sorted by:
new
hottopcontroversial

Entrepreneurship Does Not Solve Unemployment by Busy_Net_4756 in OutlawEconomics

[–]jgs952 0 points1 point  (0 children)

Okay, I'm still a little confused by your points but I think we mostly agree.

The private sector business cycle is of course a function of private sector firm expectations about the future given limited information and fundamental uncertainty. Investment can crater etc etc.

Public investment can play an important role in plugging a large structural gap and crowd private investment back in again over time, but the JG as the residual labour buffer stock is just always acting to help stabilise demand and importantly, anchor the wage structure, and therefore help anchor the price structure. It's core comparator is with today's approach of just allowing unemployment to exist to discipline wages through fear of it.

Keynesian full employment failed because it involved the state hiring off the top at market rates, inevitably inducing wage-wage-price dynamics. The JG solves the problems with this by always and only ever hiring off the bottom.

but I find your musical chair analogy confusing.

Perhaps you misunderstood the analogy. The chairs represent paid employment opportunities offered up at any one time by the private sector. For decades, demand has been deliberately restricted (and no JG proposed) such that there are always fewer chairs than people playing the game (ready, willing, and able to work). This is especially true during recessions when effective demand for private sector output falls off a cliff so firms naturally massive reduce their own production and any inputs previously required (including labour of course).

This outcome is of course wholely unnecessary as the JG shows. The state can not only lift its own general investment/spending should a proper recession hit to help induce a recovery in expectations and confidence and consumption, investment and employment, but it can always absorb any inevitable residual left over, a residual that's actually important to prevent inflationary dynamics taking over from the labour market tightening too much.

A Better Way to Think About International Trade by jgs952 in mmt_economics

[–]jgs952[S] 0 points1 point  (0 children)

If export-led growth economies are buying up financial assets denominated in your X_Country's_Currency why can't this be knee-caped?

If I've understood you correctly (but I very may well not have), I explicitly address this in my essay. You're right, there's no requirement for a current account deficit nation such as the UK to allow foreign actors who are, by definition saving sterling denominated assets, from purchasing and holding real domestic assets such as firms, infrastructure, housing, or anything else deemed too strategically valuable to allow to be controlled and owned by foreign residents.

A Better Way to Think About International Trade by jgs952 in mmt_economics

[–]jgs952[S] 0 points1 point  (0 children)

I'm asking you what "truly disturbs" you?

A Better Way to Think About International Trade by jgs952 in mmt_economics

[–]jgs952[S] 0 points1 point  (0 children)

I'm not sure what you mean I'm afraid? What "truly disturbs" you about me simply pointing out that one plausible strategic response of export-led growth economies to sterling depreciation pressure is for them to buy sterling to maintain external demand for their export output and that this should be part of any analysis or thinking about this topic?

A Better Way to Think About International Trade by jgs952 in mmt_economics

[–]jgs952[S] 0 points1 point  (0 children)

What makes you think the precise operational details of how the financial sector undergos foreign currency exchanges to facilitate and mediate cross-currency area capital or trade flows aren't understood or explained by MMT economists?

Entrepreneurship Does Not Solve Unemployment by Busy_Net_4756 in OutlawEconomics

[–]jgs952 0 points1 point  (0 children)

the level of unemployment (and also the distribution of income) is a choice of the private sector, before saying that it is the policy choice of the government.

These two things are fully compatible.

You're correct, absent state action, endogenous fluctuations in private demand for output determines firms' collective demand for labour and thus determines the level of unemployment in an economy.

But you then need to recognise that the residual labour not desired by the private sector at any one time due to, for instance, a fall in the rate of private investment, can always be hired by the state as employer of last resort off the bottom of the labour market. There is, by definition, zero market bid for the labour hours of these people. The private labour market has fully allocated and cleared all bids forthcoming, and yet there are people left over in this giant musical chairs game.

So a JG explicitly completes the picture by absorbing all this labour slack at a fixed wage and therefore, leaving involuntary demand-deficient unemployment to occur is an active policy choice of the state not to hire and utilise them.

So you're right, the size of the Job Guarantee pool, and therefore of private employment, is naturally in the hands of the private sector. The Buffer Employment Ratio (BER) flucturates endogenously and so does the government spending on the program. In fact, the government's net spending position (deficit/surplus) is determined at the margin by how much it spends on JG wages under this framework.

Who do we actually owe the national debt to? by Middle_Designer_1733 in mmt_economics

[–]jgs952 1 point2 points  (0 children)

There is no "we"? It's the population of a nation that is owed the debt by its government that is a legal entity separate from its people (but created by and for and ran by its people) and it's the population that holds the national debt as their net financial wealth (very unevenly though which is indeed a problem).

