on a series of meetings.

          I had forgotten about it until later in the day, and then well, what’s done is done. I am very sorry I made Tom feel bad/angry/upset in the slightest way, he’s a good guy.

    • Dan Kervick March 29, 2012 at 11:25 am

      You can’t have more consumption without more production; and you can’t have more production without more consumption (unless the production is just mindlessly building up capital stocks without any more end products in sight.) So I don’t understand the dichotomy here . I don’t know what it would mean to prioritize consumption over production or production over consumption.

      • Cullen Roche March 29, 2012 at 11:51 am

        Capacity is there to be filled, no? If you’re a good Keynesian then you understand this. Yes, consumption and production are two sides of the same coin, but you can theoretically have an economy operating at full capacity where the coin doesn’t grow and rather just stays the same size (if there is no innovation or optimization of resources). More people consuming the same production doesn’t necessarily result in a bigger (or better) coin. Imagine a super JG with 300MM people picking up eachother’s trash. :-) You need Volney’s Natural Law to kick in. You need the innovative man. The visionary to make the coin bigger. This is not to say that demand is not important. It’s crucial and it can always be filled with govt aid. But that doesn’t mean we should lose sight of what grows the coin.

        • Dan Kervick March 29, 2012 at 12:49 pm

          The visionary entrepreneur, I would say Cullen, is a person who knows how to build a successful and enduring enterprise that is organized around satisfying some human desires that are currently unsatisfied. The enterprise can only succeed if those human beings have a way of converting their desires into purchasing power. I believe that what MMTers and other similar Keynesians and post-Keynesians see when they look at the current relative dearth of entrepreneurial activity and expanded production, is not that there is a shortage of bright folks with awesome ideas, or a shortage of means of financing viable projects. What they see is that no matter how awesome the ideas are and no matter how much initiative and drive is present in the people with the ideas, awesome ideas will not be implemented and developed into thriving enterprises if there is a shortage of potential customers with growing purchasing power.

          Their recommendation is that there is little more that can be done on the financing side by piling up funds in bank reserve accounts. If we instead drive more income into the pockets of the world of potential customers, which includes publicly employing those who cannot find employment currently, then that zombie army of listless, struggling and insecure consumers – who have been building their backlogs of pent-up demand for four years now – will be reanimated and energize a virtuous circle of demand –> investment –> production –> more employment –> more income –> more demand, etc.

          The alternative approach which has been very popular among all kinds of mainstream economists is the “build it and they will come” approach: to somehow get firms and entrepreneurs to finance new production and hire employees, built up the inventories and wait for the customers to come. The idea is that the aggregate hiring boost will generate the income and demand to buy the new products.

          My criticism of this approach since I first began arguing with people about it back in 2008 and 2009 is that it is based on an unrealistic picture of the way businesses actually work. Most businesses and their financiers don’t act on the basis of bold and blind entrepreneurial leaps of faith. They respond to detectable demand in the markets they know. They respond to people going into markets (including online markets these days) with cash in their pockets looking for stuff.

          • Cullen Roche March 29, 2012 at 12:55 pm

            I didn’t say Keynes was wrong or that AD shouldn’t be filled. My point is much more specific.

        • Tom Hickey March 29, 2012 at 12:53 pm

          MMT economists have explained that the private sector is chiefly responsible for production and innovation. Government is supplemental, providing the foundation of education, health care, basic R&D, infrastructure, along with fiscal policy to stabilize effective demand when there is demand leakage. Under capitalism, it is not the purview of the government to involve itself directly in either production or innovation for greater productivity, and MMT agrees with the mainstream position on this as far as I can see.

          It is true that government has in fact been directly responsible for much innovation historically, primarily through the military. In the US a great deal of innovation has come through this route, too, such as through aircraft, nuclear, and then the missile program developed initially during and immediately after WWII in response to the German innovation and the “Red menace.” Subsequently, the space program was instigated by the challenge-threat Sputnik presented. The Internet was a government project and arguably it is the most transformative innovation of the transition from the 20th to the 21st century, which did But this is “accidental” and incidental under capitalism rather than government intervention in innovation.

          The position that most economists agree upon is that a well-functioning private sector is the way to optimize production and and create the space for innovation. Most money in the economy is credit money generated by the private sector also. MMT economists do not dispute this, nor do they wish to change it substantially. They simply want to remove what they see as unnecessary obstacles to effective and efficient management for progress in a sustainable fashion.

          MMT economists want the present system to work better (more effectively and efficiently), which is the bone I have to pick with MMT and other economics approaches that accept the presumption that “capitalism” is the most effective and efficient system, although Minsky observed that there are “52″ approaches to capitalism. What I object to is making capital (consolidating land into capital) the solely significant factor and treating labor as a commodity on the level with other commodities. But that is for another day.

        • Tom Hickey March 29, 2012 at 12:54 pm

          CR: “Imagine a super JG with 300MM people picking up each other’s trash.”

          Cullen, where did this come from? MMT economists advocate socialism? Really?

          • Cullen Roche March 29, 2012 at 12:55 pm

            I didn’t say that….

        • AK March 31, 2012 at 8:55 pm

          MMT and MMR debates are great, but MMRists really must stop implying that the job guarantee is designed to employ a huge sector of the population. It isn’t.

          Many comments in this thread have debated the most efficient method of putting unemployed people to work. Easy, says MMT: in the private sector!! MMT literature makes it crystal clear that fiscal operations are the first and best method of closing up an AD gap, getting business to hire, and putting unemployed people to work. I can quote countless articles, especially from Bill Mitchell (that “commie”!) that repeatedly argue for fiscal operations as the first and most obvious step to close the unemployment gap.

          Then, the JG operates on the remainder, which, if fiscal policy is used correctly, should almost always be small if we actually implemented good fiscal policy. Again, Bill Mitchell repeatedly points to many post-WWII examples where nations were near full employment, with price stability, purely because of fiscal operation. How easy would it be to implement a small JG on the remainder of unemployed in such an environment?

          So to argue that MMT advocates hiring anywhere NEAR the current amount of people unemployed is just a plain misrepresentation of MMT.

          • Cullen Roche March 31, 2012 at 9:31 pm

            You are wrong. Wray has said the program could employ up to 30 million currently. If that’s not “huge” to you then I don’t know what is….

            • geerussell March 31, 2012 at 10:12 pm

              Do you have a citation for that? It’s far larger than numbers put forth in any of the literature. More context is needed. Especially if it’s going to be repeatedly put forth as some kind of baseline for your particular construction of what you think a MMT JG looks like.

              • Cullen Roche March 31, 2012 at 10:33 pm

                Please stop accusing me of putting words in the mouths of MMTers. I am getting really tired of it and it’s embarrassing for you all that I know so much more about your own theory than you do. Please get up to date with the opinions of the people you’re defending or just stop defending them because you guys are making mistakes left and right all over this website. It’s reaching a level of sheer absurdity.

                “We’ll offer a job to all who want to work, creating somewhere between 10 million and 30 million new jobs at a living wage”

                http://neweconomicperspectives.org/2012/02/mines-bigger-than-yours-notes-on.html

                • geerussell March 31, 2012 at 10:44 pm

                  Thanks for the link. I’m not sure where you got the notion you were being “accused” of anything.

                  • geerussell March 31, 2012 at 10:45 pm

                    Well, other than waving the 30 million number around with far more certainty than can be justified.

                • geerussell March 31, 2012 at 10:49 pm

                  …and you cherry picked that 30 million number. In a similar fashion that you did with Mitchell’s nationalized banking you pulled out one sentence and ignored what immediately followed because the full context undermined what you were saying.

                  Here is what comes immediately after what you quoted:

                  (note that not all of the new jobs will be in the JG program—that depends on “multiplier” job creation in the private sector, but those jobs will also pay living wages or otherwise workers cannot be recruited out of the JG).

                  So from now on, if you’re going to use the 30 million figure, it would be far more accurate not to obfuscate that it includes private sector jobs.

                  • Cullen Roche March 31, 2012 at 11:06 pm

                    Holy smokes. Only an MMTer could dig his heels in and make himself look so bad time after time after time. The Fullwiler simulation shows that over the time the JG is fully phased in it creates about 10% private sector jobs relative to all of the JG jobs. So yes, if Wray says 30 million then we can assume that that translates into roughly 3 million private sector jobs (during the recent recession for instance). So let’s be generous and assume you’re right that Wray is including pvt sector jobs in his comments. Well, then we’re at 27 million govt jobs. So, does it make you happier if I say 27 million as opposed to 30 million?
                    :-)

                    • AK March 31, 2012 at 11:13 pm

                      Sorry, just saw the above discussion where you talk about this point.

                      I don’t see it that way. The rapid fiscal adjustment that has repeatedly, obviously, and clearly been prescribed by MMT would ensure that the unemployment figure was way below 30 million before any sort of JG legislation even made it halfway through Congress.

                    • Cullen Roche March 31, 2012 at 11:20 pm

                      It’s not about how you see it. It’s about the facts. And the facts from the Fullwiler simulation clearly prove that you guys are wrong about this. You’re vastly overstating the effect of the JG as a liquid buffer stock and a transfer job. In fact, the JG doesn’t prove to be much of a liquid buffer stock at all when compared to regular pump priming as the Fullwiler simulation clearly shows. In fact, the JG just barely outperforms the stimulus package on a dollar for dollar basis in terms of pvt job creation.

                      The evidence there is pretty cut and dry. So sure, you guys can cite less than 30 million if you want, but it’s still going to be a huge number….But to keep you all happy I’ll use 27MM in the future. Wouldn’t want Geerussell to feel like he didn’t embarrass himself by throwing down the gauntlet tonight. Call me generous. :-)

                    • geerussell March 31, 2012 at 11:18 pm

                      It’s a start. Now that you’re walking back from simple, unequivocal statements that a JG means 30 million jobs you’re headed in a more productive, less hyperbolic direction.

                      Next up: what’s the determining factor that decides where you fall along that range? You state 30… now, 27 as “the number” for JG jobs. It was presented as the upper boundary of a very wide range. What are the assumptions you are including to arrive at the upper bound with such confidence?

                    • Cullen Roche March 31, 2012 at 11:21 pm

                      Yes. A pyrrhic victory for Geerussell! Congratulations. Go have a drink. :-)

                • AK March 31, 2012 at 11:08 pm

                  Context really is everything.

                  Right next to that sentence, Wray says “note that not all of the new jobs will be in the JG program—that depends on “multiplier” job creation in the private sector”.

                  So clearly he’s not saying that the government will provide 30 million people with jobs.

                  • Cullen Roche March 31, 2012 at 11:14 pm

                    See my other comment. The Fullwiler simulation shows 16 million JG jobs between 2009-2011 and just 1.73MM new pvt sector jobs created between the start of the program and the time it’s fully phased in. So it translates into roughly 1 pvt sector job for each public sector job. So if we take Wray at his word on the 30 million then about 3 million of those jobs are pvt sector. So it’s 27MM. So I guess you guys win. I’ll cite 27 million in the future. :-)

                • Tom Hickey April 1, 2012 at 1:06 pm

                  Out of context.

                  Wray is advancing a hypothetical there of his desire to get rid of military Keynesian and reduce the size of the military, there changing the structure of the US economy. He is saying that in that case a large welfare program would be needed to pick up the slack from that shift away from massive military spending. In this case he says that a MMT JG of 10-30 million might (he gives numbers overestimating what he thinks likely) be needed and that it is doable. He is actually speaking to Austrian-Libertarians here about how their desire to curtail US foreign policy could be handled.

                  This is not offered as a general MMT policy recommendation. It is a policy option should the US suddenly return to sanity and nchange foreign-military policy.

                  • Cullen Roche April 1, 2012 at 1:11 pm

                    Whatever Tom. The Fullwiler sim showed 16 million. So if you want to argue that increasing the govt workforce by 75% is small then go for it. You’ll need all the luck in the world for that sale because you’d have to be blind to buy it….

                  • Ramanan April 1, 2012 at 1:35 pm

                    What’s the simulation one keeps talking of. Any link to a paper?

