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You implement a Job Guarantee. The ability to sell your labour to the central bank at the living wage, who then allocates it to local democracy to use as local

You implement a Job Guarantee. The ability to sell your labour to the central bank at the living wage, who then allocates it to local democracy to use as local democracy sees fit working for the public good. After all the 'interest rate targeting' function of the central bank, and the unelected wonks that run it, is supposed to guarantee full employment. If it isn't doing so, then those who screwed up should obviously pay the price of their failure. That it acts as a powerful targeted automatic stabiliser injecting liquidity temporally and spatially on demand into local economies in a manner bank lending could never hope to match is just an added bonus.

nickles 7y ago
For anyone unfamiliar, a job guarantee is a proposal of Modern Monetary Theory. Although the validity of MMT has neither been established nor disproven explicitly, it relies on, among other things, the ability of a nation to print its own currency, collect taxes in its own currency, and issue debt exclusively in its own currency. It is therefore not applicable in all nations. > The ability to sell your labour to the central bank at the living wage, who then allocates it to local democracy to use as local democracy sees fit working for the public good. How would a central bank determine allocations to various municipalities? This step necessarily requires discretion on the part of the central bank. Such a policy would distort the labor market, crowding out private sector employment and potentially producing malinvestment. It would also increase the power of the central bank, which is not necessarily desirable if the unelected nature of central bankers is a concern. > the 'interest rate targeting' function of the central bank... is supposed to guarantee full employment The Federal Reserve bank has a dual mandate of stable, low inflation and low unemployment. Central banks in many other countries are mandated only to maintain stable, low inflation. > That it acts as a powerful targeted automatic stabiliser There are other automatic stabilizers that can be implemented independent of the central bank. In the United States, for example, tax incentives for employer provided health insurance have a procyclical effect, as decreased employment during recession causing reduced healthcare expenditures. > bank lending could never hope to match Global lending has been distorted since 2008 due to the Federal Reserve's interest on excess reserves policy. The combination of increased reserve requirements, increased bank reserves due to the fed's enlarged balance sheet, and the availability of a risk free return on reserves has reduced the overall quantity of loans relative to prior trends. Even small, local banks, who would otherwise like to make loans and are subject to less stringent reserve requirements, have increased the reserves on hand due to the breakdown of the federal funds market caused by IOER. It's hard to definitively state that bank lending is less effective than other policy when it's been hampered by central bank policy for a decade.
- neilwilson 7y ago
  "It is therefore not applicable in all nations." It's applicable to all nations. You could have a currency that is specifically for this job. As long as you remember to tax it out of existence at the other end. "This step necessarily requires discretion on the part of the central bank. " The process in the UK is straightforward. It follows the existing Universal Credit system. The indidividual presents themselves at the local Job Centre, the Job Centre signs them up and allocates them as local democracy dictates to jobs in the area (whether working for local councils, or local charities as the municipality dictates). The job program signs off timesheets which are filed with the UC programme, and then the UC is paid - directly by the central bank. Rather than a 'Treasury' account, you use a 'Job Guarantee' account to charge the bill to. Other than than the process is the same. "The Federal Reserve bank has a dual mandate of stable, low inflation and low unemployment. " Which it is failing to keep. Central banks without employment targets have high unemployment - particularly if government is constrained. "There are other automatic stabilizers that can be implemented independent of the central bank." Not and allow a balanced budget provision at the same time. "Global lending has been distorted since 2008 due to the Federal Reserve's interest on excess reserves policy" Without that central interest rates would be zero. The natural rate of interest is zero in the interbank - as any banker will tell you. Central banks interfere in the market to raise rates. Reserves have no control function over bank lending. At all. Ever. And anyway that misses the point. Bank lending takes time, which as any student of dynamic systems knows introduces unstable harmonics into the response function. The reaction is precisely the same as trying to stabilise a skidding car with a steering wheel. Get too big a skid and you can't counter it because you can't respond fast enough. Then the car crashes.
mhroth 7y ago
It sounds nice. But isn't this literally the kind of top-down centrally-planned economy that was implemented in many post-WW2 socialist states? [0] [0] https://en.wikipedia.org/wiki/Socialist_economics https://en.wikipedia.org/wiki/Socialist_economics
biztos 7y ago
What happens if the local democracy determines that your labor is not worth the living wage? What if it really is worth the living wage, but the Allocator wants to cheat you?
darkmighty 7y ago
I recommend this (well fundamented as usual) post from SSC: 'Basic Income, Not Basic Jobs: Against Hijacking Utopia.' https://slatestarcodex.com/2018/05/16/basic-income-not-basic-jobs-against-hijacking-utopia/ https://slatestarcodex.com/2018/05/16/basic-income-not-basic... I think the main argument should be fundamented by charitable assumption, that most people actually have decent plans for employability and could use the available time much better than being stuck on a Job Guarantee (that could have very low marginal value to the employer anyway).
- neilwilson 7y ago
  The problem with that is that other people won't accept it - because you are being paid twice. Once with the output of other people who are using up their finite lives working for output from you, and once self consuming your own time. Unsurprisingly those working resent this, as they'd rather have Friday off than work an extra day to produce output for people who are producing nothing for them in return. The workers then agitate to have the income removed from those not contributing. Which is why every basic income 'experiment' in history has failed. Once you look at it in real terms, the fallacy of composition shows itself. You can't expect others to give up hours of their lives for you if you don't demonstrably give up hours of your life for them in return. Hence why you have a Job Guarantee (and frankly most of the private sector nonsense jobs out there). It is a public demonstration to those working the machines, that actually produce the output we need, that you are trying to give up hours in solidarity with them. Then they won't feel they are being ripped off by working past Tuesday. "that could have very low marginal value to the employer anyway" It's the job of the employer to extract value. If they can't then they don't get paid. Capitalists only get paid if they transform labour hours into labour services effectively. If they can't, they go bust. However the labour hours still need to be sold, because that is what keeps the labourer alive. You must give up hours of your life, if you expect others to do the same for you. If value cannot be extracted, then it gets transferred from capitalists who have failed to do their job properly.

