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Noah Smith on “modelling MMT” (Job Guarantee).
Although it would be useful to have a constructive debate about MMT, the problem is that Noah Smith is largely a troll.
Since this has nothing to do with recessions, I’m just going to give a quick response. noahpinionblog.blogspot.com/2019/03/examin…
Although it would be useful to have a constructive debate about MMT, the problem is that Noah Smith is largely a troll.
Since this has nothing to do with recessions, I’m just going to give a quick response. noahpinionblog.blogspot.com/2019/03/examin…
MMT is a school of thought that wants to replace all of mainstream economics. I’m still waiting for the textbook, but it apparently has a lot of pages. So there’s oodles of models, for all the aspects of economics.
Let’s just look at the Job Guarantee.
Let’s just look at the Job Guarantee.
Mathematical models are not the real world (believe it or not). A Job Guarantee is a real world phenomenon. If a model can describe the real world in some sense, it should be able to describe the Job Guarantee.
So you could take any macro model, and replace “unemployment” with “in Job Guarantee” status, add the appropriate cash flow, and Bob’s Your Uncle.
The question is: beyond the cash flow, what’s different for the Job Guarantee?
The question is: beyond the cash flow, what’s different for the Job Guarantee?
1) Workers are now attached to the labour force. In the real world, people out of unemployment for too long are viewed as unemployable. If the Job Guarantee works as intended, these workers stay attached to the labour force. This raises long-term growth potential.
2) Wage setting. Instead of randomly searching for workers, employers know exactly where to find people. The low end wage would be set as a markup over the Job Guarantee wage, according to MMTers.
Other theories of wage formation exist, but that’s what the debate is about.
Other theories of wage formation exist, but that’s what the debate is about.
3) The Job Guarantee workers are providing public services (which are not charged for). These added public services provide “utility” or “social welfare.”
4) Reduction of unemployment should reduce required spending on the ills associated with leaving people idle.
4) Reduction of unemployment should reduce required spending on the ills associated with leaving people idle.
In summary, if you aren’t a troll, you take whatever model you like, and slap a Job Guarantee into it. That’s exactly what the authors did in the linked article.
A mainstream model may have difficulties, but MMTers argue that’s the model’s problem.
levyinstitute.org/publications/p…
A mainstream model may have difficulties, but MMTers argue that’s the model’s problem.
levyinstitute.org/publications/p…