                    • Cullen Roche April 1, 2012 at 1:43 pm

                      It’s this. Scott ran a simulation of the JG for the crisis. The results basically show what I’ve been saying all along. The JG is nothing special. It creates full employment, but doesn’t prove to be a superior growth tool or buffer stock. Though it also doesn’t result in high inflation which I guess is a point for MMT….

                      http://prezi.com/wkqco-muy29e/costing-the-job-guarantee/

                    • Ramanan April 1, 2012 at 2:38 pm

                      thanks.

            • AK March 31, 2012 at 10:25 pm

              I haven’t seen that 30 million figure myself, nor am I aware of what context it was said in so I can’t comment.

              But I repeat what I said before: I have not read any prominent MMT author argue for a JG alone as a method to solve a financial crisis, without serious fiscal adjustment on the agenda. In fact, they have explicitly stated the opposite.

              • geerussell March 31, 2012 at 10:34 pm

                It’s certainly difficult to imagine arriving at that number other than by applying a JG to present circumstances, with no other fiscal policy, with the JG taking in every unemployed and every underemployed person along with a few million more who jump in just for kicks. All with no adjustment or reaction by the private sector.

                A scenario that seems kind of… out there.

    • Greg March 29, 2012 at 7:12 pm

      “A big part of the problem here is terminology once again. MMT changes the definition of the meaning of FE to “no involuntary unemployment”. Mainstream economics uses a very different definition: “A situation in which all available labor resources are being used in the most economically efficient way.” These are VERY different views of the world.”

      You seem to think thats a problem with MMT? They arent surreptitiously changing the definition, they are simply arguing that anyone who is willing and able to work (in private sector) but CANT is worth consideration. Mainstream economics also uses the term “unsustainable deficits” or “exploding govt debt” in many situations where you yourself have been critical of. Certainly we can agree that the paradigm/lexicon of “mainstream economics” deserves no deference among MMTists or MMRists. Its no secret that MMT and mainstream economics have a different view of the world. I thought that was what attracted you to MMT originally?

      Regarding the topic of this post…… I would first say we need to agree on a definition of production. Obviously producing things/services that other people wish to utilize or consume is the only way to run a successful business but the way it is measured within our world leaves something to be desired in my view. Today, producing a cure for cancer that you gave away would have a productivity of less than zero, since you made nothing from it and had a cost in producing it, but it would extend millions of lives many years.
      Frankly I dont see that happening. “Productive” work is probably one of the worst defined concepts in our society. Many people still live under the myth that markets are designed to reward the most productive people. One look around you shows that to be a complete fraud.

      Until we can agree on productive activity (one mans boondoggle is another mans means of providing for his children) I simply think that in a world where we expect people to have jobs in order to participate in our economy it is imperative to provide at least the number of jobs as there are working age people.

      To me its absolutely clear that a private company, focused on maximizing output and profit, will NOT hire more people than it needs to do the job it needs to do. It will innovate (hopefully) each year and need less people as time goes by. If all employers do this, jobs will decrease over time. Where will the “un-needed” go?

      We cannot, MUST NOT, rely on the private sector to employ everyone. Its asking them to go against their grain. Its like asking a cat to bark.

      • Cullen Roche March 29, 2012 at 9:00 pm

        Just because mainstream econ makes a few mistakes doesn’t mean it should be thrown out the window entirely….You guys seem to think MMT has reworked the entire way the world works and you seem to build your policy agenda around this view….

  • Tom Hickey March 29, 2012 at 11:40 am

    CR: “A big part of the problem here is terminology once again. MMT changes the definition of the meaning of FE to “no involuntary unemployment”. Mainstream economics uses a very different definition: “A situation in which all available labor resources are being used in the most economically efficient way.” These are VERY different views of the world. ”

    A chief purpose of MMT macro is to show how to use all available labor resources in the most economically efficient way. A macro approach and economic policy based on it that leaves 4-5% as a buffer stock of unemployed is hugely inefficient, and MMT claims it can reduce that inefficiency by getting UE down to 1-2% transitional through a combination of well-engineered fiscal policy supplemented with the MMT JG.

    Now one can argue that MMT theory is wrong about being able to eliminate this inefficiency, but otherwise they must argue that an approach that leaves several million people with minimum wage of zero in the US is more effective and efficient than one that does this. This is the challenge that MMT present macroeconomists. So far, I have seen no serious approach to the core of this challenge other than sniping at the margin.

    No mainstream economist I have heard of thinks that UE can realistically be reduced to no involuntary unemployment. The question is what happens to the residual. Are they to be a stock if unemployed that is permanently at least 4-5% and let the rest either fend for themselves or go on the dole, or is there a better way.

    MMT says there is a better way (more effective socially, politically and economically), that it is more economically efficient than others in that it uses available resources that would otherwise be idle and deteriorating, while other solution redefine unemployment away based on assumptions. Actually solving problems by redefining them or bring in assumptions is a typical ploy of economists, so well known that it is the brunt of jokes.

    Yes, MMT stands in opposition mainstream economics and policy based on it. It disputes the natural rate, it replaces the primacy of monetary policy with fiscal policy, it hows how to calculate the appropriate govt fiscal balance, it shows how to achieve relatively permanent FE & PS based on maintaining full production by managing effective demand. Demand is a signal to invest, so it also considers optimizing private investment and innovation pro-cyclically while using govt expenditure counter-cyclically to maintain effective demand, thereby preventing an output gap from opening. Being institutionalist also, MMT shows how to reform major institutions like banking, finance, and health care, education, and R&D without the false constraint of affordability.

  • Erik V March 29, 2012 at 11:56 am

    I think it’s clear from massive amounts of blog reading that the prevalent views are:

    MMT: FE>PS>Production
    MMR: Production>FE>PS

    This is not a small issue and is why people like me are attracted to MMR. MMT doesn’t seem to care much about efficient use of resources, including the unemployed. If you combine a FICA tax holiday with government spending on much needed infrastructure, basic research, a workable national energy policy and productivity enhancing gains from tax reform and incentives for more private R&D, we would essentially have full employment. And average productivity would be much higher than having a JG soak up the unemployed to perform useless tasks for the govt.

    • Cullen Roche March 29, 2012 at 12:04 pm

      Give that man a gold star!

    • Tom Hickey March 29, 2012 at 12:56 pm

      This is a misrepresentation of MMT by people that don’t understand it and don’t want to understand it. Simple as that.

      • Erik V March 29, 2012 at 2:29 pm

        I don’t see what the misrepresentation is, and much thought has been put into the differences between MMT and MMR. All we are debating here is an ordering of priorities. It’s hard not to draw from much of the MMT literature that employment for employment’s sake is a worthy and noble goal, without regard to what this employment produces. We read about demands for a JG, but rarely (if ever) is that accompanied by a detailed plan for say, working on a national energy grid or some type of public good that would use the unemployed productively. It seems that a job is a job to many MMTers, no focus on maximizing productivity growth.

        • Tom Hickey March 29, 2012 at 3:18 pm

          Again, a failure to understand what MMT is actually saying. The “thought” that has gone into differentiating MMT and MMR has not always been fact-based in everyone’s mind. Some people seem to focus attention on the MMT JG to the exclusion of the rest of the MMT corpus and what the MMT economists have specifically said in response to such criticisms.

          Meanwhile, the critics have not yet responded to queries from MMT economists and proponents on how they propose to create a more effective and efficient macro-based policy solution that doesn’t have a buffer stock of employed instead of of unemployed. and Nor have they said what their price anchor is, if any, and how they reconcile FE & PS.

          Some Austrians have responded that they don’t give a hoot about FE and are only concerned with PS with a preferred price anchor of gold convertibility. Moreover, they don’t “believe in” macro anyway. OK, that’s one solution that requires a change in the entire global monetary system. Good luck with that.

          Then there are the mainstream solutions all involving a buffer stock of unemployed entailing huge inefficiency in the form of idle resources, and a rule instead of a price anchor.

          What’s the alternative solution to the trifecta that is more effective and efficient than MMT?

          • Dan M. March 29, 2012 at 3:30 pm

            “and what the MMT economists have specifically said in response to such criticisms. ”

            You mean, like telling people the JG is central to MMT and that you’re not MMT unless you are for the job guarantee?? That response?

            It’s not about the argument surrounding the JG, it’s about the fact that it’s so incredibly central to MMT that they are willing to boot people out of their group for not buying into it.

            Sounds like they’ve said what they want to loud and clear, but are now regretting it, and trying to lay it on Cullen’s lap why he broke off…

            …he didn’t break off… He was kicked out, and decided to simply clarify the line in the sand that MMT had already implicitly drawn.

    • AK March 31, 2012 at 8:59 pm

      If you combine a FICA tax holiday with government spending on much needed infrastructure, basic research, a workable national energy policy and productivity enhancing gains from tax reform and incentives for more private R&D, we would essentially have full employment.

      Sounds like something pulled straight out of an MMT article…

  • JK March 29, 2012 at 3:56 pm

    JK,

    The blame game is getting boring.

    I think the challenge for MMR is to approach an issue that Tom Hickey raised:

    “…the critics have not yet responded…on how they propose to create a more effective and efficient macro-based policy solution… and how they reconcile FE & PS….What’s the alternative solution to the trifecta that is more effective and efficient than MMT?”

    I appreciate MMR’s attempts to describe the system “as is” without policy prescriptions, but as someone noted the other day… “desciption is just prescription that has already been implemented” (or something like that)

    If we’re not sooner or later talking public policy, then we’re just philosophizing.

    • JK March 29, 2012 at 3:58 pm

      To JK from JK :) (I wasn’t responding to myself)

      • beowulf March 29, 2012 at 8:49 pm

        Your comments are a closed system with supply perfectly balanced with demand.
        :o)

    • Dunce Cap Aficionado March 29, 2012 at 4:16 pm

      “Desciption is just prescription that has already been implemented”

      Disagree, rather strongly too. Description gives proper understanding of the system. Prescription/policy is based on one’s udnerstanding but can vary in terms of process, style and tactics for implementation.

      For instance, accurate description of the modern monetary system and the BSR can lead to the understanding that fiscal stimulus is needed to speed economic recovery. A person could develop prescription to affect this by-
      1) Additional Gov’t Spending (ceteris paribus)
      2) Tax Cuts (ceteris paribus)
      3) A combination of both Gov’t Spending and Tax Cuts.

      I mean, we could literally argue just over how best #1 could be done and all still agree on the description.

      • Tom Hickey March 29, 2012 at 6:05 pm

        The choice of the spending, tax cuts, or mix has to be justified on the basis of macro analysis, e.g., by appeal to multipliers. It’s not arbitrary. There are solid economic criteria involved in a rational choice.

        • Dunce Cap Aficionado March 29, 2012 at 8:21 pm

          Completely agree, but you can agree on the description and still argue over the prescription.

          • Tom Hickey March 29, 2012 at 9:01 pm

            If you recall the recent debates about the stimulus package, there were disagreements over the ratio in the mix of taxes and spending that were based on disagreements over how to figure the multipliers. One side argued for a higher multiplier for taxes and lower for spending, and the other side for the opposite.

            • Dunce Cap Aficionado March 29, 2012 at 10:38 pm

              I have to admit that debate is not is not in my realm of comprehensive knowledge.

              That being said I feel I represent an informed (however less ‘academically knowlegable’) part of the voting populace that will need to be ‘won over’ on any of these points

              Yup, I’m that lay person who is open minded but not fully convinced of anything other than what would affect my situation re: Aggregate Demand.

              -Reduced taxes (a la Mosler’s proposed FICA suspension) is something I would and do jump at viscerally. I know many politically oriented yet ‘uninformed’ people who would jump at the proposal of lower taxes but when TWSNBN is included as ‘central’ will be vihemently opposed to the whole idea.

              I am not disagreeing academically as much as I wish to point out that to achieve the fiscal policy necessary to get very close (if not all the way) in closing the gap is best proposed without the JG for political reasons.

              Again, Mr. Hickey, with great respect, thank you for your wildly intelligent and informed comments.

              • Tom Hickey March 29, 2012 at 11:09 pm

                “I am not disagreeing academically as much as I wish to point out that to achieve the fiscal policy necessary to get very close (if not all the way) in closing the gap is best proposed without the JG for political reasons.”

                MMT economists acknowledge that. However, a macroeconomists job is to present the most comprehensive solution to a design problem and let the strategists decide how to implement it.

