Is the Job Guarantee Optional?

Recently there seems to be a dramatic increase in interest surrounding the merits of the Job Guarantee and its place in MMT. Is it optional or not? I will attempt to show that the answer to this question is not simple. I will definitely show that asserting that the Job Guarantee should not be a core component of MMT is wrong. Rather the Job Guarantee is apart of an infinite number of solutions to maintaining the balance between prices, distribution and production.

Assertion: The Job Guarantee is the second best solution(second to my own :)) to maintaining the balance between prices, distribution and production(Economic Trinity).

I have seen a few comments where the assertion that a buffer-stock of some resource is needed in order to stabilize prices. I don’t agree with this because unstable prices in one sector of the economy will still adversersely affect the remaining sectors despite the existence of a infinite buffer-stock. If one sector of an economy is involved in the production of an essential resource and is acting as a exploitative monopoly(EM), then they can demand any amount of any other resource and the remaining economy will be forced to pay. So this allows the monopoly to demand infinite amount of the buffer-stock, which is going cause unstable prices. Anyway this is ‘unusual’ but it sets up the EM boundary condition of prices.

Now lets assume that the economy is operating under normal conditions, rather than under a EM constraint. The infinite buffer-stock hypothesis makes the implicit assumption that an amount of buffer-stock can be traded for any other resource. This property can be used to stabilize prices throughout the economy. Increasing the supply of buffer-stock satisfies demand, thus having a deflationary effect upon prices.

Defn Two-Way Transformation

Consequently it is assumed that this buffer-stock can be traded for other resources which will transform increased demand for other resources into increased demand for the buffer-stock. Also this transformation is two-way, meaning an supply increase in the buffer-stock also transforms into a supply-increase of all other resources. This transformation must hold, otherwise the economy will enter into a EM-like state.

I think it’s obvious that there are two problematic assumptions: (1) The buffer-stock is infinite, (2) There exists a reliable two-way transformation between the buffer-stock and all other resources.

The first assumption is a fact of nature for all buffer-stocks and thus any system aiming to manage the ‘economic-trinity'(prices, production, distribution) must be aware of this state. The second assumption is really a comparative measure of any ‘economic-trinity-proposal’. Moving forward clearly not all buffer-stocks are eligible. Now I’m going to make a guess here and assert that the ideal buffer stock is in some way related to energy. The ideal buffer stock will be related to the acquisition and transformation of energy forms. But this is abstract, and best discussed some other time.

So the objective is to choose the buffer-stock that has the best two-way transformation with all other resources. The Job Guarantee has some interesting properties that need to be highlighted. Firstly lets assume that all Job Guarantee jobs are non-productive, for example people walk on a treadmill for the working day. Whatever activity it is, I think at the minimum the activity must facilitate speedy exchange between private-sector-employment job-guarantee-work private-sector-employment. IMO this property is paramount. For this people are paid, which increases the demand for output.

A second assumption must also be made, that there is idle means of production and excess environmental capacity, meaning there are environmental resources that can be easily exploited by the means of production. Presumably there is a ‘multi-dimensional measure’ that describes this state across the entire economy which includes a time-factor that indicates the amount of time it would take to bring additional output online once human labor is operating the particular means of production.

The second assumption implicitly states that the economy is not in a EM-like state, in fact the economy is a reasonable distance away from it. Hopefully it is self-evident that given these two assumptions then paying people to run on treadmills is not inflationary. If the economy is in a EM-like state, then the Job Guarantee may be inflationary, but this is no guarantee. Even so all people on welfare would also be causing inflation as well, which raises an interesting question, would you rather inflation be caused by couch-sitters or walkers? If the economy is in a EM-like state then which group of idle workers is more likely to contribute to the breaking of the EM?

EM-like state, J.G may be inflationary but no guarantee

Given the nature of Capitalism is that economic agents pursue more ‘Capital'(profit), then a EM-like economy-state will be providing opportunities for profit. Economic agents will be attempting to increase output to (1) meet the demands of the EM and (2) replace the EM. Such output will be increased by increasing the necessary means of production and searching for more environmental resources. These activities will require human labor. As economic agents respond, they will be trying to increase output, which will demand additional human labor. At the same time it is likely that there would be some macro-regulatory changes occurring in order to break and/or satisfy the EM, which will cause changes to the economy’s worker structure. This dynamic period will see workers being exchanged from a sector of the economy, the J.G pool, and back into the economy. Therefore the effectiveness of the economy to respond to the EM will be proportional to dynamic ability of the economy. Assuming that all responses are to break the EM, then the ability to break the EM is proportional to being dynamic. In this situation I think it is significantly more favorable to have the J.G over unemployment benefits.

So the biggest advantage of the J.G is that it prevents or reduces human labor time wastage. The ability for economies to respond to EM threats requires a very mobile labor force. The mobility of this labor force is detrimentally affected by workers becoming absolutely idle, meaning unemployed.  If the labor force is immobile then Capitalists can not respond to profit opportunities caused by EM price distortions. In fact, the ability of Capitalists to respond to additional output demand will be proportional to the dynamic response of the economy.

Job Guarantee currently provides the best contempory method of price control

The ability of an economy to respond to changes in output-demand-structure will determine its ability to stabilize prices. The longer it takes to bring additional output online in response to additional demand, the longer the economy suffers a cost-inflation. The harder it is to take capacity offline, then a deflation occurs. Since labor is necessary to operate the means of production, then it currently has the best Two-Way Transformation with all other resources. Inflation control could then be achieved using fiscal policy only.

Weather or not the J.G should be a fundamental part of MMT is an open question(although a little itch in my mind suggests that it is provably fundamental). However, IMO the merit of the J.G is unquestionable and opponents have not given it enough thought or have ideological biases against it.