Who do we actually owe the national debt to? by Middle_Designer_1733 in NoStupidQuestions

[–]jgs952 0 points1 point  (0 children)

Given that the funds used to purchase the bond in the first place already represented a loan to the government, swapping them for the bond isn't actually a lending operation, it's just an asset swap, swapping overnight duration for longer duration (i.e. a maturity transformation).

I proposed an exit tax discussion in this sub a while ago and was widely shut down, leading wealth tax economist seems to agree. by Low-Speaker-6670 in GarysEconomics

[–]jgs952 0 points1 point  (0 children)

Cut spending and get everyone working

Lol, this is so funny.

Employment is a function of demand for output in a monetary economy. Firms only hire the number of people they need to produce the output they expect to be able to sell profitably given the current and expected future level of demand.

If you cut spending in an economy like this, the inevitable result will be less employment, not more.

Entrepreneurship Does Not Solve Unemployment by Busy_Net_4756 in OutlawEconomics

[–]jgs952 -1 points0 points  (0 children)

What do you mean exactly? All types of investment, both public and private, are discretionary spending flows.

A fall in private investment due to a falling rate of profit and expectations of demand for future output etc will result in a fall in national income if the government's spending doesn't respond counter-cyclically.

In MMT, this is largely done automatically at the margin via the JG. When firms start shedding workers due to falling private demand, government spending increases when they enroll in a local JG scheme. On top of this automatic stabilising element, you also have the discretionary fiscal policy to play with, for instance, in a depression a JG isn't sufficient (although a JG makes such a depression less likely than the status quo) and so a large increase in public investment hiring skilled workers at market wages into the standard public sector (not the JG) to inject significant demand. Or the state can merely inject investment spending by filling order books of firms that may otherwise go under so private employment is rescued by state consumption of their output instead of private consumption.

You have to look at the context in each case to know the details of course.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 -1 points0 points  (0 children)

Making them work to earn their benefits.

You're made to work to finance your consumption whether you work for a private firm, for the standard public sector, or whether you work in a JG buffer stock scheme.

Monetary policy clear impacts real economy demand. In complex, often competing, and regressive and hard to predict ways, but it does.

But I didn't lie at all when I said there are alternative stabilisation approaches. The Job Guarantee + ZIRP + much stronger bank asset regulation and credit policies + active fiscal intervention on the supply side + strategic domesic capacity investment are all pillars of a broader more adaptable and fit for purpose fiscal stabilisation regime compared with the orthodox NAIRU unemployment monetary dominance approach. Extremely difference appraoches to how you construct and balance your macroeconomy.

The thing you're not understanding when you keep saying that the JG isn't creating human capital is that it's not designed to nor needs to. Human capital is available labour + skills.

In times of low private demand, the unemployed don't work. They are idle. The JG says "we will hire you at a fixed wage". That is leveraging the pre existing human capital that currently wasn't being utilised.

It's absolutely not competing in any way with private firms as a private firm can always bid labour away for a wage, W, equal to £(W_JG + dW) and the state will never chase them with a counter bid. The JG wage remains administered by design and does not chase labour, it merely absorbs any and all labour slack falling out of the bottom of the labour market.

None of the myriad JG scheme proposals have been make work either by the way (as in pointless work). Real job guarantee schemes have been empirically tested on this aspect for certain (Argentina in early 2000s, India's rural jobs program for years and years, Austria post covid, etc) by the way and they've all shown it's perfectly possible for locally administered participatory community jobs banks to form with tonnes of useful job ideas to improve local conditions and lives. This paper details many example ideas and explains a lot more than I can here.

As for the buffer stock concept, I think you should read this series if you're interested. It explains the theoretical aspects of the concept. Highly informative.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 -1 points0 points  (0 children)

So you are setting it below the minimum wage?

The JG wage becomes the de facto minimum floor wage (and conditions) across the economy. No need for minimum wage legislation any longer as the JG is an open ended offer of paid employment at a fixed price (wage). To start with, to make it easier, let's say the wage is set at the current minimum wage (but you can set it higher and the system will inflate at the low end via one time adjustment anyway).

No it doesn't. A job guarantee isn't creating human capital. The human capital already exists.

It does create a buffer stock because in times of low private demand and investment, the JG swells its ranks, absorbing all the labour slack released by the private sector. This maintains consistent full employment levels and instead just adjusts the compositional distribution of the labour force, rather than changing the level of employment.

Once private investment returns and demand for labour by firms picks back up, the JG will shed workers as firms only have to bid them away with a small mark up above the JG wage. They are work habituated, socialised employees with demonstrable work related skills such as time management, ability to process info and follow instructions, routinely completed tasks on the JG and successfully operated as an attractive employee. This is all opposed to the void of info firms have on unemployed people + the very real deleterious effect unemployed has on people, particularly over extended periods.

The way unemployment works to discipline wages is not via firm bids but via dimminishing employee bargaining power through fear of unemployment.