                This is what happened with the stimulus. Christina Romer presented a package to Larry Summers who present to the president what he deemed politically feasible. The president apparently never saw the Romer proposal in toto. Then the political team debated it and prepared it for submission. So by the time it got to the bill stage it was woefully short of what was needed. But something is better than nothing.

  • JK March 29, 2012 at 4:52 pm

    It’s amazing the amount of word twisting, reading between the lines, and putting words in other people’s mouths that goes on in this debate.

    Dunce,

    What I meant by “description is just prescription that has already been implemented (or something like that)” is that the current system/arragenment, at somepoint in history, was offered as a prescription. And as we describe the system, inevitably we must talk about whether or not the current “prescription that has already been implemented” is better or worse than a possible “prescription that has not already been implemented.”

    I apologize for not being explicit about what I meant.

    Of course I think their is value in describing the system as it is and how different actions and inactions affect the various parts of the economy and our existence. There is no doubt that description has enormous value.

    • Dunce Cap Aficionado March 29, 2012 at 5:15 pm

      Apologies if I twisted your words/meaning/intent.

  • Tom Hickey March 29, 2012 at 6:01 pm

    Dan: “…he didn’t break off… He was kicked out, and decided to simply clarify the line in the sand that MMT had already implicitly drawn.”

    Wrong again. What a lot of people that were present at the time took away from it was that Cullen didn’t understand MMT in the first place if he didn’t know that the MMT JG was a central pice of it. Randy Wray’s 1998 book was a very clear statement of MMT, and the subtitle, The Key to Achieving Full Employment and Price Stability, declares this clearly. Cullen seems to have missed that, and when he found out that MMT is a macro theory that includes the MMT JG as a key piece rather than simply the operational description of a soft currency monetary system, he got horrified of being associated with it. Completely understandable. I don’t see any problem there.

    As far as Cullen getting “kicked out,” as I see it, the final straw came when he expected Warren to side with him over MMT being essentially Warren’s “Soft Currency Economics” with no MMT JG, the MMT JG being an add from the economists chiefly Bill Mitchell. when that did not happen, Cullen bailed. No one “kicked him out,” whatever that means.

    The MMT developers and other economists just explained what MMT includes and that if anyone wanted to represent MMT accurately in talking about it, the package included a macro theory and policy prescriptions based on it which were adopted for reasons of economic efficiency and effectiveness rather than based on social justice or some other ideological normative criteria. There is going on twenty years of publication about this. Nor is MMT “normative” rather than descriptive. MMT justifies MMT chiefly based on economic criteria applied to the macro, although there are also other non-economic criteria that apply. The policy prescriptions follow from this, not some non-economic value preferences. Even the social aspect is justified in economic terms wrt to costs to society and economic well-being.

    Warren explained that after initial discussion over a couple of years, the original developers, himself, Randy Wray and Bill Mitchell were on the same page regarding essentials, including the MMT JG. Randy then wrote it up for popular consumption, integrating the economic background that Warren did not have. This was not a mystery or hidden away. I understood it off the bat when I came to discover MMT since I read Randy’s book right away. MMT was presented as comprehensive macro theory in Randy’s book rather than as simply a description of the monetary system. The approach to macro is based on that description, which differentiates it, not the MMT JG. Subsequent publications fleshed this out professionally.

    I think I can say confidently that no one on the MMT side has any problem with MMR or anyone else using the monetary description (with attribution) as far as I know. The MMT developers are happy to see others picking up this, including New Classicals, New Keynesians and Austrians. They don’t expect or anticipate other economists and financial types who come to understand the monetary ops aspect will necessarily come aboard MMT as a PK development for that reason though. They are happy to Steve Keen integrating more vertical concepts, for instance, and are friendly with Austrian Ed Harrison who are also integrated the MMT description of monetary ops.

    • Dan M. March 29, 2012 at 6:46 pm

      You raise some points but the following statement:

      “I think I can say confidently that no one on the MMT side has any problem with MMR or anyone else using the monetary description (with attribution) as far as I know.”

      Kinda feels like utter garbage… aren’t MMRists Monetarily Retarded? Sure seems like certain heads of MMT are anything but glad.

      • Cullen Roche March 29, 2012 at 8:58 pm

        Yeah, if MMTers didn’t have any problem with us then they wouldn’t be obsessing over our every move. You guys have wasted countless hours here and at your own site trashing us, misrepresenting us, etc. Then you call us insignificant and try to say no one has a problem. What a load of garbage. MMT being inconsistent. Gee, what else is new?

    • Cullen Roche March 29, 2012 at 8:55 pm

      Tom, that’s total bull shit and you know it. MMT misrepresented the JG’s position from day one. Warren calls it an “option” in SCE which is MMT’s seminal paper. The academics are the ones who later made the JG a “central” piece of MMT. Warren might agree with them now, but that was never made clear to me until the JG debates. Seeing as how I learned MMT from Warren then it’s not surprising that I took SCE at its word. You’re being very dishonest with this representation of how things went down and how the JG is portrayed in MMT.

  • JK March 29, 2012 at 6:08 pm

    Dunce, thanks for the apology. This small miscommunication has got me thinking…

    There are a lot of bright and brilliant people on both sides of the MMT/MMR feud. Everyone needs to eat a little slice of humble pie and seek clarification whenever they feel the need to beat their chest. This information is really important. There’s got to be a constructive way for MMT and MMR to engage each other in a polite and professional manner.

    Honest and considerate dialogue makes us all better off. The bickering and blame-gaming often makes both sides seem like children. (and I think both sides are guilty of acting passive-agressive).

    I hope both sides keep up the good work and try their best to put hurt feelings aside. Nearly everyone here is, when compared to the mainstream, on the same side. I look forward to productive engagement on this site and the MMT sites.

    • Dunce Cap Aficionado March 29, 2012 at 8:13 pm

      Agree, I’m all for coming together over the MASSIVE amounts of common grounds between the two.

      But I’ve been following this whole thing since inception and while MRRists have challenged and disagreed (in a professional manner) with some parts of MMT, MMTers have been much more standoffish. The word ‘retarded’ was used in a response to a overall small criticism (HOW CAN THAT BE JUSTIFIED?!?!?).

      To me, certain (important) individuals on one ‘side’ (I hate saying there are sides here as they are in a vast majority in agreement) have lobbed downright childish denigrations at the other. JKH used the word ‘Churlish’ to describe them and I think that best applies.

  • Tom Hickey March 29, 2012 at 7:28 pm

    Dan M: “Kinda feels like utter garbage… aren’t MMRists Monetarily Retarded? Sure seems like certain heads of MMT are anything but glad.”

    Not the way I see it. I don’t see that any of the MMT economists started this kerfuffle, e.g., by saying that Cullen had lifted their ideas. They were pleased at his interest and supported his work to increase understanding of operational description of the present monetary system.

    But when Cullen eventually realized the MMT JG was an integral aspect of MMT, he reacted — some might say “overreacted.” And when criticism starts getting thrown around, then people get miffed, especially when they think it is undeserved, or is either ignorant of their position or misrepresents it.

    At that point, things degenerated and proponents of both sides joined in with ad hominem attacks. It’s regrettable, but I don’t see any good coming from assigning blame. Time to move forward.

    Actually, this happens all time in many areas of life, including professional life. Why bogged down in a dynamic that drains energy and is otherwise useless. If there are rational objections to a theory or claim make them and debate them rationally instead of arguing emotionally. That goes for all parties. Where areas of fundamental disagreement arises, then the rational course is to agree to disagree about those things and debate other things still at issue.

    If MMR cottons to certain aspects of MMT and wishes to use them with attribution, why not just do so. That is pretty standard practice. No reason to get involved in arguments over it. If MMR just wants to increase exposure to a correct understanding of the monetary operations and how to talk about them, fine. It would be expected that MMR would also make its own contributions eventually, as is already taking place.

    If MMR wants to do more than that, i.e., enter the macro fray, then the road is clear. One has to enter the debate at the state of the art and try to extend the envelope, or else come up with a new approach. If MMR wants to enter the macro arena, then opposing other theories in areas where one is offering improvement, that’s part of the game, too.

    No big deal.

    • Cullen Roche March 29, 2012 at 9:02 pm

      Tom, this is just a total misrepresentation of the way things went down. You and Scott were the first ones who even called anyone names. YOU overreacted and I tried to maintain the peace. You need a full record of the events. Here you are since your memory is clearly foggy:

      This is exactly how this little tiff played out in real-time. I said in a comment to Scott in early December that I didn’t think the JG was a rational policy to go “all in” on. I didn’t even reject trying the JG:

      “I’d be interested in seeing a jobs guarantee implemented in place of unemployment benefits or something similar on a smaller scale. Perhaps we scale it up if it proves workable. But there are too many moving parts here for anyone to definitively conclude that a JG is a good thing. And no economic model is going to prove otherwise. I’m open minded, but this is not the sort of program that I would advise leaders to dive into. The downside risks over the long-term are potentially enormous.”

      Scott fired back in an emotional rant calling my position 100% ideology. http://pragcap.com/the-politics-of-mmt/comment-page-1#comment-90652

      I responded very calmly that he was being unfair and that I was only judging the risks in an unproven program. He later admitted he was wrong and even told me point blank that he agreed with my position on the JG. He later came back and trashed me again despite this….

      The debate went quiet over the Xmas holiday and then heated up again after the New Year. I tried to hash out the descriptive vs prescriptive debate citing comments by Fullwiler and MItchell that said there was a clear divide. That all changed when Mitchell drew his line in the sand and I began to question whether I was MMT or not. Trust me, this was not a comfortable moment for me as I felt like I was being thrown out of MMT. I tried desperately to get Warren to side with me since I had always been under the impression that the JG was an “option” as he states in SCE. I was not trying to create a divide, but find common ground. Many founding MMTers told me they were “disappointed” that Bill had drawn a line in the sand. At that point I posted a discussion between Warren and I again trying to calm the waters and express that Warren and I agreed on much. And the MMTers attacked my position.

      Neil Wilson accused me of playing politics as he has done repeatedly. He’s misconstrued my position worse than any of you have. http://pragcap.com/warren-and-i-discuss-the-job-guarantee/comment-page-1#comment-94618

      Some of you MMTers have even said my position was worthy of bodily harm as a reader said I deserved to be “laid out” for disagreeing with Mitchell on the JG. http://pragcap.com/warren-and-i-discuss-the-job-guarantee/comment-page-1#comment-94625

      And then Tom Hickey called me an ideologue. So, after being stabbed in the back by a mentor, having my politics entirely misconstrued, being threatened with bodily harm and again being called names I FINALLY started fighting back and said Tom was the one being ideological. How unreasonable of me, right? Or “snide” as some of you would put it. http://pragcap.com/warren-and-i-discuss-the-job-guarantee/comment-page-1#comment-95366

      It would be helpful for people to go back and read how this all actually played out because MMTers have once again miscontrued the facts to portray me as some sort of evil person. Throughout this debate I have tried to remain calm and keep things focused on the facts. You won’t find a single insult or demeaning comment in my actual posts (unlike many MMT posts, some by the founders themselves). Read this discussion and see how many times I try to keep people on point and focused on the discussion at hand. http://pragcap.com/the-fundamental-difference-between-austrians-and-mmters

      I was accused in that discussion of “hijacking” MMT or trying to create a divide. I very clearly said I was not doing either and that I wanted to work with the founders on developing our ideas:

      “I realize I am not MMT and it was never my intention to hijack the term. Personally,I look forward to working with the founders and others on the evolution….this is NOT an intellectual battle among Mmters. Its a battle for a better world and I hope to contribute positively. Happy NY to all!”

      http://pragcap.com/the-fundamental-difference-between-austrians-and-mmters/comment-page-1#comment-94175

      A few days later when I followed up on that piece you guys once again went into attack mode. You all repeatedly tried to pit me against the founders and I tried to calm the waters:

      “I really don’t like how people are trying to pit me against other people. We are on the same team. We just disagree how the team should be run.”

      http://pragcap.com/the-evolution-of-mmt/comment-page-1#comment-94341

      I even warned my own defenders repeatedly to stop raising the rhetoric:

      “LVG, you need to stop making this so personal. It’s not personal. Let’s stick to the facts of the discussion. Thanks.”

      http://pragcap.com/the-evolution-of-mmt/comment-page-1#comment-94359

      And then Scott once again piled on in an emotional comment calling me names and saying he doesn’t care what I think:

      “Sorry. You’re wrong. Numerous studies both empirical and theoretical. You’re being ideological because you just don’t like the JG. Why don’t you just say it?”

      http://pragcap.com/the-evolution-of-mmt/comment-page-1#comment-94489

      “I really don’t care much if you’re sold anymore. I don’t think any evidence would work. Sorry. One good thing to come of this, though, is I have a better idea where to go next with research on this issue, so thank you for that.”

      http://pragcap.com/the-evolution-of-mmt/comment-page-1#comment-94491

      So this all started because I was skeptical about the JG and said that it wasn’t the slam dunk MMTers seem to think. That was a totally reasonable position (one which I now find out has been verified by Fullwiler’s simulation – no wonder he agreed with me initially!!!). But you guys kept pushing back with the insults and hightened rhetoric trying to push me out of MMT because I didn’t support the JG. I tried desperately to find common ground. At one point even spending 3 hours on the phone with Warren thinking we had actually agreed on much….. I tried to find a common ground with Warren and others, but the academics and commentators kept hightening the insults and rhetoric. And yet you’ve felt justified in claiming that I’ve been the one being “snide”. You’ve done what MMTers always do and you’ve attacked the people behind an argument in your typical fashion. And then you’ve played the “woe is me” card in an attempt to obscure the way things really went down. MMTers are 100% to blame for the way things have played out. I tried at many points to calm the waters, but you all wouldn’t have it. Have some accountability. Learn to discuss things with people in a rational and mature fashion. Otherwise, you’re just shooting yourselves in the foot.

