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Paying for Lunch -- MMT Style

gavinfielder

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This is a very good article and explains a good deal of the foundation of MMT rather articulately:

Paying for Lunch -- MMT Style | New Economic Perspectives

Dan Kervick said:
A common criticism of Modern Monetary Theory is that it is a naïve doctrine of free lunches. The critics grant that a country like the United States, which issues its own freely floating fiat currency, can always make the policy choice to issue whatever quantity of that currency it deems appropriate. The US government can spend as many dollars into the private sector economy as it chooses, without obtaining those dollars from some other source first, and it can always pay any debts that have been incurred by borrowing dollars. But the critics will go on to charge that MMT mistakenly concludes from these few institutional and operational facts that there are no economic limits to the wealth-generating capacities of the government. They caricature MMT as a doctrine of manna from heaven, in which the power of issuing a generally accepted medium of exchange confers the power of conjuring real wealth into existence by prestidigitation. In short, they see MMT as a disordered syndrome characterizing people who are experiencing massive money illusion.

But this criticism misses the mark. MMT does focus a good deal of attention on the monetary system and the banking system, and on the operational mechanisms of public and private finance. But the whole point of analyzing and clarifying the monetary system is to help people see through the glare of the economy’s glittering monetary surface to the social and economic fundamentals that operate below that surface. The point is certainly not to deny real limits on our capacity for economic development and progress, but to correctly identify where those limits lie – and where they don’t. MMT’s criticism of some standard economic and public policy approaches is that the standard discourses sometimes incorrectly locate those limits, and as a result manufacture artificial barriers to progress where none exist.

Our real opportunities for economic progress are grounded in our ability to apply work, cooperative activity and creative ingenuity to the real resources we already possess. By the enterprising application of our industry and intelligence, we transform the things we have into different and better things, and exchange our work and the products of our work among ourselves to make our lives better. Our real limits, then, are the constraints imposed by our inherently finite nature: we only have so many resources; we can only work so hard; our cognitive capacities are only so great; we only live so long, etc.

But what we must try to avoid is the imposition of artificial barriers to progress that are only the psychological fallout of confusion about the complex social institutions we ourselves have constructed. When we possess resources that are not used to improve our lives in the ways they could be used, when there are unemployed people in our societies who are both able and willing to do the work needed to improve those resources and realize their potential to yield value, and when people are suffering needlessly or living under deprived conditions as a result of the underemployment of resources and people, then we are somehow failing as a society to seize our real opportunities, and have succumbed to artificially imposed limits.

The monetary system is best seen as a public utility that is employed by its users to finance the production and exchange of goods and services. It is a system of institutions created by human beings to help realize opportunity, and match opportunities for the creation and transfer of goods with the potential producers and recipients of these goods. It’s our monetary system, and we can do whatever we want with it to achieve our society’s full potential. We can create, destroy, transfer or manipulate the monetary medium of exchange as we see fit to advance the good of society and improve the condition of our people. Thus there can be no such thing as an economic limit due solely to our society as a whole being “out of money”. That’s like saying we can’t organize better schools, or write more and better books because we have run out of words.

Many of the key ideas of Modern Monetary Theory go back to the years during and immediately following the Great Depression and the Second World War, when great thinkers and public servants applied bold, creative thinking and practical problem solving to the daunting economic and organizational challenges of their times, and helped their societies overcome systemic failure, triumph over threats and adversity, and achieve renewed optimism and growing prosperity. One of those thinkers was Abba Lerner, who developed the concept of functional finance, which he described this way in his paper “Functional Finance and the Federal Debt”:

The central idea is that government fiscal policy, its spending and taxing, its borrowing and repayment of loans, its issue of new money and withdrawal of money, shall be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine what is sound and what is unsound.​

Lerner then articulated two “laws of functional finance”, which I think still very well capture the spirit of the MMT approach to economic policy. The two laws are given as follows:

The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce.



