tag:blogger.com,1999:blog-2277215496195926573.post7416584017786602644..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Bill Mitchell and the Job Guarantee.Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-2277215496195926573.post-88217794590751706672013-11-08T03:17:06.574-08:002013-11-08T03:17:06.574-08:00I prefer the concept of "bottlenecks" to...I prefer the concept of "bottlenecks" to NAIRU, but its essentially the same idea. So yes to all your points!KongKinghttps://www.blogger.com/profile/10992633301481631373noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-73638162506004311592013-11-08T00:22:42.120-08:002013-11-08T00:22:42.120-08:00Hi King Kong,
I’ll take your points in turn.
You...Hi King Kong,<br /><br />I’ll take your points in turn.<br /><br />You say “some prominent MMT gurus seem to have largely abandoned truly Keynesian remedies for general unemployment. Instead of Keynesian aggregate demand management, some MMT gurus say "we do not favor “pump priming”, old-style, Keynesian aggregate demand stimulus in most situations.”<br /><br />I agree that some prominent MMTers are confused as to when standard Keynsian AD increasing measures are appropriate, and when JG is appropriate. The basic principle here is extremely simple: when unemployment is above the “natural level” or NAIRU or whatever you want to call it, Keynsianism is the best measure for reducing unemployment (down to NAIRU).<br /><br />Having done that, JG has to potential to reduce unemployment even further (even, in principle, to near zero).<br /><br />Of course – statement of the bleed’n obvious coming up – it’s impossible to know exactly what level of unemployment corresponds to NAIRU. However, it’s important at least to get the THEORY right, even if putting a theory into practice is difficult in the real world.<br /><br />Put that another way, Randall Wray’s claim that JG is preferable to Keynsianism “in most situations” is wide of the mark. He should have said: JG is preferable to Keynsianism at NAIRU.<br /><br />Next, and re your claim that JG results in a DISINCENTIVE to move to more productive work, it certainly CAN DO if the pay and conditions on JG are attractive enough. And that needs to be avoided. In fact Lars Calmfors and me about 20 years ago tumbled to the fact that the latter point makes a workfare element in JG unavoidable (By workfare I mean “do this job else your benefit gets cut”).<br /><br />Reason is that if people are VOLUNTARILY attracted to JG, the attractions for them of productive REGULAR jobs are reduced, which has the undesirable effects you refer to. Calmfors called that his “iron law of ALMP”: a law which is beyond the comprehension of MMTers, far as I can see.<br /><br />Re your last paragraph, where you seem to argue that JG is beyond redemption, I don’t agree. As I pointed out above, it CAN BE worse than useless. But if it contains a workfare element (which is actually incorporated in the UK’s Work Programme and other similar programmes in the past), then I think JG has potential, at least in principle. Of course it’s always possible that IN PRACTICE, the administration costs exceed the output of JG employees, in which case the whole idea becomes very questionable.<br /><br /><br />Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-20696271949976074682013-11-07T22:29:25.562-08:002013-11-07T22:29:25.562-08:00This is a very important subject because some prom...This is a very important subject because some prominent MMT gurus seem to have have largely abandoned truly Keynesian remedies for general unemployment. <br />Instead of Keynesian aggregate demand management, some MMT gurus say<br />"we do not favor “pump priming”, old-style, Keynesian aggregate demand stimulus in most situations. We prefer targeted policy. A case in point is the job guarantee/employer of last resort program, which sets a fixed wage to COUNTER the fact that bottlenecks exist in many markets and as an alternative to traditional Keynesian pump priming precisely because of problems associated with bottlenecks." - L Randall Wray http://neweconomicperspectives.org/2011/06/mmp-blog-1-responses.html<br /><br />This argument seems to confuse general unemployment with structural problems in the economy. <br />True, Keynesian demand stimulus is constrained by bottlenecks as full employment is approached. <br />But JG does nothing to increase labour supply or capacity in bottleneck industries or areas.<br />To the contrary, JG would tend to exacerbate structural problems. It would create largely unproductive or unprofitable JG jobs in areas with declining industries. This would tend to reduce the incentives to labour and capital to migrate to "bottleneck" areas and industries where they are needed.<br /><br />Superficially JG creates "full" employment. <br />In reality JG = employment misallocated into unprofitable declining industries/areas <br />= concealed unemployment = bottlenecks to economic growth.<br />KongKinghttps://www.blogger.com/profile/10992633301481631373noreply@blogger.com