      • Tom Hickey March 29, 2012 at 9:45 pm

        Have you seen Kurosawa’s Rashomon? Or as we say, “There are two sides to every story.” Arguments are largely about perception and feelings.

        • Cullen Roche March 29, 2012 at 10:20 pm

          Yes and the perception coming out of MMT arguments is pretty much always the same. You guys overreact and say regrettable things and then you lash out even more when people defend themselves. You guys have a very well known reputation.

      • JK March 30, 2012 at 11:59 am

        Cullen,

        I didn’t mean “hijacked” as a pejorative. It was merely a novice’s observation that if

        1. the founders insist that the JG is integral to MMT, and…
        2. you don’t support the JG but continue to call yourself MMT, then…
        3. you’ve been misrepresenting what MMT “is”

        I think the rest of my comments there show that I wasn’t accusing you of purposeful wrong doing.

        • Cullen Roche March 30, 2012 at 12:05 pm

          JK,

          Many MMTers made it clear that what I was describing was not MMT. That’s why you’ll notice that I very respectfully stopped referring to myself as MMT. But Tom’s point is a total misrepresentation. If you learn MMT from Warren’s SCE then you’ll assume the JG is an “option”. That’s precisely the path I took since Warren taught me MMT. Again, this is the terminology problem and inconsistency in MMT literature. Some of the lit says the JG is an “option” and others say its integral. I don’t get that. Why is there even any confusion about that? There shouldn’t be. Why did it take 20 years for this to come up? Because MMT is incredibly vague and inconsistent about major points on many different things.

          Cullen

          • Tom Hickey March 30, 2012 at 12:47 pm

            As I have said many time, the MMT JG is integral to MMT as a macro theory. Policy options follows from the macro. As MMT economists have said, you can adopt any aspects of MMT macro as policy options but if you don’t adopt all, including the MMT JG, don’t blame them for MMT “not working.” But that also assert that adopting any of these options will be a step up from not.

            Policy options are neither arbitrary, nor purely normative prescriptions. They involve predication following from causal explanation. Specific policy recommendations follow from and are justified by the macro model, relevant data, and key metrics. So a JG as a general policy option would also involve specific policy recommendation like the actual wage-benefit package, cost-benefit analysis, etc.

            • Cullen Roche March 30, 2012 at 12:56 pm

              It’s become abundantly clear that the JG is an integral piece of MMT. Without it you are not describing MMT. There’s no question about this now. But that was clearly not the case as Warren first described MMT in SCE. He says:

              “There is a very interesting fiscal policy option that is not under consideration, because it may result in a larger budget deficit. The Federal government could offer a job to anyone who applies, at a fixed rate of pay, and let the deficit float.”

              There’s no “integral”. Nothing about essential buffer stocks. He’s very clear that the JG is a “policy option”. So you can see how someone might read the most important piece of MMT literature there is and come away thinking the JG is not central to the theory. The seminal paper on MMT and the one you regularly cite directly contradicts your own statements. Why is MMT so inconsistent about so many things? Why don’t you guys fix this so you don’t come off as misleading?

              • Tom Hickey March 30, 2012 at 1:31 pm

                Warren has explained that ater writing SCE he got together with Randy and Bill and together they worked up MMT as macro theory. After a lot of back and forth over some time, they came to agreement on the project, which Warren provided significant funding for developing, e.g., Randy’s book.

                Warren has a bachelor’s degree in economics and said that he knew little of the historical background underling SCE before becoming involved with Randy and Bill, who filled it in as a macro theory. SCE is a collection of ideas, not an economic theory. MMT is developed from SCE but it is a significant elaboration on it, and a lot has been published on it subsequently, which I am given to understand Warren is in agrement with. As Warren has said, there is no daylight between them. At the same time, Warren usually speaks for himself, and I think rightly regards himself as the originator of MMT.

                One could begin with SCE and develop another theory on top of it, I suppose. Or Warren could have left it at that. But the fact is that he teamed up with Randy and Bill and that’s the direction MMT took and where we are now.

                I agree that Warren is not completely clear on this at times, at least to my mind from things have read. Sometimes he seems to suggest that SCE is MMT and at other times he includes the subsequent development as MMT. He did say that he intuited SCE without knowing the prior contributions in the field that it reflects. Randy’s book fleshed those out. I am led to conclude that Warren sees the fundamental insights of MMT as contained in SCE and the rest is elaboration on that and articulation of what is already implicit.

                So I don’t see there being any contradiction in Warren’s saying that a JG is a policy option in SCE and then later regarding the MMT JG as an integral element in a developed macro theory in that the MMT JG is a significant elaboration on the JG that Warren surfaces in SCE.

                • Cullen Roche March 30, 2012 at 1:33 pm

                  That’s fine, but it doesn’t mean the literature is consistent. It should be fixed because it obviously creates confusion and discredits MMT.

  • beowulf March 29, 2012 at 7:39 pm

    The trouble with ranking production ahead of FE or PS is there isn’t really a solid metric for it. FE metric is easy, U3 unemployment rate as published monthly by BLS. Likewise, for PS we look at the CPI-U rate also published monthly by BLS.

    BEA’s GDP numbers are released quarterly and are subject to more post-hoc revisions than a Star Wars movie. In a weird variation of the Heisenberg Uncertainty Principle, the more out of date the GDP numbers become, the more accurate they become. GDP numbers are released 1, then 2, then 3 months after quarter of record, U3 numbers are released a week after the month of record. Capacity utilization figures (from quarterly Census surveys) are even softer.
    http://innovationandgrowth.wordpress.com/2010/08/19/defense-implications-of-misleading-manufacturing-capacity-data/

    My view is if economy can achieve full employment and stable prices (with the caveat that trade is more or less balanced), then production is one of those things, like the budget deficit and real wage growth, that will pretty much take care of itself. So I’m FE > PS > CAD > Prod.

    • Michael Sankowski March 29, 2012 at 8:12 pm

      Hey, you’re throwing my own “measurability” back at me!

      Nice touch on the CAD btw.

      This is entirely correct. We can’t easily measure current GDP, or any other production statistics. It’s vastly easier to count unemployed people. It’s one of the major strengths of the JG – we know the number of people in the JG.

      “My view is if economy can achieve full employment and stable prices (with the caveat that trade is more or less balanced), then production is one of those things, like the budget deficit and real wage growth, that will pretty much take care of itself. So I’m FE > PS > CAD > Prod.”

      I think this is one issue I/we are trying to get to here. Can we trust the “pretty much take care of itself” to actually take care of itself?

      “Pretty much take care of itself” the assumption I’ve made about production in the past, and its close to what MMT is saying with the “JG and no stimulus” scenario which is sometimes proposed. It’s what the mainstream says about the benefits of price stability.

      I’m just saying if I had my way, I’d at least consider maxing out production and let price stability go to hell and

      1. Deal with the PS consequences though limiting the prices government pays for goods and services and contracting private credit through fed pricing action.
      2. let FE “pretty much take care of itself”
      3. Deal with the CAD through the Buffet plan

      Perhaps this can only last for 10-15 years before it explodes. But we’d get 100 years of growth during those years.

      • Dan Kervick March 29, 2012 at 11:31 pm

        I’m just saying if I had my way, I’d at least consider maxing out production and let price stability go to hell and

        Michael, I don’t really see how you could max out production if price stability went to hell. The whole reason price stability is important in the first place is that when people can’t accurately predict future prices, they lack the confidence to make long-term contracts and expose themselves to price risks. So production inevitable suffers as a result.

        If a society’s productive output is falling short of its productive capacity, I think the question to ask is why that is happening. It seems to me that the major reason is that the society’s distribution of the wages of production has become so unbalanced over time that the foundation of consumers (who are also wage earners) ends up lack sufficient income to finance the earlier level of consumption that full productive employment of the society’s real capital resources would seem to allow. Unemployment both results, and then adds to the problem.

        The solution, I believe is for the public to use the resources at its command to directly hire the unemployed. This delivers income to them to begin to re-stoke the productive engines; and it has the added benefit of putting those people to work doing something productive and socially and economically beneficial right away.

        I also think the employment-oriented approach has an additional benefit or reinforcing the idea of a social contact that emphasizes the work ethic and promotes the concept that social benefits are the reward of social contributions,

        • Cullen Roche March 29, 2012 at 11:34 pm

          “The whole reason price stability is important in the first place is that when people can’t accurately predict future prices, they lack the confidence to make long-term contracts and expose themselves to price risks.”

          An MMTer making the Market Monetarist case. Dear lord. What is the point of all this back and forth? You guys are so inconsistent in your positions that no one could ever keep track of all the changing points!!!!

          • Dan Kervick March 29, 2012 at 11:59 pm

            C’mon Cullen, that’s silly. What I just wrote is standard textbook “Why price volatility is bad” stuff.

            The Market Monetarists are inflationists. They haven’t been promoting price stability at all, but want to use NGDP level targeting to sustain aggregate nominal spending, including engineering catch-up spending when nominal spending falls below the target. In a recessionary environment, the policy’s primary initial effect is to raise nominal spending primarily by raising the price level rather than real spending. But as followers of Friedman they believe in the short-term non-neutrality of money and the stimulative effects of inflation.

            • Cullen Roche March 30, 2012 at 12:28 am

              Well, you’re wrong about that. Here’s Sumner:

              “Price stability worked well up until 2008. When central banks switched to a more deflationary policy we got the severe recession predicted by the Friedman/Phelps Natural Rate model. Monetary policy can prevent this from occurring with level targeting of prices, or better yet, NGDP. Oh, and the tight money also made the financial crisis much worse.”

              If you’re really in favor of stabilizing prices through some change in animal spirits then you should ring up Dr. Sumner because they would be happy to align themselves with you. You guys could combine forces and use your understanding of the Fed as monopolist to alter the yield curve or to purchase municipal bonds to finance state deficits to reach some particular economic target (which would vary according to your definitions, but whatever, same difference). Oh, I forgot. MMT only likes to use the money monopolist argument when it favors their policy agenda. And this approach would validate the QE/MM approach which would be a big bummer for narrow minded Keynesians. So never mind. This thought experiment is not compatible with your politics so it’s no good…. :-)

              • Dan Kervick March 30, 2012 at 6:43 am

                So he now wants some catch-up inflation to offset the deflation and bring aggregate nominal spending up to the trend level.