The second law of functional finance is that the government should borrow money only if it is desirable that the public should have less money and more government bonds, for these are the effects of government borrowing.​

These two simple rules of action yield immediate logical results that people still find surprising or counterintuitive, and sometimes even find impossible. Recall that taxation generally reduces the total rate of spending and government spending generally increases total spending. Thus, a combination of tax changes and government spending changes will tend to increase government spending if it increases the government deficit, and will tend to reduce total spending if it reduces the government deficit. So, suppose the country is running a deficit, but suppose the total rate of spending in the country on goods and services is less than that rate which at the current prices would buy all the goods that it is possible to produce. Then the first law says the government should increase its deficit. But suppose it is not desirable that the public should have less money and more government bonds. Then according to the second law, the government should not issue more bonds. It should not finance the increased deficit with more borrowing.

But how is this possible? If a government wishes to increase its deficit, doesn’t it necessarily have to borrow to cover the larger gap between revenues and spending? No, it does not. A government that is the issuer of its own currency has the option of increasing its deficit without increasing bond sales. It can issue new money in the very act of spending it. And that is what the two laws of functional finance recommend in the hypothesized circumstances.

Unfortunately we have not made full use of this inherent governmental option, and have not implemented the laws of functional finance. Congress has legislatively implemented a system in which deficit spending automatically triggers bond sales, without regard to any calculations as to whether it is in fact desirable that the public have more government bonds and fewer dollars. And we have divided up the two important functions of issuing money and issuing government bonds between two different operational branches of the government – the Treasury and the Fed. Happily, there is some degree of a workaround available for those who might want to apply functional finance within our current legislatively determined framework, so long as these two branches of the government are able to work cooperatively. The Treasury can issue bonds and sell them for dollars, while the Fed is at the same issuing dollars and using them to purchase government bonds. But the system is probably not as efficient as it should be, and its functioning can be hampered by institutional jealousy over policy turf, and by the neoliberal preoccupation with central bank independence that characterizes the thinking of the most powerful members of the global financial class, a preoccupation which imposes a pressure for the Fed not to be seen as not cooperating too closely with the Treasury. So to fully implement functional finance, we might want to think about changing the current system.

Now note what the first law of functional finance says about a situation in which the total rate of spending in the country on goods and services is likely to be greater than that rate which at the current prices would buy all the goods that it is possible for the economy to produce. The result is that prices would then rise until spending and production at the new price level are in balance, and Lerner’s first law thus entails that the government’s responsibility in such a situation is to decrease spending to so as to prevent or curtail such price increases. So here is where functional finance takes account of the real limits of our economy, the ones built into our limited resources and limited capacity to produce.

Now, to be frank, Lerner’s first law of functional finance is perhaps overly austere. It views the economy as analogous to a factory or business enterprise, and views the government as a sort of demanding manager whose chief job responsibility is to assure production up to the level of full capacity. But our economy is not a wartime factory; it is a democratic society. And whether or not we produce everything that it falls within our capacity to produce should be a matter of public choice, not iron policy law. We might choose a somewhat more leisured and relaxing life than the one we would have if we were producing up to our full capacity.

But I believe the spirit of Lerner’s recommendations is still valid. If we are faced with a society in which there are many people who want to be working and contributing and producing, and earning incomes as a result, but who are not provided with the opportunity to do that work; and if we are presented with a society in which there is a general sense of stagnation and a general dissatisfaction with the levels of output, innovation and improvement, then surely it is our responsibility to act through our government to boost employment and the pace of economic development.

We owe all of our fellow citizens an opportunity to participate fully in the common work of building a prosperous life for ourselves, and we also owe them a fair share of the economic goods that that all of that work produces. And when we finally do right by them, perhaps they will at least be able to buy a well-earned lunch.
 

Xerographica

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This...

Our real opportunities for economic progress are grounded in our ability to apply work, cooperative activity and creative ingenuity to the real resources we already possess. By the enterprising application of our industry and intelligence, we transform the things we have into different and better things, and exchange our work and the products of our work among ourselves to make our lives better. Our real limits, then, are the constraints imposed by our inherently finite nature: we only have so many resources; we can only work so hard; our cognitive capacities are only so great; we only live so long, etc.​

...is the opportunity cost concept...

