I ask this not because I’m opposed to the basic insight of MMT, but because I’m not an economist and struggling to understand the implications:
Let’s assume a super-simplified economy that consists of just two classes of workers and their respective products: public sector nurses (healthcare) and private sector farmers (food). While MMT allows us to easily increase nurses’ pay or employ more nurses, no amount of fiat currency can increase the yield of food per acre or the land used for farming. If an increasing proportion of school-leavers prefer nursing to farming, how does MMT address the imbalances or shortages?
Excellent question. MMT doesn't address the imbalances. It underpins reforms we need at the macroeconomic level but it's not a policy as such, so it doesn't, of itself, solve shortages. Conceptually MMT changes the way that federal funding should be arranged; so it helps governments make much better choices about spending. It frees them up to spend as much as we need them to spend for our wellbeing and survival. It gets rid of the mind-forged manacles of neoclassical economics. And if governments use functional finance in a mindset that accepts MMT, then they can stimulate the formation of a skilled workforce in anything we want. This takes time and it requires something beyond macroeconomics. It requires us to embark on other types of reform. I had a shot at describing these other necessary reforms in Chapter 6 of The Public Interest Economy. MMT is not a cure for all our ills. But we can't cure ills until we grasp it. So understanding and accepting it is a first step towards addressing shortages of essentials, but only a first step. I'll be writing more on this in the next few months. Thanks for the great comments.
A timely shot across the bow!
I ask this not because I’m opposed to the basic insight of MMT, but because I’m not an economist and struggling to understand the implications:
Let’s assume a super-simplified economy that consists of just two classes of workers and their respective products: public sector nurses (healthcare) and private sector farmers (food). While MMT allows us to easily increase nurses’ pay or employ more nurses, no amount of fiat currency can increase the yield of food per acre or the land used for farming. If an increasing proportion of school-leavers prefer nursing to farming, how does MMT address the imbalances or shortages?
Excellent question. MMT doesn't address the imbalances. It underpins reforms we need at the macroeconomic level but it's not a policy as such, so it doesn't, of itself, solve shortages. Conceptually MMT changes the way that federal funding should be arranged; so it helps governments make much better choices about spending. It frees them up to spend as much as we need them to spend for our wellbeing and survival. It gets rid of the mind-forged manacles of neoclassical economics. And if governments use functional finance in a mindset that accepts MMT, then they can stimulate the formation of a skilled workforce in anything we want. This takes time and it requires something beyond macroeconomics. It requires us to embark on other types of reform. I had a shot at describing these other necessary reforms in Chapter 6 of The Public Interest Economy. MMT is not a cure for all our ills. But we can't cure ills until we grasp it. So understanding and accepting it is a first step towards addressing shortages of essentials, but only a first step. I'll be writing more on this in the next few months. Thanks for the great comments.