                People who find proposals of value in the MM theorizing are free to say so. But for me personally I have trouble figuring out how to find anything useful in it. Everything under the sun for them is a “monetary phenomenon” and the measure of economic health is whether some variable – measured on in purely monetary terms – is at some particular value. Worse, they think the the Fed always has the ability to “target” that variable and hit it by executing policies that are entirely within the Fed’s purview. So basically, they think the Fed runs the economy and can achieve whatever macroeconomic outcome it desires.

                Try getting those guys to talk about production and real resources. I once suggested to Sumner that to find out why businesses aren’t hiring, people should do actual empirical research that consisted in part of asking lots of people in the business world why they weren’t hiring. He thought that was the height of absurdity, because according to his bizarre macroeconomic rationalism, the participants in the real economy are always blind the the underlying macroeconomic monetary forces that only the monetary theorist understands.

                • Cullen Roche March 30, 2012 at 9:43 am

                  Well, the Fed can technically do fiscal, but since this doesn’t really fall into the mainstream MMT position and would validate the MM position you guys seem to flatly reject it. I have no idea why, but my guess is rigid politics.

                  • Dan Kervick March 30, 2012 at 9:58 am

                    How can the Fed do fiscal? Only Congress has the power of the purse. The Fed can’t start buying bridges, roads, school buildings and transportation systems – or send transfer payments to random Americans.

                    If they started doing something like this, and members of Congress sat back and let them, I would urge a recall of each member of Congress who refused to put a stop to it, since it would be a clear attack on our Constitutional system of government and a treasonous attempt to shift public spending decisions away from legislative branch oversight and democratic control.

                    • Dan Kervick March 30, 2012 at 10:06 am

                      Also it would hardly validate the MM position. The MMers believe that all that is needed is pure monetary policy and not fiscal expansion. If the Fed usurped fiscal policy from Congress and the executive branch, that would only show that our political system was broken, not that monetary policy worked. If anything, it would vindicate the fiscalist/Keynesian position as a matter of economics. But I wouldn’t celebrate that fact since if Bernanke crossed the Rubicon it would be a sad day for the Republic and the end of the democratic era in America.

                    • Cullen Roche March 30, 2012 at 10:23 am

                      Actually, I’ve been talking to Dr. Sumner and he’s already agreed with my position although it’s not his preferred method of attack.

                      Also, I find it pure comedy that you guys are so in favor of this money monopolist idea yet you cringe at the idea of the Fed “usurping” power. Are you kidding me? So when the Tsy uses monopolist powers to enact policy it’s okay, but if the Fed does it then it’s a big no-no, right? But they’re the same entity, remember? We should condense the govt. So why do you break them up when you talk about monetary policy in this manner? More inconsistencies in MMT? That’s weird.

                      Besides, our entire system is designed to disperse power across various entities, but you guys are all in favor of monopolist powers. It’s like you aren’t even familiar with our form of government and its structural design. But you argue in favor of certain monopolist powers when it suits certain political goals and you shoot down other monopolist powers when they’re not in-line with the overall agenda. You guys want to be consistent for once? Okay, apply your state theory to all money and be consistent about the money monopolist across all money. Create one vertical component and stop trying to tip toe around your true position.

                      I don’t even think you guys understand how deep all these inconsistencies across MMT run. I mean, we’re barely even scratching the surface here!

                    • Cullen Roche March 30, 2012 at 10:19 am

                      The Fed Act allows them to buy corporate bonds and municipal bonds. So the Fed could technically finance state spending in the same way the ECB is doing. That’s an Act of Congress so yeah, they can puff up their chests in retrospect and get all angry, but they already voted to allow this….

                    • Michael Sankowski March 30, 2012 at 1:23 pm

                      QE I was (in part) fiscal policy. The Fed bought non-US Treasury assets.

                    • beowulf April 1, 2012 at 12:48 am

                      1. Exchange rate policy (Ravi Batra’s dual exchange rate plan would grant de facto export subsidies without need of congressional appropriation).
                      2. Creating 13(3) lending facilities to lend to state/local govts or to refi home mortgages at a cartoonishly low rate.
                      3. Using its authority to levy and adjust transaction fees to tighten and then lighten fiscal stance based on economic conditions.
                      4. Placing orders with the US Mint for jumbo platinum coins (which would an example of demand creating its own supply). Wouldn’t actually change fiscal policy directly but may affect it indirectly as it dawns on the politicians that Uncle Sam can’t run out of its own money.

            • Michael Sankowski March 30, 2012 at 10:00 am

              Hi Dan,

              I don’t think economists have done a very good job of exploring the relationship between volatility of inflation level and economic performance. I know this is standard textbook stuff, but in this case, economists are probably using overly complex tools and possibly even approaching the problem(s) in the wrong way.

              The typical method is to use GARCH or ARCH as a way to think about volatility issued raised by Friedman 1977.

              When I looked at these models as an options trader, I thought they were total $%$#@ and unusable even for thinking about what happened in the past. When I showed GARCH/ARCH models to other options traders, they were even more dismissive.

              I know from my investigations of GARCH and ARCH the amount of data required to make these models work properly is gigantic. They required a year of daily volatility data.

              Markov regime switching fared a bit better, but this was so esoteric and sensitive to changes, I didn’t find it useful either.

              I haven’t looked at the ARCH models in the inflation volatility literature because most of the papers are behind pay walls.

              They’ve done a decent job of investigating inflation uncertainty, but even this seems lacking to me.

              And something else I found lacking was an awareness contract formation should be/could be strongly related to NPV calculations. The NPV can sometimes be estimated as 1/discount rate.

              There has been some good investigation of volatility drag in the financial community. It just seems to me the response to Friedman 1977 hasn’t been good enough, and over long enough time horizons, or enough investigation of what happens when interest rates are close to zero due to low inflation level expectations.

              I need to do more research on this. But I think this discussion is pointing out everyone wants Production but Production is hard to measure, so we use proxies like PS and FE to try and get there.

        • Michael Sankowski March 30, 2012 at 6:33 am

          I am pretty sure low-relative-price-volatility matters more than “price stability” meaning zero inflation.

          If we had 10% inflation per year with zero variance in that 10% – meaning we knew inflation would be exactly 10% every year – this would be a superior regime to our current 2% +/- 1% regime.

  • beowulf March 29, 2012 at 9:07 pm

    No no, I’m throwing Orszag’s “measurability” at you (just kidding). I totally agree that we should max out production, I just think you get to the same place by striving for max employment. At the same time, I don’t think PS can be left by the wayside because the Fed (or if not them, Congress) won’t take long to slam on the brakes if inflation heats up.

    I think Bill Vickrey had the right idea. If your goal is full employment, your first task is ensuring price stability without using interest rates or the unemployment line. Whether that’s through tax policy or with Vickrey gross markups market, there has to be anti-inflation policies in place BEFORE the economy starts booming. After all, you don’t wait till you’re thirsty to start digging a well.

    • Cullen Roche March 29, 2012 at 9:27 pm

      Depends on your definition of FE. Do you mean the traditional definition or the definition under MMT? Adhering to the MMT definition would logically align you with MMT. :-)

      • beowulf March 30, 2012 at 10:04 am

        By FE I mean work, not make-work.

    • Cullen Roche March 29, 2012 at 9:31 pm

      Also, it’s easy to create FE. But FE is not necessarily synonymous with FP. There’s nothing in FE that guarantees FP….In fact, MMT research proves that FE won’t optimize output. See the Fullwiler simulation. Hell, I know for a fact that Scott himself has said the JG isn’t enough….

      • Tom Hickey March 29, 2012 at 9:49 pm

        What metric of FP are you using?

        • Cullen Roche March 29, 2012 at 10:21 pm

          Well, the output gap is just one of many ways to measure it. And the Fullwiler simulation doesn’t come close to closing the output gap even though it generates FE. The evidence is pretty cut and dry from that. So it’s very easy to disprove the idea that FE = FP.

          • Tom Hickey March 29, 2012 at 11:02 pm

            FE = FP when labor input is directly correlated with productivity. However, technology releases productivity from that constraint and innovation makes labor input increasingly expendable. Moreover, in an open economy in which lavor is fungible, firms can draw on foreign workers through outsourcing under neoliberalism.

            Use of productive capacity is correlated with effective demand for goods, and effective demand comes from a variety of source, such as income and credit, as well as government and exports.

            That’s why managing effective demand is key according to PK theory, and MMT adopts that macro approach as is starting point.

            • Cullen Roche March 29, 2012 at 11:32 pm

              I have no idea why anyone would debate anything with MMTers. You guys can take factual evidence and just ignore it in favor of your previously stated positions. So let’s just call it quits.

          • beowulf March 30, 2012 at 10:06 am

            You’re presupposing that FE = JG which I would disagree with (don’t let the MMTers get inside your head Cullen). :o)

            • Cullen Roche March 30, 2012 at 10:17 am

              It’s hard to keep all their inconsistencies straight! :-)

    • Tom Hickey March 29, 2012 at 9:41 pm

      Agree. It really is necessary to acknowledge how important FE and PS are politically. They have to be addressed beforehand, or they will be addressed when they are perceived as a political problem. And that is generally not in the best way.

    • Michael Sankowski March 30, 2012 at 10:34 am

      haha! :) I need to go as Orszag for Halloween.

      I’m just trying to make these implied linkages a bit less implied and a bit more out in the open. Maybe at some point someone willl stumble across a really good idea and we can go a bit farther.

      You know I don’t like those inflation markets in general, but that doesn’t mean the idea is “broken”. You mentioned a way to do this through the tax code at one point. And you’ve pointed out using the tax code is the “logical” place to strike at fiscal problems in the first place.

      What was that idea again?

      Because imagine it mirrored(in some ways) the buffet plan, so we’d have similar ideas across two gigantic areas of contention, inflation and the CAD.

      I am pretty sure I could design a market which would be easy to use and largely seen as beneficial by the participants in the market. They would want to participate. (Unlike Scott S’s NGDP futures, for example)

      One thing which hasn’t been proposed is a core-satellite approach like NYMEX has for Natural Gas, where the nat Gas trades one big future, and there is a series of listed swaps against that future for alternative delivery points. It provides liquidity and precision.

      • beowulf April 1, 2012 at 1:06 am

        An excess profits tax was effective anti-inflation tool during both World Wars and is worth considering, as President Wilson advocated, as a replacement for the corporate income tax ( Vickrey’s market is essentially a cap and trade version of an excess gross profits tax). Perhaps you could peg the excess profits (whether net or gross) tax rate to the BLE’s monthly inflation report, say, 21% at 2% inflation, 40% at 4%, and so on.

        As long as the numbers are approximately right, the simpler the formula the better. For political reasons, the easier the operations of an anti-inflation tax is understood by the public the more effective it will be, the economists can save the algebra and fancy algorithms for monetary policy (which after all, is like an elevator whose close button may or may not actually work). More at the link where I go even further in the weeds.
        http://traderscrucible.com/2011/04/21/yglesias-and-mmt/#comment-350

        • Tom Hickey April 1, 2012 at 1:20 pm

          excess profits tax = tax on monopoly rent?

          • beowulf April 1, 2012 at 9:49 pm

            Exactly. Think Lerner Index.

            “The Lerner Index attempts to measure classical market power directly by subtracting a firm’s marginal cost from its price, and then dividing the result by the firm’s price. Lerner ratios range from 0 to 1. Firms that lack market power show ratios close to zero. As the ratio increases from zero to one, it is more likely that the firm possesses significant market power.”
            http://www.ftc.gov/opp/jointvent/classic3.shtm

            • Michael Sankowski April 2, 2012 at 6:06 am

              a quick point

              An excess profits tax would be harder on successful small businesses that you might think. Many small businesses have high profit margins, even though they are not even close to a monopoly.

              • beowulf April 2, 2012 at 4:24 pm

                As I believe I mentioned in the “going in the weeds” link, there’s no reason not to have a broad exemption for small businesses (since if they had monopoly pricing power they wouldn’t be a small business for very long). For larger companies, the added cost of excess profits taxes would be offset by the elimination of corporate income taxes.

  • Greg March 30, 2012 at 8:00 am

    Another question that we could get people to chime in on is ; Should we pay people to produce or Should people produce to get paid? I think this might be at the heart of some of the disagreements in the blogosphere.