These extraordinarily complex micro-relationships are what we are really referring to when we speak of “the economy.” It is definitely not a single, simple process for producing a uniform, aggregate glop. Moreover, when we speak of “economic action,” we are referring to the choices that millions of diverse participants make in selecting one course of action and setting aside a possible alternative. Without choice, constrained by scarcity, no true economic action takes place. Thus, vulgar Keynesianism, which purports to be an economic model or at least a coherent framework of economic analysis, actually excludes the very possibility of genuine economic action, substituting for it a simple, mechanical conception, the intellectual equivalent of a baby toy. - Robert Higgs, Recession and Recovery

Without each and every one of our opportunity cost decisions..."no true economic action takes place". The thing is...half of our nation's revenue is spent by a small group of government planners. Each and every taxpayer does not have the freedom to choose whether they will spend more of their taxes on defense and less of their taxes on public education. The result?

When we possess resources that are not used to improve our lives in the ways they could be used, when there are unemployed people in our societies who are both able and willing to do the work needed to improve those resources and realize their potential to yield value, and when people are suffering needlessly or living under deprived conditions as a result of the underemployment of resources and people, then we are somehow failing as a society to seize our real opportunities, and have succumbed to artificially imposed limits.​

The fact that taxpayers can't choose where their taxes go is an artificially imposed limit. The solution, therefore, has nothing to do with printing more money and everything to do with helping people understand the negative consequences of this artificially imposed limit.

Your decision to spend your limited time replying to my post has nothing to do with MMT and everything to do with opportunity cost. If your decision is taken away from you and given to somebody else...then what happens to your creative ingenuity...your enterprising industry...and your intelligence? It's wasted...and that's not a problem that can be solved by printing more money.
 

JP Hochbaum

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I like this part the best:

"The monetary system is best seen as a public utility that is employed by its users to finance the production and exchange of goods and services. It is a system of institutions created by human beings to help realize opportunity, and match opportunities for the creation and transfer of goods with the potential producers and recipients of these goods. It’s our monetary system, and we can do whatever we want with it to achieve our society’s full potential. We can create, destroy, transfer or manipulate the monetary medium of exchange as we see fit to advance the good of society and improve the condition of our people. Thus there can be no such thing as an economic limit due solely to our society as a whole being “out of money”. That’s like saying we can’t organize better schools, or write more and better books because we have run out of words."

A fiat currency used to its potential makes a country operate at it's peak.
 

JP Hochbaum

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This...

Our real opportunities for economic progress are grounded in our ability to apply work, cooperative activity and creative ingenuity to the real resources we already possess. By the enterprising application of our industry and intelligence, we transform the things we have into different and better things, and exchange our work and the products of our work among ourselves to make our lives better. Our real limits, then, are the constraints imposed by our inherently finite nature: we only have so many resources; we can only work so hard; our cognitive capacities are only so great; we only live so long, etc.​

...is the opportunity cost concept...

These extraordinarily complex micro-relationships are what we are really referring to when we speak of “the economy.” It is definitely not a single, simple process for producing a uniform, aggregate glop. Moreover, when we speak of “economic action,” we are referring to the choices that millions of diverse participants make in selecting one course of action and setting aside a possible alternative. Without choice, constrained by scarcity, no true economic action takes place. Thus, vulgar Keynesianism, which purports to be an economic model or at least a coherent framework of economic analysis, actually excludes the very possibility of genuine economic action, substituting for it a simple, mechanical conception, the intellectual equivalent of a baby toy. - Robert Higgs, Recession and Recovery

Without each and every one of our opportunity cost decisions..."no true economic action takes place". The thing is...half of our nation's revenue is spent by a small group of government planners. Each and every taxpayer does not have the freedom to choose whether they will spend more of their taxes on defense and less of their taxes on public education. The result?

