My previous post seems to have been interpreted by some Modern Monetary Realists and supporters as a personal attack. Included among the offended parties appears to be Cullen Roche for whom I have much respect. Hopefully it is clear to readers here that I meant no offense in my post. In retrospect, I should have avoided any reference to politics, and kept strictly to the economic arguments that were my focus.
Critics of the Job Guarantee often seem to come from the right-libertarian quadrant of the Political Compass. Most recently, several respected participants in the debate have begun to describe themselves as Modern Monetary Realists (for example, here and here), partly to distinguish themselves on the Job Guarantee issue. Joe Firestone has provided an excellent broad-ranging series on the questions in dispute. My focus in this post will be much narrower, concerned with one particular aspect of the Modern Monetary Realists' critique that remains unclear to me.
I have been reflecting on the role an unconditional basic income could play in the transition to a freer and more equal society. One set of considerations concerns the viability of the policy. Would it be technically feasible? Would it destroy the currency? Another set of considerations concerns the beneficial dynamics the policy might be expected to set in motion. By liberating individuals from the fear of poverty, everybody would be freed to focus on the all-sided development of human capabilities.
An important aspect of a Basic Income Guarantee, whether implemented in isolation or alongside a Job Guarantee, is the freedom it would give all people to make ethical life choices if they were so inclined. In the absence of an unconditional basic income, anyone who lacks independent means is essentially compelled to seek employment on terms set by employers. Private-sector employers, in turn, cannot be concerned with ethics or morality to the extent that this compromises profit. To indulge in ethical behavior not dictated by law or profit considerations would only see the enterprise lose out to others willing to do whatever it takes to get ahead of the competition. The provision of an unconditional basic income to all would free people to take employment only when, in their view, it served a socially beneficial purpose. This alteration in relative bargaining power could then be expected to encourage more ethical behavior by employers to the extent that workers were attracted to more fulfilling and socially beneficial roles, even when at lower pay than the alternatives.
There is quite a lot of resistance in the MMT blogosphere to the Chartalist theory that the tax obligation underpins demand for the currency. A notable recent example is an interesting discussion at Pragmatic Capitalism. But a similar reaction seems to pop up in many places. The consternation on this point has surprised me in the past. It is not the disagreement over the theory that surprises me, but the strength of the reaction the theory seems to incite in some people otherwise sympathetic to MMT. Lately, a couple of possible explanations have occurred to me.
This is a brief response to Warren Mosler's contribution to a dialogue with Joe Firestone, who has put together an excellent multi-part series that can be read by following the link provided. In this post, I am addressing only the section on the Job or Income Guarantee. Mosler makes the claim that the value of the currency is determined "at the margin", and from this takes what I consider to be a leap to the conclusion that a BIG as part of the JIG would likely cause a collapse in the currency and hyperinflation.
The recent discussions over what is or is not Modern Monetary Theory (MMT) have brought out some differences in perspective on broader questions of where we might want to head as a society. As far as I am concerned, the Modern Monetary Theorists have defined their theory to include both descriptive and prescriptive elements, and that is fine. For non-academics who have taken a strong interest in MMT in the blogosphere, the definition provided by the academics has clarified our position relative to it. There are some on the political right who would not consider themselves to fall within the definition. And, of course, there are some of us on the political left who likewise consider ourselves outside the definition. In this post, I thought it might be interesting to touch on what appear to be some similarities and differences in vision between those on the left and right.
In much of Europe there has been high unemployment for a long time, since well before the onset of the present crisis. People are increasingly accustomed to its existence. That means they are also accustomed to a sizable proportion of society receiving an income disconnected from labor time. In many other countries there has been high unemployment at one time or another during the neo-liberal period. In upcoming decades, waves of mechanization are going to make it increasingly unnecessary for people to work full time or for everybody to participate in the labor force. In thinking about a progressive way forward, why try to swim against the tide with a Job Guarantee when the tide brings with it the necessary preconditions for a Basic Income Guarantee?
I have been reading some of the academic literature on the relative merits of a Basic Income Guarantee (BIG) and Job Guarantee (JG). In the academic literature, a BIG – for example, as proposed by Van Parijs – refers to a policy in which every citizen receives a basic income irrespective of labor force participation or employment status. A JG, as readers here will realize, refers to a guaranteed job at minimum wage for anyone who wants one. In opposition to the BIG, one argument advanced by Modern Monetary Theorists (e.g., here) concerns the value of the currency, which they define as the amount of labor time required to obtain it. In making their argument, however, they reason "at the margin", somewhat reminiscent of neoclassical analysis. I think this is incorrect for a reason I will discuss.
One type of objection to the Job or Income Guarantee (JIG) that has been expressed concerns its potential effects on the level of productive activity. In particular, there has been some concern that without a requirement of reciprocity, the JIG would enable some people to obtain an income without doing anything for society in return, and this would be unfair or at least perceived by many as unfair. My view is that the net effect of a JIG would be to promote socially productive activity, and that the extent of true free riding – in the sense of contributing nothing to society – is not likely to be significant.