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The Job Guarantee and the MMT Core: Part Sixteen, Conclusion

letsgetitdone's picture

This is the concluding post in this Job Guarantee and Modern Monetary Theory (MMT) series. After evaluating the specifics of the posts by John Carney and Cullen Roche criticizing the MMT Job Guarantee (JG) proposal in the first 13 posts in this series; in the 14th post I introduced the concept of the MMT Knowledge Claim Network (KCN) consisting of Social/Value Gaps, Knowledge Gaps (problems), Descriptive Knowledge Claims, Prescriptions, and Narratives. I also argued that the MMT KCN was a fused fact-value network with important value commitments, that it was developed holistically by its originators. that it is not focused on descriptive aspects of economics alone, that it offers explicit value claims, and that it's normative aspect is clear. I also argued that many of its practitioners, offer policy prescriptions rather than simply concentrating on the way the world is right now. I also noted that the social/value gap, problems, and prescriptive aspects of the MMT KCN are progressive and Second New Deal oriented, and that is why many people who are persuaded by parts of the descriptive aspect of MMT want to do what they can to place these aspects into a secondary role and drive them out of the KCN altogether.

In the 15th post, I detailed my view of the current components of MMT in its five categories of knowledge claims as preparation for this post, which will answer the questions I posed at the beginning of the series; namely

-- What is part of the MMT core right now? and

-- how it ought we to change it in the future?

How Do we Tell What's Part of the MMT Core Right Now?

I think the way we do this is to read the literature produced by the founders and their students, look at their videos, presentations, graphics, listen to audios, and then make an assessment about the components that capture most of their attention. In addition, one should look at writers who've entered the field after the founders and see where they are focused. But, of necessity, their concerns will initially have less weight simply because they haven't defined the direction of the MMT movement, and will be viewed as proposals for changing it, to be evaluated by others.

So, what is the core of MMT right now? My assessment follows.

Social/Value Gaps:

-- The goal of public purpose as a general organizing ideal;

-- Closing the output gap;

-- Closing the employment gap;

-- Achieving price stability; and

-- closing the gap between the minimum wage and a living wage.

I think these goals are part of the core because of their intrinsic value. And also because, if we reach them the MMT founders think the other social/value gaps will be greatly alleviated.

Knowledge Gaps/Problems: All the problems listed have solutions relating to the core social/value gaps, so all of them are part of the core.

Descriptive Components: All of these either are, or contribute to, solutions of the problems listed earlier, which, in turn, are related to the core social/value gaps.

Policy Prescriptions: Most of the policy prescriptions offered by MMT founders are core to MMT because they are closely related to the goals of Full Employment (FE) at a living wage, at least, along with Price Stability (PS). According to MMT, moving the Fed under the Treasury isn't essential to FE/PS, or to getting around monetary constraints imposed by Congress. Proof Platinum Coin Seigniorage (PPCS) can be used to get around constraints on debt limits. It can also be argued that ending debt issuance isn't essential even if PPCS isn't used, as long as Congress gets rid of statutory debt limit constraints.

We can also say that: fixing the health care system, the energy crisis, and the housing crisis, are not, in themselves part of the MMT core because FE with a living wage and PS don't require these proposals. However, a counter-argument to this is that all three categories of proposals are essential elements of Public Purpose, that they are part of the MMT core for that reason. This line of argument also suggests that such items could easily be added to the core if MMT writers start paying more attention than they have so far to these three issues.

Narratives: All of the narratives named in Part Fifteen are part of the MMT core, because they set the context for MMT's descriptive components about how the financial system relates to Government fiscal and monetary policy.

How Should the MMT Core Change Over Time?

The posts by John Carney and Cullen Roche calling out the MMT Job Guarantee proposal raised the issue of what's in the core of MMT, and also the issue of change in MMT's knowledge claim network. How should MMT change over time?

Carney and Roche both delivered criticisms suggesting that the JG wouldn't create FE and PS, but suggested that various unanticipated side effects would make the program unsuccessful. I replied to those criticisms in earlier posts in this series. But the significant point here, is that the first line of attack was to question whether the JG would be effective in meeting the MMT objectives. So, their objective was to move the JG out of the MMT core by refuting it through argument.

This is a THE BEST way of attempting to change the MMT knowledge claim network, but one has to present evidence that really calls the JG or any other conjecture one is trying to refute into question.

Carney and Roche, also tried to question Full Employment and Price Stability as appropriate goals for MMT. In doing this, they never mentioned Public Purpose but instead asserted that “prosperity” should be a primary social value that should be realized through attaining “full productivity” (in Cullen's words). Cullen also claimed that the continued existence of the possibility of unemployment was needed as an incentive to reach “full productivity.”

Without arguing against this view here, it's pretty clear that this goes after the JG program, by going after the higher level goals that make it desirable. It's not a criticism of the truth of the proposition that the JG will facilitate FE and PS, but a criticism of whether FE is a desirable goal. Judging from the absence of any mention of public purpose, along with the assertion that “prosperity” should be the higher level goal justifying possibilities that would support the continued existence of an unemployment buffer stock, it also seems to be a proposal to replace “Public Purpose” with “prosperity” as the highest level goal in the MMT fact-value knowledge claim network.

