Henric

Is it always better to have someone producing something rather than nothing? Chapter 8: "Is It 'Better to Produce Anything than Nothing'? Job Guarantees Versus Idleness" by Lucas M. Engelhardt. One of MMT's signature policy proposals is a federal job guarantee. The government would offer employment at a fixed wage to anyone willing and able to work. They say that this would eliminate involuntary unemployment, put idle resources to work, and help stabilize the economy. But Dr. Engelhardt asks: "Why are resources idle in the first place?" - p. 190 Drawing on W. H. Hutt's The Theory of Idle Resources, Dr. Engelhardt explains that apparent "idleness" isn't necessarily wasteful. A machine might sit unused because its owner expects more valuable opportunities in the future. Someone might remain unemployed while searching for a better job. Students forgo employment while in school. Some people simply prefer leisure to the available employment opportunities. Hutt called some of these situations pseudo-idleness. What appears to be wasted productive capacity is actually in the factor owner's best interest. If anyone else has a better idea on how to use the "idle" machine or labor, they are free to bid for it and employ it. Simply observing that a resource isn't currently being used doesn't establish that putting it to work would improve economic welfare. But there's another problem with the job guarantee: "very few jobs rely on labor alone." - p. 203 Suppose the government hires unemployed workers to paint murals. They'll need paint, brushes, ladders, transportation, etc. Other government jobs require computers, office space, and other equipment. All these complementary resources have alternative uses. And here's where the calculation problem enters (once again--noticing a theme in this book?): "Without accounting for profit and loss, it is impossible to say whether the cost of these workers is worth the value of the services they provide." - p. 204 Dr. Engelhardt points out that even if job guarantee wages are comparable to unemployment benefits, the additional costs of employing workers could make the program substantially more expensive. Anyone (even government bureaucrats!) can find something for unemployed workers to do. The trick is finding something for them to do where the value of what they produce exceeds the opportunity cost. Only the profit and loss system of the market can do that.

MMTers need to check their privilege. Chapter 7: "'Check Your Privilege': MMT's Privilege Position and Economic Destructionism," by Joshua Mawhorter. MMTers point to the United States as the monetary sovereign par excellence. Kelton: "When a country issues its own nonconvertible (fiat) currency and only borrows in its own currency, that country has attained monetary sovereignty." But Mawhorter asks a question MMTers rarely consider: How did the US achieve this privileged position in the first place? "MMT gained intellectual traction in wealthy countries—wealthy in production, with a stronger record of respecting free trade, property rights, and sound money." - p. 166 Mawhorter argues that the US attained this status through centuries of capital accumulation, private investment, and relatively sound money—not by following MMT's prescriptions. And there's another problem. MMT's chartalist theory claims that money originates with the state, particularly through taxation. But American colonial "governments could only get people to accept paper money substitutes because there was a preexisting link between the paper and the commodity money." - p. 168 MMT takes for granted the very economic institutions and accumulated wealth that its policies would undermine. This brings us to the Mawhorter's most important point: capital doesn't automatically sustain itself. As Mises put it, "Capital does not reproduce itself." - quoted on p. 172 Capital goods must be maintained, replaced, and accumulated through saving and investment. Diverting resources toward present consumption (see Patrick Newman's chapter) can create the appearance of prosperity while actually consuming the economy's capital stock. Mises called this economic destructionism. MMTers pay lip service to the fact that the government cannot print real resources. But they ignore how monetary expansion, taxation, and government spending can distort economic calculation, discourage capital accumulation, and waste productive resources. MMT "is a theory of unacknowledged privilege built atop foundations it would destroy." - p. 183 What happens to the dollar's privileged position if those foundations are gradually eroded? Read the full chapter here: mises.org/library/book/anti-…