When we possess resources that are not used to improve our lives in the ways they could be used, when there are unemployed people in our societies who are both able and willing to do the work needed to improve those resources and realize their potential to yield value, and when people are suffering needlessly or living under deprived conditions as a result of the underemployment of resources and people, then we are somehow failing as a society to seize our real opportunities, and have succumbed to artificially imposed limits.​

The fact that taxpayers can't choose where their taxes go is an artificially imposed limit. The solution, therefore, has nothing to do with printing more money and everything to do with helping people understand the negative consequences of this artificially imposed limit.

Your decision to spend your limited time replying to my post has nothing to do with MMT and everything to do with opportunity cost. If your decision is taken away from you and given to somebody else...then what happens to your creative ingenuity...your enterprising industry...and your intelligence? It's wasted...and that's not a problem that can be solved by printing more money.

You need to move on from this. You keep referring to allocation of tax revenues, when MMT'ers keep telling you we don't believe tax revenue is needed. I get the fact that you must have dedicated a part of your life to this tax allocation thing but it isn't worth holding onto. Learn something new please, this is pointless to argue.
 

gavinfielder

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You need to move on from this. You keep referring to allocation of tax revenues, when MMT'ers keep telling you we don't believe tax revenue is needed. I get the fact that you must have dedicated a part of your life to this tax allocation thing but it isn't worth holding onto. Learn something new please, this is pointless to argue.
Well, taxation is at least necessary to create a demand for the currency. And controlling inflation, controlling inequality in some cases, and modifying behavior. Taxes are needed, just not for revenue.
 

Xerographica

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As an MMT'er it is silly to ask people to vote on where their tax dollars go, when we advocate that there be no income tax and for the most part only land value taxation.

You need to move on from this. You keep referring to allocation of tax revenues, when MMT'ers keep telling you we don't believe tax revenue is needed.

Which is it? First you say that only a land value tax is needed and then you say that no taxes are needed. And then gavinfielder, your fellow MMT'er, says that you're wrong about tax revenues not being needed.

I get the fact that you must have dedicated a part of your life to this tax allocation thing but it isn't worth holding onto. Learn something new please, this is pointless to argue.

1. gavinfielder created this thread to share Dan Kervick's article...Paying for Lunch – MMT Style
2. Dan Kervick's article attempts to address the widely held economic belief that there's no such thing as a free lunch.
3. If you've read the Wikipedia entry that I linked to...then you'd know that "TANSTAAFL demonstrates opportunity cost"
4. Opportunity cost ensures "that scarce resources are used efficiently"
5. Pragmatarianism is based on the opportunity cost concept
6. Therefore, allowing taxpayers to spend their taxes in the public sector would ensure that scarce resources are used efficiently

And here you are telling me to learn something new when you haven't even learned something old.

But maybe I'm wrong! Maybe you already know all about opportunity cost and have discovered that we can completely disregard it and still ensure that scarce resources are used efficiently. Or maybe you've discovered that it's really not that important to ensure that scarce resources are used efficiently.

I'm all about learning new things...so please...go ahead and share exactly why we can disregard the opportunity cost concept.
 

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Well, taxation is at least necessary to create a demand for the currency. And controlling inflation, controlling inequality in some cases, and modifying behavior. Taxes are needed, just not for revenue.

And now we get to the crux of the biscuit...."0the power of the state is necessary to control the people. Hmm......
 

gavinfielder

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Which is it? First you say that only a land value tax is needed and then you say that no taxes are needed. And then gavinfielder, your fellow MMT'er, says that you're wrong about tax revenues not being needed.
The key here is revenue. Traditionally we think of taxes as revenue. That's not the case for a nation with a sovereign fiat currency...unless there's a legal mechanism that forces a pass-through of taxed money to go directly to its purpose, and then its more of a mandatory payment for services. But we don't do that--there'd be no point in it in the first place.

MMT says that taxation is necessary, but revenue is not. So...we weren't at odds, really. It's just that lingering linguistic connection that we have between taxes and revenue, when really, Taxes for revenue are Obsolete.