    I would say that Austrians firmly believe anyone who can be productive will get paid what they are worth and that without govt interference, everyone will find that which they are best suited to produce and make their living, commensurate with their efforts.

    Others would say that people will be productive if they are well compensated for their efforts. Our current system has many near monopolist markets where workers only get what the “overlord” deems they are worthy of and they are supposed to be happy to get that. To get more they just need to work more.

    I dont think its a simple black and white situation. In many instances where the means of production are essentially in place, someone simply has to be willing to pay someone to produce what is already producable. But there also needs to (and will be) those individuals who will find the ways and means to create something entirely new which will then find a spot in the market and make that person wealthy.

    Both of these dynamics are always operable to different degrees and both must be supported fully in a healthy economy

  • Dan Kervick March 30, 2012 at 11:38 am

    So when the Tsy uses monopolist powers to enact policy it’s okay, but if the Fed does it then it’s a big no-no, right?

    Not the Treasury. The Congress. The Treasury can’t just just spend money unilaterally. It only spends what Congress authorizes. Even if the Exec branch employed coin seignorage, they could only do it to spend under existing authorizations without issuing more debt. The folks who have the currency monopoly are not “the Treasury”. We have it. The public. Our country and people. Our elected representatives can vote any time they want to authorize the Treasury to spend in excess of revenues.

    I find it odd that you don’t understand the difference between a tyrannical usurpation of spending power by an unelected central banker and democratically approved spending from the public treasury.

    • Cullen Roche March 30, 2012 at 11:44 am

      Are you seriously giving me a lesson on how Congress enacts spending? What is the matter with you people? Could you make a more semantic point as you backpedal from ANOTHER mistake of yours? Is there something in the MMT dna that makes you all totally intolerable in the face of criticism? The Fed Act, an act of Congress (or the people as you might correct me later in effort to backpedal out of your previous MANY innacuracies) gives the Federal Reserve the power to buy municipal bonds. That’s really easy to understand. If you want to disagree with it then fine, but you’re just wrong again. Not a little bit wrong. Not questionably wrong. 100% wrong. Definitively. Verifiable wrong. No question. Besides, you guys are already totally inconsistent about this. The Fed is now suddenly separate from Tsy in your argument. Nevermind that they’re the same entity in MMT. Oh, you just break them up when it’s convenient. How nice for you and your totally inconsistent arguments…I have no idea why you guys are so hard headed that you dig your heels in on these blatantly wrong positions and then embarrass yourselves by making these petty and absurd comments. Sometimes you just need to learn when you’re wrong and move on to fight another day. Instead, you die on these molehills….

      • geerussell March 30, 2012 at 12:49 pm

        The issue digresses away from MMT, away from state theory of money and into theory of state. Whether or not fiscal policy should be conducted by the Fed is a purely political question.

        • Cullen Roche March 30, 2012 at 1:05 pm

          No, this decision has already been made. It is an Act of Congress. It’s in the books. Already reviewed and voted on. The Fed can do fiscal if it wants. MMT might not like it and it might not agree with it, but it’s the reality of our world. Who cares anyway? The whole world already thinks the Fed “prints money”. It’s not like the Fed doing this would be a big shocker to everyone who already thinks the Fed prints money and manipulates everything….But you guys reject the monopolist powers in this regard because it’s not compatible with your politics and would do much to justify economic models that you don’t agree with….There’s no theory here. This is our reality. Deal with it and stop trying to create some mythical constraint or alternate reality that fits better into the MMT argument. You guys are totally inconsistent in your positions and here again you’re just splitting up the entities when it’s convenient to push your policy agenda….

          • geerussell March 30, 2012 at 2:42 pm

            There’s a reason I emphasized should is because there’s no disagreement on what the Fed can do. Yes, it can do fiscal policy in all kinds of ways.

            Whether it’s a good idea or not is a political question. Which is why I said the question digresses away from MMT.

            • Cullen Roche March 30, 2012 at 2:56 pm

              It shouldn’t make a difference. If MMT were consistent about the consolidated govt then fiscal would be fiscal whether done by Tsy or Fed. Both are legal and within the monopolist powers that each has. But you guys hate one and love the other….odd. Just another of many inconsistencies.

              • geerussell March 30, 2012 at 3:12 pm

                For the purposes of MMT it doesn’t make a difference.

                Preference for fiscal policy designated by congress and executed by the treasury vs fiscal policy carried out autonomously by the Fed is purely a matter of where you stand on political accountability for that policy. It’s not an MMT-specific issue.

                • Cullen Roche March 30, 2012 at 3:22 pm

                  Well that’s news to me. I’ve never seen an MMTer come out in support of QE or NGDP targeting….Or maybe you all just don’t support these actions by the Fed, which would be odd since they’re both legal and supported by the monopolist thinking. You can see how this appears quite contradictory….

                  The bigger thing to me is your lack of consistency in the monopolist argument. You guys argue in favor of it when it suits your politics and you ignore it or are even against it in some cases when it’s not. Why not take the state theory to its logical extreme and take MMT to its natural base case – one fully vertical component? Why tip toe around it? Is it all just politics?

                  • geerussell March 30, 2012 at 3:41 pm

                    Because those extremes aren’t “logical” they’re policy preferences. The range within which those extremes exist is described by MMT but that’s a completely different thing from requiring a particular stance, extreme or otherwise.

                    A single vertical component is not and never has been an MMT requirement. Even in the Mitchell blog post you frequently refer to in support of your assertion, he prefaces it by saying it’s a personal preference, not part of MMT.

                    Why not acknowledge this fact rather than steadfastly clinging to the demonstrably false assertion that MMT requires one fully vertical component?

                    • Cullen Roche March 30, 2012 at 4:14 pm

                      You can claim that, but even your own people admit that the state theory renders horizontal unnecessary. One need only understand MMT and the state theory to understand its logical conclusion….Either way, this is no excuse for being so inconsistent in the monopolist powers. But you guys pick and choose where it suits your politics. It’s not operational at all. It’s all politics. And that’s been my big beef from day one….It just took me a while to connect all the dots.

  • Paul March 30, 2012 at 4:07 pm

    Cullen Roche
    No, this decision has already been made. It is an Act of Congress. It’s in the books. Already reviewed and voted on. The Fed can do fiscal if it wants. MMT might not like it and it might not agree with it, but it’s the reality of our world. Who cares anyway? The whole world already thinks the Fed “prints money”. It’s not like the Fed doing this would be a big shocker to everyone who already thinks the Fed prints money and manipulates everything….But you guys reject the monopolist powers in this regard because it’s not compatible with your politics and would do much to justify economic models that you don’t agree with….There’s no theory here. This is our reality. Deal with it and stop trying to create some mythical constraint or alternate reality that fits better into the MMT argument. You guys are totally inconsistent in your positions and here again you’re just splitting up the entities when it’s convenient to push your policy agenda….

    Cullen,

    Would you point me to the section of the FRA that authorizes this type of action?

    • Cullen Roche March 30, 2012 at 5:15 pm

      Section 14 of the Fed Act:

      “To buy and sell, at home or abroad, bonds and notes of the United States, bonds issued under the provisions of subsection (c) of section 4 of the Home Owners’ Loan Act of 1933, as amended, and having maturities from date of purchase of not exceeding six months, and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, district, political subdivision, or municipality in the continental United States, including irrigation, drainage and reclamation districts, and obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof, such purchases to be made in accordance with rules and regulations prescribed by the Board of Governors of the Federal Reserve System. Notwithstanding any other provision of this chapter, any bonds, notes, or other obligations which are direct obligations of the United States or which are fully guaranteed by the United States as to the principal and interest may be bought and sold without regard to maturities but only in the open market.
      To buy and sell in the open market, under the direction and regulations of the Federal Open Market Committee, any obligation which is a direct obligation of, or fully guaranteed as to principal and interest by, any agency of the United States.”

      • Paul March 30, 2012 at 8:11 pm

        How would this section of the FRA allow the implementation of fiscal policy when the term to maturity is restricted to six months or less? Maybe I’m missing something…

        • Cullen Roche March 30, 2012 at 8:30 pm

          Why would that matter? They can just keep buying the debt when it matures and keep funding new projects, etc.

  • wh10 March 30, 2012 at 5:25 pm

    I don’t want to get in on the ongoing argument, but on a related topic, does this mean that even US states aren’t really like the revenue-constrained states we always talk about? In other words, they’re just like the Fed Govt, because their bonds also have the backing of the Fed?

    The thing that makes me doubt this is the phrase “issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues.”

    • Cullen Roche March 30, 2012 at 5:47 pm

      I don’t think CA bond owners are genuinely worried about not getting paid…And rightfully so. It would be a catastrophe if the state of CA went under….But that doesn’t mean they’re not a currency user….

      • wh10 March 30, 2012 at 6:01 pm

        Why though? I was under the impression the US states aren’t currency issuers ultimately because they don’t have a central bank, with unlimited printing ability, to back their debt. But if they did, which this legislation makes it seem potentially, then they are practically currency issuers. It’s not like the US Treasury spends first without constraint; it does have to have a positive balance in its account, either through taxes or bonds, but that is no matter because the Fed is there backing US tsy bonds.

        • Cullen Roche March 30, 2012 at 6:03 pm

          Why didn’t AIG bonds go to zero in 2009? I bought loads of them. Why? Because the govt said “fully guaranteed by the USA”. It’s the same thing. Give bond buyers the confidence to stay in a market with implicit backing and that’s all they need. That doesn’t make AIG a currency issuer. The same implicit backing applies to states. And if you ever see yields on CA debt skyrocket then buy those bonds hands over fist and we’ll spend the rest of our lives fishing together. :-)

          • wh10 March 30, 2012 at 6:14 pm

            Haha- sounds great. I might bring my dad if you don’t mind. He can share his fishing wisdom, although of course, everyone thinks they know the special secrets and tricks to doing fishing the right way :).

            • Cullen Roche March 30, 2012 at 6:28 pm

              Well, being the OCD freak that I am – I created this chum mix out here that absolutely drives the fish mad. Not saying it’s the best thing in the world, but last time I used it we hauled in about 40 fish in 2 hours….Hoping for warm waters from Mexico this year….If so, you guys won’t be hearing much from me. :-)

              • wh10 March 30, 2012 at 6:32 pm

                Dude I’m ALL about the chum! That’s pretty incredible though. Cheers!

                • Cullen Roche March 30, 2012 at 6:38 pm

                  If you’re ever in San Diego you can buy the beers and I’ll supply the boat and rods. Gotta catch your own fish though. :-)

                  • wh10 March 30, 2012 at 8:34 pm

                    Sounds like a deal!

  • geerussell March 31, 2012 at 12:01 am

    Cullen Roche
    You can claim that, but even your own people admit that the state theory renders horizontal unnecessary. One need only understand MMT and the state theory to understand its logical conclusion…

    A country could have state money with a fully vertical system. A country could have state money with a tiny vertical and mostly horizontal. A country could fall anywhere between those extremes. Those are political choices idiosyncratic to each individual nation.

    MMT doesn’t attempt to dictate those political choices, it offers a framework to understand the outcomes.

    Either way, this is no excuse for being so inconsistent in the monopolist powers. But you guys pick and choose where it suits your politics. It’s not operational at all. It’s all politics. And that’s been my big beef from day one….It just took me a while to connect all the dots.

    The concept of monopolist powers applies at the level of the State without consideration for how the institutions are arranged within that State.

    MMT describes the policy space that state money allows. What a given country chooses to do within that space is a political decision.

    So when you look at a political discussion over which institution within a State is a better option for exercising fiscal policy and claim you found some inconsistency in MMT, you’re wrong. MMT doesn’t dictate how the political system must be arranged.

    • Cullen Roche March 31, 2012 at 2:41 am

      MMT absolutely does try to dictate these decisions. T Hickey just reminded us that MMT can’t be blamed for anything until their policies have all been implemented…..So MMT isn’t even applicable until these policy decisions have been dictated….what?

      But why would I bother trying to change your minds? You guys wouldn’t change your minds no matter what….

