r/mmt_economics

Right now we have the indicators, but not in one concentrated place.

So whenever there's a discussion about what should be done when an economy is having trouble, you end up with something that's like a bunch of people trying to figure out what's wrong with the car they're driving, while having no information displayed on the dashboard, not because it's not there, but because (unlike normal dashboards) you have to press certain buttons (in various places) to display different bits of information (This one shows gas levels, this one shows engine temperature, this one tells you about the battery, etc.)

Other than unemployment rate, inflation rate, foreign debt level (needed for some countries), currency type (foreign, peg, sovereign, commodity-based), private debt levels, trade balances, exchange rate, central bank interest rate, gas prices, oil prices, what are the economic indicators that should be on a economic dashboard?

I’ve been thinking about the Job Guarantee — I think it’s an important idea. The NAIRU system is obviously flawed. Human immiseration is used as a raw material to buffer demand. The Job Guarantee solves for this, and would, all things considered be better than an unemployment based system.

However, I have concerns. These concerns stem in part from my being influenced by the Anarchist philosopher David Graeber (who actually knew about MMT and produced a book with deep relevance to this topic, his magnum opus *Debt*). Graeber was deeply skeptical of bureaucratic structures and entrenched cultural assumptions. His book *Bullshit Jobs* is essentially a wholesale critique of the institution of employment itself.

Private companies are very capable of creating wasteful employment; jobs where you must be present for 8 hours but only really work 4. Jobs that exist to keep some badly designed systems running, instead of just fixing the system. Entire industries (advertising, tax compliance) that either produce very limited social value, or are perversely self justifying (you need a tax specialist or tax software because the tax code is designed to support this cottage industry). In many workplaces perverse incentives can become crippling. People slow down their work to fill the time. Efficient or creative workers are rewarded with additional work. It can create a bad incentive structure, and a crushing sense of hopelessness or pointlessness.

Automation is also coming quick. I work in an automation exposed field. Huge amounts of time in the economy today are spent on things like data entry in excel, which can be automated easily. Huge amounts of business processes and administrative activity are in principle capable of being automated. In China factories are being built that use a fraction of the labor of traditional factories. The premise that the economy always needs more workers in organized employment is worth questioning.

With all this in mind, I want to hear how the best defenders of the JG respond.

How do we determine the shape of work? Should people continue to work 40 hour weeks? Are there systems in place to return time to workers if the need for work diminishes? Are jobs task oriented (do X and get paid) or time oriented (work 8 hours, get paid)?

Who decides what tasks are needed? How do we prevent powerful people or even institutionalist insiders from manipulating this? If my job is to supervise JG workers who dig holes and fill them back in again, I might have an incentive to say “man we’ve got a lot more holes to dig, work never ends!”.

How would such a system cope with very high unemployment, or with a private sector that had a diminished capacity to absorb workers?

How do we evaluate the social benefit of work? Similar jobs could have divergent outcomes. A team that practices sustainable landscaping with native plants versus a team of leaf blower and lawnmower crews — one is creating more beautiful spaces, providing habitat for wildlife, improving the environment, the other is causing noise and air pollution and degrading the environment. Depending on your values and esthetics we might think “I like my parks looking neat and tidy” — how do we ensure a robust ongoing debate around what is being done?

How do we treat non formalized care roles (caring for children or the elderly in your family)?

Finally, how do we value human freedom in a JG system? Are efficient or creative workers rewarded or punished with more work? Is there some system in place to reward creative work, art, philosophy, writing? Or are we locking the next DaVinci into an 8 hour shift doing some drudgery?

My preferred base case solution is a UBI with property / sales taxes becoming the dominant tax most people pay. UBI removes the regressive nature of consumption tax, since basic consumption is supported. Taxes could be paid through the payment system (calculated at point of sale) with minimal compliance and administrative costs. The system could be made progressive, with luxury purchases being taxed more than food. This could serve a macro stabilization function, as consumption heats up, tax revenues grow.

Anyway, I actually think there’s a lot of good in the JG idea. There are many things we could be doing to improve society. I remember my late grandfather saying “we could have our roads lined with roses tended to by government employees, with the government serving as the employer of last resort” — it’s a sentiment I agree with. But I think there is moral hazard in work. Work can be productive, rewarding, and beneficial, but it can also be a power structure mandating that you spend your time doing something you wouldn’t otherwise want to do, Somthing with limited social benefit. Work can be useless and wasteful. Work can be degrading. Make work isn’t, in my opinion, an acceptable solution to economics — make work is a tragic waste of limited human life. A JG would need to be thoughtful about these issues, in my opinion, for it to be a *good* system.

