A recent post introduced the income-expenditure model, a staple of introductory courses in macroeconomics. In this post, a closely related model of the sectoral financial balances is considered at a similarly introductory level. The ‘sectoral financial balances model’, or ‘SFB model’ for short, has been discussed in the blogosphere by a number of Modern Monetary Theorists, including Bill Mitchell, Robert Parenteau, Eric Tymoigne, Daniel Conceicao and Scott Fullwiler, prompted by a post of Paul Krugman’s which contained a useful diagram. Analysis of the sectoral financial balances proved insightful in understanding both the lead up to the global financial crisis and its aftermath. This claim will be substantiated once the basic model has been outlined.
In any society, there will be real output (real income) that is not produced solely by humans. Some real income is due to the contribution of nature – land, natural resources, beneficial weather patterns, animals and so on. Some real income is produced by machines, robots and other means of production that were created by prior applications of labor in combination with nature. In any given accounting period, this real income is ‘unearned’ in the sense that it is not due to human effort exerted within the period. Much of it currently flows to industrial capitalists and rentiers on the basis of property ownership rather than productive contribution. Over time, the real productive contribution of means of production can be expected to rise, due to technical progress. In this post, a framework is tentatively suggested for thinking about the distribution of unearned income, both at a point in time and as it grows over time.
Technology has reached the point where nobody should be compelled to spend most of their waking hours working in dangerous, menial or otherwise unpleasant jobs (‘bad jobs’, for short). It is increasingly possible to mechanize most menial and repetitive tasks. But of the bad jobs that continue for a time, there remains the question of how best to share the burden they impose. Even with better jobs, there is the potential to reduce standard working hours and create more free time for those who want it. Here, too, there is the question of how to manage such an overall reduction in working hours. Since some people will desire to maintain or increase their current working hours, ideally there should be latitude for them to do so, just as there should be latitude for others, so inclined, to shorten their labor-time commitment. In this post, three alternative approaches to the problem are briefly considered. They can be labeled ‘universal job sharing’, ‘optional job sharing’ and ‘job or income guarantee’.
Footage of Paul Samuelson, posted by Mike Norman, claiming that we can’t be trusted with the truth when it comes to fiscal matters.