  • Tom Hickey March 31, 2012 at 11:46 am

    Cullen, the basis of the rule of law, which distinguishes civilized society from barbarism and tribalism, is the social compact giving the state a monopoly on the use of violence in settling disputes, instead of individuals and clans resorting to honor killings, blood feuds that last generations, and vigilantism. Admittedly, the logical extension of this power is totalitarianism. Civilized societies therefore impose limits on the state’s monopoly power through laws and institutional arrangements in order to guard against this.

    It does not follow that because the state has a monopoly on currency issuance, the logical extension of that power is a purely vertical system, anymore than a state’s monopoly on violence necessarily implies totalitarian repression.

    The notion that states possessing such monopoly powers leads down the road to serfdom is an assumption held by anarchists on the left and right. There is, of course, a danger in such powers, and that is why there are constraints imposed, like constitutions, laws, courts, and balance of powers within the government in modern representative democracies. In modern democracies there are political processes in place for determining the mix of public and private and restraining govt overreach. They don’t always work perfectly, but so far this is the best system that humans have devised to govern large groups that are heterogeneous, asymmetrical, and complex.

    There are always trade-offs. Civilized people have been willing to put up with some state excess in order to avoid the consequences that history documents concerning other systems of governance, which we are stil seeing demonstrated graphically in some parts of the world. But the real question in my view (not MMT) is given recent events why do we continue with the vertical-horizontal system as it is? The institutional arrangements are perverse.

    • Cullen Roche March 31, 2012 at 12:54 pm

      Well, I disagree with a lot of that including the myth that the state has a monopoly on violence, but it doesn’t matter. MMT is inconsistent about the monopolist powers for political purposes. Even you’ve admitted that the state theory renders the horizontal unnecessary, but let’s take your word for it (and ignore Mitchell’s calls for bank nationalization) and just say the vertical isn’t the logical endgame for MMT. You guys are still inconsistent about the use of this mythical money monopoly.

      • JK March 31, 2012 at 4:42 pm

        It seems there is a difference in the way each of you define the word monopoly. Whatever that difference is, because the money monopoly debate is heated, it may be easier to flesh out using the state’s (real or supposed) monopoly on the use of force/violence.

  • geerussell March 31, 2012 at 11:31 pm

    Cullen Roche
    It’s not about how you see it. It’s about the facts. And the facts from the Fullwiler simulation clearly prove that you guys are wrong about this. You’re vastly overstating the effect of the JG as a liquid buffer stock and a transfer job. In fact, the JG doesn’t prove to be much of a liquid buffer stock at all when compared to regular pump priming as the Fullwiler simulation clearly shows. In fact, the JG just barely outperforms the stimulus package on a dollar for dollar basis in terms of pvt job creation.
    The evidence there is pretty cut and dry. So sure, you guys can cite less than 30 million if you want, but it’s still going to be a huge number….But to keep you all happy I’ll use 27MM in the future. Wouldn’t want Geerussell to feel like he didn’t embarrass himself by throwing down the gauntlet tonight. Call me generous.

    You’re dancing back and forth from the Wray quote to the Fullwiler simulation. For consistency’s sake, it would help if you decided on which one you’re going to use as your JG “scare” number. The range of JG employees in Q4 2010 in the Fullwiler simulation is between 13 and 15.7 million depending on whether you include stimulus, holiday or JG alone.

    Now 13-15.7 is a far cry from 27 so again I have to ask what assumptions are you making for the JG “scare” number you use?

    • Cullen Roche March 31, 2012 at 11:40 pm

      Yes, I am now “dancing back and forth”. Actually, I am using the comments made by MMTers and the factual data showing that had the JG resulted in 30 million jobs as Wray implies then roughly 3 million of them would have been pvt jobs. It’s simple to compute and it’s based on quoted statements and simulations by MMTers. If you want to say I am misconstruing things then fine, but I am not.

      I see where this is going and it’s precisely nowhere. I’ll continue to use the figures I’ve always used because those are the ones provided to me by MMTers. Thanks.

      Btw – disappointed to see that you’re adding yourself to the list of MMTers who frequent this site and can now be pinpointed as trolls. You were generally well behaved until the last few days when your comments became increasingly inflammatory.

      • geerussell March 31, 2012 at 11:55 pm

        Yes, dancing back and forth. You’re combining the multiplier from Fullwiler’s simulation with the upper bound from Wray’s quote in order to produce the biggest, scariest number you can.

        On what basis do you ignore the drastically lower JG employment figures from Fullwiler’s simulation?

        On what basis do you apply Fullwiler’s multipler to Wray’s quote? Wray didn’t specify how that number breaks down.

        Also, there’s this, which is kind of incoherent but keeps getting repeated:

        the JG doesn’t prove to be much of a liquid buffer stock at all when compared to regular pump priming

        Define liquidity. When Mosler described JG as a more liquid buffer stock, he described it in terms of fitness for work. Comparing a stock of UE vs a stock of JG, a currently employed worker is more readily employable than one who is unemployed. Liquidity in the sense that it might be used for an asset, how readily can you sell or convert it.

        Can you clarify whether you A) have some personal definition of liquidity of your own construction or B) believe that unemployed people are more employable than unemployed?

        • Cullen Roche March 31, 2012 at 11:59 pm

          You’re just trolling. Good night. Next time I won’t warn you.

          • geerussell April 1, 2012 at 12:12 am

            If you consider it trolling, then I respectfully apologize. My intention was to get into the details behind a claim to shed light on the facts and I think my posts acquit themselves well in that regard. Goodnight.

            • Cullen Roche April 1, 2012 at 1:27 am

              Your comments, like those of a few other readers, have fallen under a pattern of only responding to others when you feel the need to defend MMT. The pattern in these comments is a repeated almost robotic like response of well known MMT positions. It’s almost like some of you have been programmed or paid to go out into the blogosphere and repeat these points to bolster MMT’s reputation or something. You generally do it respectfully, but many of you do it in an inflammatory and nasty manner. Many of the worst offenders are here on a regular basis and have made it a daily ritual to trash me or repeat chapters from the MMT bible in an almost nauseating manner….

              If you want to eternally defend MMT then fine. But don’t troll this site doing it. Start your own site or go to one of the many MMT sites and voice your opinion. I’ve done nothing in my comments to misrepresent MMT comments or misconstrue what they’ve said. If you’re upset that I am taking their comments to prove my point then you should tell MMTers to be more careful in their terminology. Unfortunately, MMT is so inconsistent about things and so vague in terminology that it’s pretty easy to take their comments and use them against them in easily proven points. But again, this is not my fault. It is MMT’s fault. So please don’t come here trolling and accusing me of fear mongering when all I am doing is quoting MMTers verbatim. Thanks.

  • AK March 31, 2012 at 11:31 pm

    Cullen Roche
    It’s not about how you see it. It’s about the facts. And the facts from the Fullwiler simulation clearly prove that you guys are wrong about this. You’re vastly overstating the effect of the JG as a liquid buffer stock and a transfer job. In fact, the JG doesn’t prove to be much of a liquid buffer stock at all when compared to regular pump priming as the Fullwiler simulation clearly shows. In fact, the JG just barely outperforms the stimulus package on a dollar for dollar basis in terms of pvt job creation.
    The evidence there is pretty cut and dry. So sure, you guys can cite less than 30 million if you want, but it’s still going to be a huge number….But to keep you all happy I’ll use 27MM in the future. Wouldn’t want Geerussell to feel like he didn’t embarrass himself by throwing down the gauntlet tonight. Call me generous.

    Who is overstating anything? You keep implying that the JG is some alternative to stimulus. It’s not. The simulation clearly showed that a JG combined with adequate stimulus measures has a positive effect. Which is what MMT says.

    • Cullen Roche March 31, 2012 at 11:44 pm

      The stimulus performed in-line with the JG. Ie, it didn’t add anything more beneficial. But whatever, this is a dead end conversation. This is like trying to argue with religious zealots. It’s totally pointless.

      • AK April 1, 2012 at 5:01 am

        I find it disappointing that you seem not to want to engage in reasonable debate about these points any more (which ironically, is what you accuse MMT of).

        And it’s not even like we are saying the same thing every time – every debate covers at least some new ground.

        Anyway, it’s your site, so I’ll leave this debate peacefully.

        • Cullen Roche April 1, 2012 at 11:54 am

          What is the point AK? You guys are set in your ways. So what happens is I say something you don’t like, then you make some semantic point (like 27MM vs 30MM), accuse me of lying, pat yourselves on the back for nothing and then attack the next point in the same way. The thing is, MMT is incredibly rigid. There is no gray area. There is the MMT way or the highway. I’ve shown clearly, using MMT’s own evidence, that 30MM jobs would result in roughly 3MM pvt sector jobs and would leave a MASSIVE govt bureaucracy at work. Even if you want to claim I am being dramatic using the 30MM figure then let’s use Fullwilers 16MM and 1.73MM pvt jobs. Is that not enormous? Yes, it is enormous. There are currently 22MM govt employees and MMTers have the balls to come in here and claim that increasing that by 75% is not a lot? Are you kidding me? Give me a break. We could do this all day and I could make fact based points and you guys can point to ideology all day long and we’ll get nowhere. So let’s just cut the BS from now on and call you guys what you are – trolls. If you want to actually debate and you’re open to reasonable positions then maybe you’re different than some of the others. But there are 5 or 6 commenters here who I see a pattern in. So be prepared in the future. If you troll this website pushing some nonsensical MMT ideology then I’m going to shut you down for trolling. If you are flexible and open minded in your positions then let’s debate. But don’t take my quotes from MMTers and throw them in my face accusing me of lying or misleading. That’s just MMTers being intolerable.

          • AK April 3, 2012 at 8:52 am

            Don’t remember doing any of that.

            You keep presenting selections of blog opinions as the definitive text on MMT. That’s just not the right approach. Given a long enough time scale everybody will make careless and badly contextualised statements, and yes, some plain wrong statements too. This is magnified in non peer reviewed writings such as blogs.

            You can keep pointing to those occurrences as evidence that the entire theory is “wrong”. Or, you can view the body of work as a whole, in which case it would be patently obvious that if MMT were applied, the jobless figure should be far below 30 or 13 million due to fiscal adjustments, before we even think of a JG.

            I’m not asking you to agree with me, or with the idea of a JG. I’m asking you to engage with the statements I make, based on the body of MMT literature as a whole, rather than snippets of other people’s blogs.

            Lastly: refusing to change my position is not an exercise in religious fervour. Quite simply, i just haven’t yet been convinced by any of your core arguments against MMT. And whilst you continue to invite debate by specifically mentioning MMT in your blogs (which is a good thing) i dont think its at all “trolling” for me to respond. Debate is always fruitful. I gather that you may not share that opinion, which is a shame.

            • Cullen Roche April 3, 2012 at 11:38 am

              Okay, you’re doing what MMTers always do. I don’t know why you guys are so extreme in all your views. A little balance and flexibility would help in a lot of ways. I didn’t say I was trying to prove the entire theory wrong as you claim. That’s extreme and totally wrong. I am probably 75% on board with MMT. But I do find that other 25% troublesome. And they’re not minor things. We’ve seen persistent inconsistencies in the thinking and rationale behind MMT. You abuse language to push a point (like the saving debates or the use of net financial assets). Your own research proves the JG isn’t a liquid buffer stock or a growth tool, but other research claims it is. You claim we live in a state money system, but you guys don’t even have a single definition of “money” to work from so your language on this is all over the map with some people claiming that debt isn’t even money (which is really a flabbergasting statement) but still using the term “money monopolist”. You pick and choose when the govt gets to be a monopolist and when it doesn’t despite claiming that monopolists should be price setters because “that what they do” (probably because Keyesians hate monetary policy and love fiscal). You claim to care about production, but the research is so heavily skewed towards the JG (which doesn’t optimize production according to the JG research) that it’s impossible to conclude anything other than MMT is geared towards full employment first and everything else second. You separate Fed and Tsy when you need to make a political point, but you combine them when you need to make an operational point (what?). There are a ton more of these inconsistencies and they’re not minor points. They’re big gaping holes across 20 years of research. If someone were to organize them all and lay them out it would really be a big problem for MMT.