And now we get to the crux of the biscuit...."0the power of the state is necessary to control the people. Hmm......
We use taxes to modify behavior, certainly. The easiest example is cigarette taxes. That's not the only purpose of tax, but both sin taxes and tax incentives can be effective in achieving enough of a change in behavior to, if premised correctly, be of benefit to society.
 

Xerographica

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MMT says that taxation is necessary, but revenue is not. So...we weren't at odds, really. It's just that lingering linguistic connection that we have between taxes and revenue, when really, Taxes for revenue are Obsolete.

So you agree with JP Hochbaum that there would be a Land Value Tax?

Well, taxation is at least necessary to create a demand for the currency. And controlling inflation, controlling inequality in some cases, and modifying behavior. Taxes are needed, just not for revenue.

How would you use taxes to control wealth inequality?

We use taxes to modify behavior, certainly. The easiest example is cigarette taxes. That's not the only purpose of tax, but both sin taxes and tax incentives can be effective in achieving enough of a change in behavior to, if premised correctly, be of benefit to society.

So you would have land value taxes, income taxes AND sin taxes? What about sales tax?

The key here is revenue. Traditionally we think of taxes as revenue. That's not the case for a nation with a sovereign fiat currency...unless there's a legal mechanism that forces a pass-through of taxed money to go directly to its purpose, and then its more of a mandatory payment for services. But we don't do that--there'd be no point in it in the first place.

The key here is that you haven't explained exactly how the government would know how to spend its revenue. Private organizations make educated guesses. If they guess right then they receive more revenue. If they guess wrong then they lose revenue. Right guesses are right because they use society's limited resources more efficiently. Wrong guesses are wrong because they use society's resources less efficiently.

In the absence of accurate feedback from citizens...without all their demonstrated preferences...without all their considerations of the opportunity costs...without all their decentralized knowledge...then how would the government know that it is efficiently allocating society's limited resources?
 

gavinfielder

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So you agree with JP Hochbaum that there would be a Land Value Tax?

How would you use taxes to control wealth inequality?

So you would have land value taxes, income taxes AND sin taxes? What about sales tax?
I don't know what taxes. And that's not relevant here anyway. Some taxes are necessary--no one can disagree with that.
 

imagep

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There is no need what so ever to have a sales or consumption tax, except for any need to control inflation, or to deincentivize the consumption of particular items, such as tobacco, pot, prostitution, gambling, alcohol, and fossil fuels.

An overall consumption tax is probably the most harmful form of tax, next to a tax on working.
 

Xerographica

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I don't know what taxes. And that's not relevant here anyway. Some taxes are necessary--no one can disagree with that.

Why would you say that no one can disagree with taxes being necessary when you're well aware of anarcho-capitalism? Let me refresh your memory ...

How could taxes not be relevant to a discussion on TANSTAAFL?

Pragmatarianism indirectly answers the question of whether taxes are necessary by allowing each and every taxpayer to choose, for themselves, which public goods are important enough for them to pay for with their own, hard-earned taxes.

In the absence of taxpayer choice...then how can you be confident that public funds would be be efficiently allocated? You didn't answer this question the first time I asked it. Maybe you forgot to do so. That's why I'm asking it again.

Perhaps the problem is that you do not understand the question? Let me try and cover all the bases...

The point of MMT is that the federal government does not have a budgetary constraint. They would be able to print as much money as they believed was necessary. The question that I'm concerned with...is how do they determine how to spend all the money that they printed? This is where the idea of "efficient allocation" comes into play.

Let's say that the government decided that education is a priority...so they spent 99% of all "their" money on public education. Obviously this would represent an inefficient allocation because it would only leave 1% for all the other government organizations. No problem though because the fed could just print more money to "adequately" fund all the other government organizations.

However, it is a problem though. If public education has a ton of additional money...it has to spend it. When it spends the money on new teachers, higher salaries, new schools, improved schools, laptops for students...the consequence is that resources are shifted away from all other sectors of the economy and redirected towards public education.