nickles 7y ago

For anyone unfamiliar, a job guarantee is a proposal of Modern Monetary Theory. Although the validity of MMT has neither been established nor disproven explicitly, it relies on, among other things, the ability of a nation to print its own currency, collect taxes in its own currency, and issue debt exclusively in its own currency. It is therefore not applicable in all nations. > The ability to sell your labour to the central bank at the living wage, who then allocates it to local democracy to use as local democracy sees fit working for the public good. How would a central bank determine allocations to various municipalities? This step necessarily requires discretion on the part of the central bank. Such a policy would distort the labor market, crowding out private sector employment and potentially producing malinvestment. It would also increase the power of the central bank, which is not necessarily desirable if the unelected nature of central bankers is a concern. > the 'interest rate targeting' function of the central bank... is supposed to guarantee full employment The Federal Reserve bank has a dual mandate of stable, low inflation and low unemployment. Central banks in many other countries are mandated only to maintain stable, low inflation. > That it acts as a powerful targeted automatic stabiliser There are other automatic stabilizers that can be implemented independent of the central bank. In the United States, for example, tax incentives for employer provided health insurance have a procyclical effect, as decreased employment during recession causing reduced healthcare expenditures. > bank lending could never hope to match Global lending has been distorted since 2008 due to the Federal Reserve's interest on excess reserves policy. The combination of increased reserve requirements, increased bank reserves due to the fed's enlarged balance sheet, and the availability of a risk free return on reserves has reduced the overall quantity of loans relative to prior trends. Even small, local banks, who would otherwise like to make loans and are subject to less stringent reserve requirements, have increased the reserves on hand due to the breakdown of the federal funds market caused by IOER. It's hard to definitively state that bank lending is less effective than other policy when it's been hampered by central bank policy for a decade.

