Btw @morganwarstler, this is from Warren Mosler (MMT founder) - not a dismissive response at all so maybe avoid the ad hominems at the start.


ok, I finally read it. note he says 30 million would enroll. That means there is no other fiscal adjustment from what we have today. couple of things. first, jobs that produce output for sale are a function of sales. this doesn't increase sales other than via increased govt deficit spending for this program. so the jobs first go to people 'with money' who want a cheap housekeeper, driver, weed puller, crew for their super yacht, machinists for their super yacht, oil field workers who output goes to the super yacht, etc. The jobs are largely what I've called 'sultan fanners'. Yes, some auto mechanics might higher cheap assistants to keep the place cleaner, chase down tools, etc. as well. Only to the extent the new deficit spending on this program increases total spending/sales will output that gets sold increase. The problem with an economy of sultans and sultan fanners is the real consumption of the sultan fanners is necessarily a lot lower than if they were working at jobs that produced output for general consumption, not just a few super yachts for the sultans.

then there's the macro issue. taxation functions to create unemployment. the govt then hires those its tax unemployed to provision itself. unemployment is the evidence the tax unemployed more people than the govt decided to hire. the answer is to lower the tax so it unemploys fewer people, or hire the rest of the people the tax unemployed.

this proposal opens a channel that will work to increase govt. spending to a level that provides the funds needed to pay the tax and net save to the economy. let's say the need today is $1 trillion per year. that means the dynamics of this proposal will continue until deficit spending is increased by that amount. yes, it could be private sector deficit spending, or non resident deficit spending (net exports) but for this analysis I'll assume it will be govt. deficit spending. so the question is how much this program will expand to get new govt deficit spending to that level. he's assuming 30 million 'enter the auction' initially. the result has to be a whole lot more entering the auction ultimately.

my quick guestimate tells me the dynamics will tend to drive pretty much everyone into the auction in a massive shift to a sultan/sultan fanner economy. Cost sensitive businesses will tend to 'replace' as many workers as possible with auction workers, which tends to reduce aggregate demand/increase 'savings desires' and thereby intensify the shift to auction work.

note his conclusion. he says the basic problem today is a social justice problem that this addresses. however there is a massive 'shortage of aggregate demand' problem (as evidenced by mass unemployment) dynamic in place as well that he ignores but that nonetheless has serious consequences.

So let's look at the umkc buckaroo model. There would be unemployment if the umkc taxed the students a total of 10,000 bucks and only offered work that earned 9,000, for example. So now try to apply this auction proposal to that situation. Labor would be auctioned such that some of those students earning the 9,000 bucks would hire others at less than the 1 buck/hour the school currently pays for the 9,000 hours it's spending, and those hired under this auction process get a subsidy from the school. This will continue until the school's spending has increased to 10,000 buckaroos plus any residual savings desires.

So in that sense it 'works' to end unemployment. But it creates what at best i'd call a 'peculiar dynamic' far removed from the public purpose behind the buckaroo, which was to provision the school with labor to be used for community service. Instead, the auction proposal forced students into servitude for other students who were 'allowed' to earn the initial 9000 bucks from the school (aka, the 1%)

What I say is if you are going to tax as a means of provisioning govt, fine, but give everyone a way to earn the funds to pay the tax. Hence the JG. And if a tax 'unemploys' more people than desired, lower it or hire them anyway. And yes, there are serious social justice problems to address as well.

Said another way: the 'labor market' is already an auction market. And it doesn't clear because the currency itself is a public monopoly with the govt. restricting supply (net financial assets). And when a monopolist restricts supply the evidence is excess capacity, unemployment in this case.

What JG does is fund jobs to the point where the economy has sufficient govt (deficit) spending to allow us to pay the tax and net save. And if the JG pool is deemed 'too large' than a tax cut/spending increase is in order to keep the jg pool at desired levels. And by offering paid work to everyone willing and able to work vs 'basic income' to people willing and able to work, it seems to me important aspects of 'social justice' that concern the writer are addressed as well.

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