This is known as creative destructionism. Except...it's not the buggy whip factory being destroyed as a result of the creation of cars. It wasn't resources being shifted away from less beneficial uses and directed towards more beneficial uses...with the definition of "benefit" being independently determined by millions and millions of consumers. Public education wasn't using society's limited resources in new or innovative ways. They did absolutely nothing to "earn" the influx of resources. It was simply the result of some government planners going on a well researched hunch. They decided that public education should be a "winner".

Here's a bit of redundancy just to be sure that you understand the concept of efficient allocation.

If you're going to make an apple pie...you'll need an optimal balance of ingredients. In other words...you'll need an efficient allocation of inputs. Adding too much sugar would represent an inefficient allocation of inputs. If you add way too much sugar...if the allocation is extremely inefficient...then the pie will be ruined. "Ruined" here means that limited resources were wasted...the output was of no value to anyone.

Let's say that you decide to be innovative and add the perfect amount of lemon juice to the pie...and instead of sugar...you use honey. You share the pie with your friends and they love it so much that you decide to start selling your pies. You make millions and millions of dollars...which means that millions and millions of dollars aren't spent on less beneficial pies. Therefore, as a result of your innovative pies, the distribution of society's resources has become more efficient. All because everybody wants more bang for their buck.

You certainly get credit for your innovation...but we only know that your innovation had value because millions and millions of people had the freedom to choose your pie over the alternatives. This is how and why markets work. People have the freedom to exchange one thing that they value for another thing that they value even more. This is how we make progress.

Don't get me wrong...sometimes we take steps in the wrong direction...but the positive externality of freedom means that, because we are all unique individuals...with diverse values, interests, preferences and tastes, it's extremely unusual for people to all choose to step in the same direction. Heterogeneous activity hedges our bets as a society.

Ok, so let me ask the question again. In the absence of taxpayer choice...then how can you be confident that public funds would be be efficiently allocated?
 

gavinfielder

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You didn't answer this question the first time I asked it. Maybe you forgot to do so. That's why I'm asking it again.

Perhaps the problem is that you do not understand the question?
No, it's that you're posing the question here.

And everywhere else.
 

Xerographica

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No, it's that you're posing the question here.

And everywhere else.

Feel free to explain why the question is not relevant here. Do you not understand that you started a thread on the opportunity cost concept? Or do you not understand how opportunity cost is relevant to the efficient allocation of scarce resources?
 

JP Hochbaum

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This...

Our real opportunities for economic progress are grounded in our ability to apply work, cooperative activity and creative ingenuity to the real resources we already possess. By the enterprising application of our industry and intelligence, we transform the things we have into different and better things, and exchange our work and the products of our work among ourselves to make our lives better. Our real limits, then, are the constraints imposed by our inherently finite nature: we only have so many resources; we can only work so hard; our cognitive capacities are only so great; we only live so long, etc.​

...is the opportunity cost concept...

These extraordinarily complex micro-relationships are what we are really referring to when we speak of “the economy.” It is definitely not a single, simple process for producing a uniform, aggregate glop. Moreover, when we speak of “economic action,” we are referring to the choices that millions of diverse participants make in selecting one course of action and setting aside a possible alternative. Without choice, constrained by scarcity, no true economic action takes place. Thus, vulgar Keynesianism, which purports to be an economic model or at least a coherent framework of economic analysis, actually excludes the very possibility of genuine economic action, substituting for it a simple, mechanical conception, the intellectual equivalent of a baby toy. - Robert Higgs, Recession and Recovery
1. I don't think you understand opportunity cost or understand Keynesian economics. Calling it vulgar, without telling us why, is lazy and incoherent.

2/ How does Keynesian exclude the possibility of economic action? Keynesianism is primarily based on creating and adding to aggregate demand, which adds more economic activity, through tax cuts and spending.

3. The rest is really just attacking Keynes without saying what is wrong with it.

they are general quotes, which seems to be all you have in your repertoire (no facts or data).