              Personally, I am not here to debunk MMT. Doing so only makes my life a lot harder because then I am on the receiving end of the same sort of nonsense that I am trying to get you guys to cool your jets on (like calling Krugman an idiot in every other comment on his website). And since I consider myself a Moslerian I really have no intention of trying to debunk MMT. I’ve been trying hard to simmer down the tone of these discussions. Something I’ve been trying to do since day one of these debates. But the MMTers are practically rabid in their attacks. It’s great that you guys are passionate, but at some point it’s just self defeating. Like when you come here accusing me of lying and claim a big (pyhrric) victory over getting me to change my stance from 30MM to 27MM. This sort of stuff burns bridges. And for what? So you could try to claim that you’re never wrong? Man, what a misguided approach.

              I’d love to help you guys out. And my advice to you all would be to try being a bit more open minded and reasonable in debate. Don’t call people names and try to stick to the facts. Don’t just regurgitate what you read in some MMT literature. Consider that your opposition might actually be right for once. MMTers don’t have all the answers to everything. Try to form bridges with people and not burn them. People want to know how I’ve amassed a million monthly readers on Pragcap in the first 18 months I was running the site? I’m reasonable. That’s how. I admit when I am wrong. I keep an open mind. And I hug up to even those who I disagree with. This is life and business. If you don’t get these points about relationships, society, networking, etc then you might as well go live in a cave. Money is a social construct and your ultimate form of currency is your ability to get your PERSONAL CURRENCY accepted by others. MMT is failing miserably in this regard right now and has for 20 years. I was a big boost to MMT because of my approach. But you’ve burned that bridge. Ironically, this is all happening because MMTers don’t live what they preach about money being a social construct….Just another inconsistency among many.

              • geerussell April 3, 2012 at 1:17 pm

                Like when you come here accusing me of lying and claim a big (pyhrric) victory over getting me to change my stance from 30MM to 27MM.

                Just be clear, I don’t believe you lied about, well, anything. Nor do I seek to claim a victory (big, small, pyhrric or otherwise. I’m fine with being wrong, it’s an opportunity to learn something… from you… which would be nothing new as I’ve learned a great deal reading your material in general.

                I do happen to disagree on facts and framing wrt some of the topics you mentioned but hopefully that’s a basis for constructive discussion. If there are gaping holes in MMT or in a particular critique of MMT, laying them out for examination is a win-win when it’s done constructively.

                • Cullen Roche April 3, 2012 at 1:35 pm

                  This is important. Now, I am being overly hard on a few of you who haven’t done much (if anything wrong), but I am realizing that the problem with MMT discussions is so pervasive that painting with a broad brush is necessary. The latest Krugman debate is a perfect example of what you guys do. You try to bulldoze your competition with inflammatory rhetoric. This distracts from the entire point. Just look at what’s happened. Krugman didn’t even consider you guys right for a second. Why? Because he started reading the tone of the comments and got turned off. And my guess is he’ll think twice about mentioning Keen or MMT ever again. That’s a huge loss. Krugman is 90% on our side. And MMT burns a bridge with him over what? A basic misunderstanding of banking? Sure, it’s a big deal. He should know this stuff and he should take the time to understand it. But we need to hug up to him and get him to embrace our position. Not write snide comments and posts which basically call a Nobel prize winning Princeton professor an idiot. And yes, it does matter that Paul Krugman has achieved a great deal (whether anyone agrees with it or not). He has nothing to lose. MMT has everything to lose.

                  Anyhow, I am sorry to come down on you so hard, but this is becoming a real problem. I know first hand having been on the receiving end of it so much. You guys need a new approach. Try to build bridges and stop burning them because at this point MMT is becoming more and more isolationist every day. And yes, I need you guys to succeed because even though we disagree on some stuff we’re still all heterodox looking in….We’re on the same team whether we want to like it or not. So if you guys go down in flames because you can’t make friends then it makes MMR’s existence that much hard. We’re all Mosler Monetary Theorists. So let’s do it like Mosler does it….With respect, courtesy and by staying on point!!!!

                    • Cullen Roche April 3, 2012 at 2:08 pm

                      Here’s Keen doing the same thing. http://www.debtdeflation.com/blogs/2012/04/04/krugman-apologises/

                      Krugman stopped reading this stuff days ago. It’s now just a circle jerk of heterodox thinkers piling on….This was a big opportunity missed. Warren should have responded on behalf of MMT and he should have been the ONLY one. You’ll notice that Mark Thoma is also involved. That dude should be 100% on our side. Instead, he’s taking the sides of the monetarists! Talk about burning bridges. Geez. How did MMT not win over PK and Thoma. They should have been slam dunks.

                    • Tom Hickey April 3, 2012 at 2:28 pm

                      Cullen: “You’ll notice that Mark Thoma is also involved. That dude should be 100% on our side. Instead, he’s taking the sides of the monetarists! Talk about burning bridges. Geez. How did MMT not win over PK and Thoma. They should have been slam dunks.”

                      Easier said than done. Some time ago, Bill Mitchell agreed to a debate with Mark Thoma and the Mark rejected it publicly on his blog, saying that talking to someone who rejected the money multiplier was just a waste of his time. These guys are tough nuts to crack, and the only way to “play nice” with them is to agree with them, at least as far as they are concerned.

                      Agree that pissing them off is a probably counterproductive though.

                    • Cullen Roche April 3, 2012 at 2:34 pm

                      Tom,

                      You’re generally very good with this stuff so take the lead on this since you’re active on other sites. Beat people with facts. Avoid the nasty rhetoric and even suck up to guys like Krugman and Thoma if you have to. Krugman’s a Nobel Prize winner. He doesn’t need us. He’s used to being praised for his genius even if you don’t think it’s genius. That’s just the way it is. You have to remember – we’re on the outside looking in. Demanding that we be allowed in doesn’t cut it. You’ve got to win people over and sometimes that involves being excessively nice. You don’t have to be fake, but keep in mind that these guys don’t need to give you a seat at the table. And in order to get a seat you’re going to need to give them something they need. Stroking their egos and sticking to the facts is probably your best bet. Thoma and Krugman are probably lost causes at this point. Thoma f$cking hates MMTers. But it’s worth keeping in mind for the future. Burning bridges through inflammatory rhetoric is really setting us all back. MMTers need to tone down the attack dog approach.

                      This is a really good teachable moment. Now, it might be too late for the MMT reputation, but it’s not too late to start trying to change it. But it will take even more time and effort now.

                      Cullen

                    • Tom Hickey April 3, 2012 at 2:46 pm

                      One of the problems is that economists have little control over their advocates on the blogs, and probably most damage is the result of excessive zeal in proselytizing . The prominent economists get hit by a barrage of zealots of different brands everyday. I will say that the Austrian-Libertarian fanatical types tend to be the most persistent and annoying though.

                      I have tried to engage Thoma on occasion and he has responded to some of my comments. He has actually moved a bit forward in my view, although not a whole lot.

                  • AK April 3, 2012 at 7:35 pm

                    Sorry but that is where I disagree entirely. Painting with a broad brush is never necessary and lumping in opinions as “you guys” is also not necessary or productive. When you respond specifically to my points, as you do most of the time, the debate is fruitful and enjoyable. When you begin to talk about the gripes you have with a bunch of other MMTers and overlay them on to my debate, the discussion becomes rather pointless because it is no longer a response to what I actually said.

                    The above debate would have been a lot more fruitful if you engaged with my point that, despite Wrays blog post, a JG would never apply to anywhere near 30 million people if fiscal operations work as MMT intends. But unfortunately we couldn’t get to that point without first talking about how some internet posters seem not to be able to engage in persuasive debate which, although probably correct, is not the point I am here to debate.

                    • Cullen Roche April 3, 2012 at 8:46 pm

                      You were making a semantic point. The Fullwiler sim uses 16 million. So let’s erase that whole conversation and start there. It’s still a humongous program so this whole conversation was never going anywhere….The reason this annoys me is because you guys are picking out comments of mine to claim I am misrepresenting MMT when the reality is that this is not remotely true. I just used the biggest figure I’d seen to date because it’s what MMT says. There’s no point in my using 0 for my JG argument is there? But fine, you want to use a smaller number so let’s use 16MM. That’s a 75% bump in govt employees. Sell that to Congress as “small”. Even the Democrats will laugh in your face….See my point and why this is all so frustrating? You guys aren’t arguing rational points. You’re just arguing for the sake of it with no real rational basis to back it up….

                    • AK April 3, 2012 at 9:48 pm

                      16 million was approximately the number of unemployed in the United States at the peak of this crisis. So to say that 16 million is the number that the JG intends to employ would still require you to ignore the effects of the fiscal adjustments that MMT has been calling for from day one.

                      Also, since when did anyone ignore the practical difficulties of getting a JG through Congress? Everyone knows its nearly impossible in the United States and will probably not happen any time soon.

                      But so what? Does that mean we just stop talking about everything that is politically impractical? One point that MMT and MMR agree on is that the USA needs a large stimulus at the moment in some form; what’s the chances of that passing Congress? Near zero. Should we stop talking about that too?

                    • Cullen Roche April 3, 2012 at 10:00 pm

                      16MM is the number Fullwiler provides. Not me. So it’s 16MM with 1.73MM pvt sector jobs created through the JG. They’re huge numbers no matter what. This is not even my data….I’m not sure what you’re getting at. You’re just being difficult for no reason.

                    • AK April 4, 2012 at 12:03 am

                      Why should I have to agree with Scott’s choice of 16 million (used for the purpose of a simulation) as the final set-in-stone figure that the JG is supposed to employ at all times?

                      You keep engaging with snippets of other people’s statements and assumptions rather than mine.

                    • Cullen Roche April 4, 2012 at 12:16 am

                      You don’t have to agree with anything. You could create a mythical JG on Mars that employs nobody. I don’t really care. All I did was take a simulation by an MMTer from the most recent crisis and use it to provide evidence of a real-life example of how the JG might work. It’s about as close to empirical evidence as we have on this matter since the JG has never been implemented in real-life. I know the conclusions don’t support your politics, but that’s just something you’re gonna have to deal with. You attacked my referring to the JG as huge. The evidence and commentary from MMTers supports my comments. So I have no idea what you’re trying to achieve here other than being difficult and generally arguing in the same stubborn manner that makes everyone despise MMTers.

  • Ramanan April 1, 2012 at 1:55 pm

    Cullen,

    Good points on rigidity. Same view as mine. Another example where I see this rigidity is the external sector and official intervention in the currency markets by the Treasury and/or the central bank. In MMTers view this shouldn’t happen because it spoils the virginity of pure float. But official intervention is regular and this is not out of choice but help markets clear.

    Monetary sovereignty – as figured by British Keynesians – when Maastricht Treaty was proposed is a right concept but the MMT concept is too rigid and hence incorrect. Most countries do not even qualify for that. Very few who do not intervene regularly do it sometimes – for example have debt denominated in foreign currency. So there are not really pure virgins but have kissed sometimes. And the few who have the power really are advanced nations because of their industrialization and production capacity. Some such as Japan are even big creditors of the rest of the world.

    Somehow I see them holding same dogmas as Jean Claude Trichet.

    • Cullen Roche April 1, 2012 at 2:10 pm

      Very good points Ramanan. MMT loves to use the USA example in order to prove points. But you and I know the USA is a rather exceptional case in many ways and so doesn’t fully apply. They’ve built one neat little packaged theory and try to fit this square peg into all the round holes in the world. Economies are more dynamic than this though. It’s bizarre that MMT doesn’t support FX intervention because it can add NFA’s in what is essentially a form of fiscal policy by the central bank. If MMT were consistent with their consolidation of the Fed and Tsy then this wouldn’t bother them, but I presume it bothers them because it just doesn’t fit into their policy agenda which flows through traditional fiscal policies, ie, govt spending.

    • Tom Hickey April 1, 2012 at 2:46 pm

      Speaking for myself here rather than MMT, my concern is over central banking assuming a command role in the economy. This is both anti-capitalistic and anti-democratic when central banks are made politically independent and control over their policy is in the hands of a small group of interested people who are unelected and unaccountable. Interest fate setting is bad enough, but conducting fiscal policy is even worse, in my view. Once a command system is in place, then what are the limits on its creeping into full control? We are seeing the result of this in the EZ, which for all intents and purposes is operating under a command system run by the ECB and the Eurocrats that control it, with predicable results.