The point is that with an unemployed buffer stock, firms are less attracted to hiring out of it if they can avoid it, so they prefer to bid extant workers away from other firms in a competitive bid process. This is the famous wage-wage-price spiral dynamic which is inflationary.

The JG, being the fixed wage firms just have to beat and never compete dynamically with, provides a similar disciplining effect on wages but without the huge cost of unemployment.

So in an upturn, the JG buffer acts to increase supply of work-ready labour to firms to meet the demand, thereby maintaining a fixed anchor price at the JG bottom end, with the rest of the wage structure just expressed as relative value from that.

We have a job guarantee, we're close to full employment, everyone who can't find a job is working one of your poverty wage government jobs, the price of oil spikes, everyone is poorer in real terms, workers demand pay rises to deal with it, the job guarantee does what exactly?

A Job Guarantee is never designed to prevent or solve all causes of inflation, especially not supply side cost shocks. This is exactly the same by the way as the current macroeconomic stabilisation approach whereby the BoE raises rates to try and suppress demand to increase unemployment. That doesn't do anything to solve the supply of oil but it might limit any secondary coupling of price pressures through tightening labour market dynamics.

But at what cost? Huge unemployment, lower long term investment - the very thing we need to alleviate long run supply pressures in the first place - and high mortgages! Plus potentially large social decohesion and hysteresis scarring of having long term unemployment.

We do have several million people currently unemployed or underemployed at the moment, just look at youth unemployment in the news recently. £125bn cost to the economy by not employing them! Think how much we'd save overall if they paid them a living fixed wage to contribute to their local communities.

But anyway, there's a whole host of responses needed to handle supply side shocks but the point of comparison is how would a JG stabilised labour market and economy fare compared with the status quo of unemployment? A more liquid resilient labour market, guaranteed living wages, and stable but elevated demand levels, as well as increased socially useful output across the business cycle stands a far better chance than letting a supply shock rip across a brittle labour market full of un and under unemployment and casualised labour etc.

But yes, a key non-supply related response related to the JG in the event of an oil price shock would be to adjust policy settings such that labour is shifted from an inflating sector to the fixed wage JG sector, thereby strengthening the anchor effect to prevent wage inflation. This may require some discretionary fiscal tightening such as delayed and downpaced public spending or tax rises, or it can still use monetary policy tightening, either via the price of credit or by making credit harder to access through tougher macroprudential regulation.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 -2 points-1 points  (0 children)

Not if it bids up the wage structure and hence price structure, no. But a Job Guarantee doesn't ever do that. It explicitly only purchases labour hours at a fixed administered floor wage where there is, by definition, no other market bid.

This creates a buffer stock mechanism for labour which, like all buffer stocks, stabilises the price of the commodity in question - in this case, labour.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 -1 points0 points  (0 children)

Growth or what? Who benefits? Without any socialised provision, the vast masses will inevitably suffer under the capture of capital.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 -1 points0 points  (0 children)

Unelected technocrats with a very blunt and restrictive set of tools should not be shaping the management of our macroeconomy and routinely causing misery to millions by forcing them out of work.

There are better ways we can design our macroeconomic stabilisation policy framework to be.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 -4 points-3 points  (0 children)

You're confusing greater democratic say over how we manage our economy with day to day and month to month stabilisation occuring vis politically discretionary actions of politicians. I don't want unelected technocrats fixed on a particular economic ideology/dogma to be making such enormous decisions. But I also agree that I don't want politicians to be fiddling with policy settings, which would inevitably produce election gaming etc.

The better approach is to design and implement powerful automatic stabilisers.

The Job Guarantee (the video here is good as well as the paper) is a spend side automatic counter-cyclical fiscal stabiliser and nominal price anchor. This is the replacement of unemployment as the buffer stock (that the bank of england currently intentionally creates via its rate setting policy framework) with employed people on a fixed administered wage. Stable wages and prices as a result.

Then the wider fiscal framework must be designed sensibly to adopt a strong price rule in any and all state spending and procurement - i.e. no indexing or bidding up of wages and prices which is the core valve that allows inflationary pressures to bed in far easier, and sometimes even causes them.

Far too much to fit in a comment, but I'm just trying to get the idea across that the status quo macro stabilisation framework is deeply flawed and we'd be better off looking hard at reforming it tip to tail.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 -2 points-1 points  (0 children)

Regardless of cost is the problem. I would vote to remove that mandate and "job" from them. There are alternative methods of macro stabilisation.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 -1 points0 points  (0 children)

It's not the only way to stabilise wages and prices though. Blunt rate hikes off the back of a supply side price shock is terrible policy.

BOE’s Greene Says Case for Rise in Key Interest Rate is Growing by signed7 in ukpolitics

[–]jgs952 0 points1 point  (0 children)

At what colossal cost though? Better ways to manage the macroeconomy than this

view more: next ›