I’d like to hear the MMT community reaction to this. What are your thoughts?

1. We are taught that money is made by fiat. This is illustrated by a bank making a loan and the extended amount over a hypothetical reserve amount, is money creation. New money. Thus, money is and can be created by private means. Why doesn't the MMT community put this into scale and distribute the "blame" for "money printing", when critics criticize centralized fiat creation contributing to inflation?

2. Tax destroys money, thus taxes help control inflation. Considering the above, how money is created by making loans, why don't we advocate a payoff of loans early? Doing so destroys a lot of the money, thus helps fight inflation.

3. If we control by paying off debts, then there is less need for taxes. Taxes as a demand lever of a currency only makes sense when other currencies are available to compete for them. However if you mandate that domestic spending be done in the currency, you create the demand inherently because people need to transact. It's easy to ban competing currencies after domestic supply is sufficient. Especially with today's technology. For a struggling colonial America with British notes available everywhere, I understand the incentive, but that's not possible in today's modern economy. Especially when it's easy to ban other currencies from being introduced.

Hello, I've been hearing quite a bit with MMT but there's an issue that I can't seem to wrap my head around, isn't mass money printing just going to devalue the currency? Like in Zimbabwe

So Monetary Policy arguably works in part because of the credibility that central banks establish that they will work towards inflation targets as best they can regardless of political headwinds. While Milton Friedman pointed out in “The Effects of Full-Employment Policy on Economic Stability: A Formal Analysis” that counter cyclical policies are formally impossible to time correctly due to delays in information coming in and the effects of policies taking time to work on problems that may have changed in scale after the data is received.

As well, fiscal policy is not driven by overall health of the economy in the same way that central bankers tend to operate but by the. Short term and localized interests of elected officials.

With all that in mind, how does a predominately fiscal policy framework propose to address issues that a monetary framework can barely do? Assume I am accepting all other premises of MMT as valid for this discussion. For further context I am an American so any presumption of fiscal competency in elected officials is aspirational at best.

This is gonna be a long one but I could really need the help of this community.

The setting:

I am working on developping a theoretical framework to assess the utility of Peatland-PV in Germany from a Macro-economic perspective.

Peatland-PV is the concept of rewetting peatlands which are currently drained and used for agriculture and placing PV on the rewetted surface.

From a macro-economic perspective, this creates benefits such as reduced GHG-emissions, which can be quantified through the social cost of carbon, increased biodiversity (incredibly difficult to quantify) and obviously the generated electricity (among others).

Most people would agree (I assume), that the CAPEX and OPEX of a Peatland-PV Project are to be considered as costs (from a macroeconomic perspective), as they quantify the resources needed to realize the project (labour and material resources). Added to these should be the integration costs of PV (System LCOE), transaction costs as well as opportunity costs (as the surface can't be used for agriculture anymore after rewetting).

Then comes the controversial part: Most people would probably assume that subsidies are a cost factor and taxes income (hence a benefit) from a societal point of view.

This view is, in my opinion, wrong: The subsidy does not represent a real consumption of resources, it merely prioritizes the allocation of real resources to the Peatland-PV project. The actual societal cost (use of resources) is entirely quantified through the CAPEX and OPEX of the project (and other costs discussed earlier). I understand though, how, if you assume that a governement can only spend money it has first earned through taxes, the prior assumption makes sense (in other words: if the government budget is considered a limited resource, considering a subsidy/expense as a societal cost does make sense. That assumption is false though, as real resources are scarce, not money).

Now the "problem" I'm facing is that I need existing literature/theory/models to justify why I don't consider subsidies and taxes in the analysis (calculating tax revenue would also be incredibly time-consuming) which is quite contrary to common economic thinking. I can't really find any literature on this specific question.

Am I right in my assumption, that in conventional macroeconomic analyses, taxes and government expenditures are considered?

Is there a way to justify not considering taxes/subsidies without arguing from a MMT-perspective?

Do you know existing theoretical frameworks or literature on similar analyses?

I'm grateful for any thoughts and potential literature recommendations.

Thanks in advance!