Your beliefs and theories are based in what people say, not what they prove. It is A Priori falsehoods and illogical. A Vulcan would death grip you if you brought this up in discussion with them.
 

Xerographica

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1. I don't think you understand opportunity cost or understand Keynesian economics. Calling it vulgar, without telling us why, is lazy and incoherent.

Keynesian economics is vulgar because it disregards the opportunity cost concept. The opportunity cost concept only works with your own money.

Opportunity cost: Obama reaches into his own wallet, pulls out $5...and decides whether he spends HIS $5 on a book or a sandwich. His decision will reflect his priorities.

Not opportunity cost: Obama reaches into everybody's wallet, pulls out $5...and decides whether he spends NOT HIS money on public education or public healthcare. His decision will not reflect all our priorities.

Not opportunity cost: Obama prints millions and millions of dollars...and decides whether he spends NOT HIS money on public education or public healthcare. His decision will not reflect all our priorities.

Opportunity cost: Each and every taxpayer pulls $5 tax dollars out of their own wallet...and each and every one of them decides whether they spend THEIR OWN $5 on public education or public healthcare. Their decisions will reflect all their priorities.

When you spend your money you consider the alternative uses of your money. Your spending decisions reflect your priorities. And it's your priorities...plus my priorities...plus everybody else's priorities which determine how society's limited resources are used.

2/ How does Keynesian exclude the possibility of economic action? Keynesianism is primarily based on creating and adding to aggregate demand, which adds more economic activity, through tax cuts and spending.

If people aren't spending their own money...if each and every one of us isn't considering the alternative uses of our limited resources...then it's Keynesian economics. If you don't need all of our priorities in order for economics to work...then this fact can't only be sometimes true. Government planners should be able to tell us exactly how much of society's limited resources should be shifted to the production of laptops, artichokes and candles.

3. The rest is really just attacking Keynes without saying what is wrong with it.

No, he explained exactly what's wrong with it...he just did not do so in a way that you can easily understand.

they are general quotes, which seems to be all you have in your repertoire (no facts or data).

It's logic. You either can...or you can't...refute it.

Your beliefs and theories are based in what people say, not what they prove. It is A Priori falsehoods and illogical. A Vulcan would death grip you if you brought this up in discussion with them.

You want the most bang for your buck. True or false?
 

JP Hochbaum

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Keynesian economics is vulgar because it disregards the opportunity cost concept. The opportunity cost concept only works with your own money.
This is where your premise fails.

In this scenario if I take money via taxation and give it to someone else. That person getting the tax money now has opportunity cost. They get to decide what to do with that money now.

In MMT scenario taxation is only needed to prevent inflation and create a less inequal society.

Plus all the facts and data show that when things become less equal democracy starts to falter, riots start to happen, and crime rises. That isn't opportunity that is a failing society.
 

ttwtt78640

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This is a very good article and explains a good deal of the foundation of MMT rather articulately:

Paying for Lunch -- MMT Style | New Economic Perspectives

But what we must try to avoid is the imposition of artificial barriers to progress that are only the psychological fallout of confusion about the complex social institutions we ourselves have constructed. When we possess resources that are not used to improve our lives in the ways they could be used, when there are unemployed people in our societies who are both able and willing to do the work needed to improve those resources and realize their potential to yield value, and when people are suffering needlessly or living under deprived conditions as a result of the underemployment of resources and people, then we are somehow failing as a society to seize our real opportunities, and have succumbed to artificially imposed limits.

Much of the current gov't spending does nothing to "improve those resources and realize their potential to yield value". The largest expendatures of our federal gov't are on the military and people that do not produce (retirees and those unable to produce enough to feed, cloth and house even themselves). We are fast becoming an entirely retail sales, gov't and service economy, as less and less of our population is involved in agriculture and manufacturing. Gov't "investment" in basic research and infrastructure is one thing, but simply rewarding failure (via income redistribution) is quite another. To assert that all gov't spending is equally effective is insane. When you tax something (wages?) you get less of it, when you subsidize something (out of wedlock childbirth?) you get more of it.
 

