Randall Wray Public lecture “Modern Money Theory & the Job Guarantee” Sept 11th 2014

This talk was a condensed introduction to Prof Wray's theories. It was well attended considering the early time slot, but the auditorium was certainly not full.

Prof Wray explained briefly that his economic viewpoint was heavily influenced by his teacher Herman Minsky- who is widely referenced in the post '08 crash debates- much of his work centred on studying the mechanisms that cause debt escalation in the economy and consequently financial crises.

The main body of the talk centred on the notion of full employment and the benefits for employees, employers and the macro economy as a whole of keeping people in work. This proposal sees the state having a far more proactive role in the economy, by becoming the 'employer of last resort'. Job guarantee schemes could provide basic wage employment for all who are able and seeking employment. The basic wage would in effect become a mechanism for controlling the wage scale throughout the economy as obviously nobody would voluntarily work for less than the pay of a state created job.

Wray explained the widely held view within economic theories of the need for a 'buffer stock' of unemployed people, that exerts a downward pressure on wages and hence prices. By stepping in as an employment provider, the idea is not that the state would be taking jobs away from the private sector but rather taking up the slack when the market can't provide enough jobs for all who want one. In this sense the business cycle would be mirrored to a degree by the job guarantee schemes, i.e. as business picked up and more private sector jobs were available people would move over in their employment, and vice versa. 

Wray made mention of the Jefes experiment in Argentina that appears to have worked well in helping the lot of poorer families after the currency crisis there wrecked the economy. Drawn up very much along the lines of MMT theory, it recruited communities to design jobs which the state then funded (i.e. 'what needs doing in your community?- the state will pay you to do it')

The benefits for employers is often overlooked by the theory's critics, however recruiting someone who is already working is usually preferred by business owners. The personal benefits for employees of remaining in work are largely obvious, even at low pay people's sense of self worth and opportunities for training etc. are higher. Wray stressed that people should not be forced to work.

The end of the talk touched briefly on the mechanism whereby government would simply instruct the central bank to issue more money to fund the state jobs ('the government cannot run out of keystrokes, therefore it cannot run out of money'). The theory that public debt is synonymous with private wealth was mentioned, although I can't claim to fully understand this concept I believe that it is central to MMT.  The danger of inflation was noted in passing but the idea that if there remained reserve capacity in the economy, inflation should not be a problem.

I've yet to read a more detailed account of the Jefes program, but it sounds like a working example is a definite plus compared to similar proposals. Here is a link for anyone who wants to read more.