How did you find MMT?

I thought I would ask everyone a question – how did you find MMT? IMO it is really important to understand what draws people to MMT in the first place. I’m sure that such experiences can be used identify strengths and weaknesses in how MMT is being disseminated into the public.

I’ll start off with my not too interesting introduction to MMT.

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Conveying the MMT message

This post is a general expression of my frustration with how MMT conveys concepts to the public. IMO there is some unrealistic expectations demanded of newcomers in terms of vocabulary and general decision making. There appears to be a belief particularly by academic MMTers that the public should conform to strict academic terms and definitions. MMTers should remind themselves that although words have a certain meaning in their mind, that doesn’t mean everyone else holds the same meaning. Since MMTers created the blogs in order to disseminate ideas it would serve MMT well to choose words that are best suited at conveying meaning to the public.

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The Trouble with Carney’s J.G Analysis

Yesterday John Carney posted an article titled The Trouble with a Job Guarantee. After reading the title I knew a response was needed. Rather than go on about how great the J.G is I will simply question some of the basic premises upon which Mr Carney makes his argument.

The Trouble with a Job Guarantee

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Implementing a commonly controlled financial system

With the advent of crypto-currencies, the possibility of implementing a commonly controlled financial system is within reach. I will outline the general processes of how a planned crypto-currency will function. This is by no means a complete ‘idea’ and I’m sure that there are different ways of achieving the same thing. Hopefully you will gain some insight into what is possible with modern cryptographic technology. At the least, I hope that you can take away some ‘basic building blocks’ that could be used to create alternative solutions.

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The JG is like the ULTIMATE Capacitor

I/O buffer is a storage of state information, whereas the Capacitor is a storage of energy(output).

As the demand for output increases, then the energy in the Capacitor will diminish. This is when macro-policy is expected to reduce demand across the economy, so that energy levels in the capacitor can return to some defined level. If the amount of energy stored in the capacitor is too much then macro-policy is expected to increase demand for energy, or the nature of the capacitor stimulates the energy demand of other components proportional to the amount of energy in the capacitor(JG Wage).

Translated, this means as the demand for output increases, then additional output will be drawn from the JG pool and brought online. At the same time it is expected that macro-policy will respond in such a way to replenish the supplies of the JG pool. If the JG pool is too large then macro-policy is expected to stimulate demand, or the very nature of the JG will stimulate the demand of the private sector proportional to the size of the JG pool.

So the behavior of the JG is to too smooth out output demands across the economy. So how do you compare one buffer stock to another? Using the Capacitor analogy and a few of the principles outlined in the previous article, then a quality Capacitor will be defined by the following:

  • It’s connectedness with all other components.     This means how well is the Capacitor able to get and receive energy to/from all other board components. If one sector of the economy dramatically needs additional output, then the Capacitor needs to be able to swiftly respond. Likewise, if output diminishes the Capacitor needs to be able to absorb the lost energy so that it is not wasted.
  • The energy-type in the capacitor.     Does it store petrol? Electricity? Spring-power? Grain? Water?
  • The energy convertibility of the energy-type.      Economic firms produce output as energy-forms, so being able to convert the energy-type to and from other energy-forms will impact on the connectedness of the Capacitor(JG Buffer) with all other components(Economic firms).

Based on these principles it is obvious why the J.G is a better Capacitor-type than all other predecessors. Firstly human labor is connected with all components, and is the true source of output. It is the universal starting point of all output. Secondly human labor is responsible for converting energy-types into energy-forms.

So rather than storing electricity in the Capacitor, the Capacitor stores the actual logic gates required by all other components. This indirectly reduces the demand for energy by components on the board. Also these logic gates are the true source of logic output since they convert the electricity into useful output.

So the JG doesn’t store energy directly, rather it stores the universal energy converter, which is needed by all firms. By increasing the JG pool, then energy forms will have decreased convertibility. This will reduce demand and maybe even build up energy inventories. This is the equivalent to computer board components storing energy since they do not have the logic gates to convert electricity into different forms.