Again, there's nothing wrong with an attempt to change MMT this way from my point of view, since I think that MMT goals and objectives should be just as subject to criticism as its causal or prescriptive statements or designations of problems. However, in raising such questions, critics should be very direct in what they're doing and should explain why they think that “public purpose” should be subordinate to some other high level goal such as “prosperity” and why prosperity is better served by an unemployed buffer stock rather than a fully employed one. Also, if they still consider “public purpose” the highest level goal in the system, and also think that “prosperity” is a better way to achieve it than FE with PS, then I think that they have to explain why that is and subject their views to critical attempts at refutation.

In his post on the difference between “theory” and “fact.” Cullen Roche says:

“. . . . we should focus on giving the world a better understanding of modern money by focusing on the proven factual pieces of MMT (monetary operations, monopoly supplier function, etc). If we offer policy proposals then that’s fine, but that’s secondary. I would expect the MMT economists to do that and it should be encouraged that they use their expertise in doing so! . . . ”

I think Cullen is here on the point of suggesting that MMT should restrict its core to those components in its descriptive category that he considers to be “fact.” John Carney also seemed to be suggesting something similar in his posts on MMT. He likes MMT's description of fiat monetary operations, but he doesn't like its policy proposals. So, he'd like to broker closer relations between Austrians and MMTers. But to do that he'd like to change MMT by restricting its core to its description of monetary operations, and ignore its social/value gap, knowledge gap, descriptive theoretical, and policy components. So, he wants to change MMT by cutting most of its core components out, so that Austrians and MMTers can agree on something.

This, however, isn't a legitimate way to evolve MMT, while still retaining its identity. You can't take a KCN, eliminate its social/value gap, problem, much of its descriptive theoretical, and also its policy context, and still claim that it is the same system, simply evolved over time.

For better or worse, MMT has a core that cross-cuts all of its categories of components. It can be changed, while maintaining its identity, by refuting claims in any of its five categories of components. But if one changes it by eliminating whole categories of components, or by changing the core aspects of its social/value gap or problem components, or the core aspects of its descriptive and policy components, then it is simply not the same KCN, framework, or approach, anymore

When Cullen Roche and John Carney critically evaluate the JG on grounds that it will not work, the kind of change implied by that kind of criticism is the right way of “evolving” MMT. Even their criticisms of Full Employment and “Public Purpose,” though more far-reaching in their implications for MMT's KCN and its identity, may, perhaps, still not be so significant as to change its essential character. But at some point, a pile of sand grains becomes a heap, and likewise, a proposal about how to evolve MMT becomes not a proposal for its evolution, but a proposal for its replacement by something entirely different.

This is the case with the proposal that MMT be restricted to a core of descriptive propositions that Roche and Carney think are “facts.” Such a proposal simply rips MMT out of its entire developmental context, as well as the heart out of MMT, and the resulting network is no longer Modern Monetary Theory at all, but something offering an entirely different understanding of the world and how we ought to act in it.

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lookin206's picture
Submitted by lookin206 on

16 parts...that's awesome and helpful.

I think i've been converted from one point of view to another. I first thought that MMT should separate its more prescriptive parts (e.g., JG and FE) from the more descriptive accounts of money and sectoral balances in a fiat currency economy.

Over months now I've shifted since realizing that every economic theory I've gone into has at its basis often disguised value assumptions favored by their proponents. For example, doesn't the moral value of "no one should get something for nothing" underlie Austerian and neo-con theories.

If I'm right about economics being value saturated, it seems better to be overt about those value rather than implicit and covert. What are your thoughts?

letsgetitdone's picture
Submitted by letsgetitdone on

Hi lookin, That's one of my main points in the series.

But not just that. It's not enough to be explicit about values and to say, well, these folks are just disagreeing over values. The values must be explicit so that they can be exposed to criticism, and people can decide which values ought to be pursued.

They also need to be explicit so that the risk of error in deciding to accept one proposition, hypothesis, model or theory, over a competing one can be evaluated. Remember risk isn't just a function of probability, but also of value.

In the end this is also a matter of seeking objectivity. What I mean by that term follows:

"'Objectivity' in both description and evaluation can refer, I think, to three aspects of our knowledge.

First, in claiming that our knowledge is objective we may mean that our knowledge claims correspond to whatever they are supposed to correspond to. If the claims are factual, we claim correspondence to the facts, to what exists, or to what may exist, or to what fails to exist. If the claims are evaluations, we claim correspondence to values, to what should or should not exist, whether the existence reference in such statements is past, present or future. Since we can never be certain that we have attained such correspondence either in the realm of fact or value, this sense of objectivity represents only a regulative ideal. It is something we seek, but can never be sure we have attained. And we think that this is all there is to the matter of correspondence and to objectivity in the sense of correspondence.

Second, 'objectivity' may refer to knowledge that is the product of a particular method, the method of scientific investigation. Objective knowledge then, would refer to knowledge claim networks that have survived testing and evaluation, and the record of their performance emerging from scientific investigation.

Third, 'objectivity' may refer, simply, to knowledge claims that are sharable and criticizable, and objective knowledge to the combination of sharable and criticizable knowledge claims that have survived our tests, along with the performance record of these claims. This sense of objectivity generalizes the second sense of this term. It recognizes that scientific investigation is just a more rigorous variety of the method of trial and error elimination, or conjecture and refutation, the method we apply to sharable and criticizable knowledge claims in order to grow our knowledge."

If the value claims assumed by people aren't explicit, then they aren't sharable and criticizable, and the errors we've made in assuming them can't be eliminated before sad experience shows us how wrong we were. So, subjectivity in how we treat values, kills, just as frequently as subjectivity in our thinking about facts.