neilwilson 7y ago
"It is therefore not applicable in all nations." It's applicable to all nations. You could have a currency that is specifically for this job. As long as you remember to tax it out of existence at the other end. "This step necessarily requires discretion on the part of the central bank. " The process in the UK is straightforward. It follows the existing Universal Credit system. The indidividual presents themselves at the local Job Centre, the Job Centre signs them up and allocates them as local democracy dictates to jobs in the area (whether working for local councils, or local charities as the municipality dictates). The job program signs off timesheets which are filed with the UC programme, and then the UC is paid - directly by the central bank. Rather than a 'Treasury' account, you use a 'Job Guarantee' account to charge the bill to. Other than than the process is the same. "The Federal Reserve bank has a dual mandate of stable, low inflation and low unemployment. " Which it is failing to keep. Central banks without employment targets have high unemployment - particularly if government is constrained. "There are other automatic stabilizers that can be implemented independent of the central bank." Not and allow a balanced budget provision at the same time. "Global lending has been distorted since 2008 due to the Federal Reserve's interest on excess reserves policy" Without that central interest rates would be zero. The natural rate of interest is zero in the interbank - as any banker will tell you. Central banks interfere in the market to raise rates. Reserves have no control function over bank lending. At all. Ever. And anyway that misses the point. Bank lending takes time, which as any student of dynamic systems knows introduces unstable harmonics into the response function. The reaction is precisely the same as trying to stabilise a skidding car with a steering wheel. Get too big a skid and you can't counter it because you can't respond fast enough. Then the car crashes.

mhroth 7y ago

It sounds nice. But isn't this literally the kind of top-down centrally-planned economy that was implemented in many post-WW2 socialist states? [0] [0] https://en.wikipedia.org/wiki/Socialist_economics https://en.wikipedia.org/wiki/Socialist_economics

biztos 7y ago

What happens if the local democracy determines that your labor is not worth the living wage? What if it really is worth the living wage, but the Allocator wants to cheat you?

darkmighty 7y ago

I recommend this (well fundamented as usual) post from SSC: 'Basic Income, Not Basic Jobs: Against Hijacking Utopia.' https://slatestarcodex.com/2018/05/16/basic-income-not-basic-jobs-against-hijacking-utopia/ https://slatestarcodex.com/2018/05/16/basic-income-not-basic... I think the main argument should be fundamented by charitable assumption, that most people actually have decent plans for employability and could use the available time much better than being stuck on a Job Guarantee (that could have very low marginal value to the employer anyway).

neilwilson 7y ago
The problem with that is that other people won't accept it - because you are being paid twice. Once with the output of other people who are using up their finite lives working for output from you, and once self consuming your own time. Unsurprisingly those working resent this, as they'd rather have Friday off than work an extra day to produce output for people who are producing nothing for them in return. The workers then agitate to have the income removed from those not contributing. Which is why every basic income 'experiment' in history has failed. Once you look at it in real terms, the fallacy of composition shows itself. You can't expect others to give up hours of their lives for you if you don't demonstrably give up hours of your life for them in return. Hence why you have a Job Guarantee (and frankly most of the private sector nonsense jobs out there). It is a public demonstration to those working the machines, that actually produce the output we need, that you are trying to give up hours in solidarity with them. Then they won't feel they are being ripped off by working past Tuesday. "that could have very low marginal value to the employer anyway" It's the job of the employer to extract value. If they can't then they don't get paid. Capitalists only get paid if they transform labour hours into labour services effectively. If they can't, they go bust. However the labour hours still need to be sold, because that is what keeps the labourer alive. You must give up hours of your life, if you expect others to do the same for you. If value cannot be extracted, then it gets transferred from capitalists who have failed to do their job properly.