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Much of the current gov't spending does nothing to "improve those resources and realize their potential to yield value". The largest expendatures of our federal gov't are on the military and people that do not produce (retirees and those unable to produce enough to feed, cloth and house even themselves).

Would we even have a country today if we didn't have a military? But I do believe that we should be able to significantly reduce the size of our military, and reduce the number of wars that we start. I'd much rather spend our tax revenues on something that is productive and has value, than to piss it away on foreign wars that don't result in an improvement in the well being of Americans or America.

As far as government employee retirees, what we are paying them was negotiated when they were working. I'm not sure that it would be the right thing to do to reneg on past contracts. But I do agree that we should start phasing out deferred compensation (pensions).

Many of the people who don't have enough income to feed/cloth/house themselves produce plenty, they just don't have the power to negotiate a decent cut of their productivity for themselves.

We are fast becoming an entirely retail sales, gov't and service economy, as less and less of our population is involved in agriculture and manufacturing. Gov't "investment" in basic research and infrastructure is one thing, but simply rewarding failure (via income redistribution) is quite another. To assert that all gov't spending is equally effective is insane. When you tax something (wages?) you get less of it, when you subsidize something (out of wedlock childbirth?) you get more of it.

A lot of that "failure" isn't failure to produce, it is failure of our system to provide lower skilled workers with enough negotiating power to have a decent wage.

That said, I agree with you that we shouldn't be providing means tested welfare freebies. I think that it is much preferable to utilize that money towards improving our infrastructure and educational system. I actually think that we should consider education as part of our infrastructure. By increasing infrastructure spending, we can replace welfare spending with productive work, which will improve our economy, and capability to be productive, by far more than welfare handouts. It's a tradeoff, and a darn good one.

And I agree that taxing work results in less of it. But I have to make a distinction between income and work, because not all income comes from work. What we should be taxing is income that is above and beyond any income that is justified by the amount of work that we do. this is why I believe that we should only have two income tax rates and brackets. The zero rate bracket for all income up to about $400k (which is about the maximum commonly found income of our most highly skilled and educated workers - the MD specialist), and the smallest rate neccesary to have a balanced budget, on income over $400k. By removing the tax disincentive to be productive, for 99% of our citizens, we will have a far wealthier nation, and by only having an income disincentive on income which exceeds the norm, we will end up with less disparity of income, and thus less need for welfare freebies.
 

Xerographica

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This is where your premise fails.

In this scenario if I take money via taxation and give it to someone else. That person getting the tax money now has opportunity cost. They get to decide what to do with that money now.

How you spend your money reflects everything that you know and value. If you take everybody's money and give it to one person...then how that one person spends everybody's money will not reflect what everybody knows and values.

Now tell me...does what everybody know and value matter to how society's scarce resources are used?

In MMT scenario taxation is only needed to prevent inflation and create a less inequal society.

How would it create a more equal society?

It doesn't matter whether taxes are being used to help pay for government programs...or whether you're printing money to help pay for government programs...the fact of the matter is...however the government spends "its" money will modify how society itself has chosen to distribute its resources.

Markets work because it's the epitome of a group effort. Millions and millions of people use their dollars to influence how society's resources are used. If somebody wants you to purchase their product...you have the freedom to say "no deal". And because we all have the freedom to boycott nonsensical trades...it's a given that the distribution of resources makes sense to society which is why it maximizes the benefit for society.

So if the government modifies how society itself has chosen to distribute its resources...it will disregard the information and values of millions and millions of people. We'll end up with too much public education and not enough public healthcare. We'll end up with major bottlenecks because command economies can't access as much decentralized knowledge as market economies can.

Plus all the facts and data show that when things become less equal democracy starts to falter, riots start to happen, and crime rises. That isn't opportunity that is a failing society.

Why is wealth unequally distributed? Do you blame the wealthy? Do you blame the 1%? Are they controlling the 99%? Does the 1% control how every person who earns $7.25/hr spends their money? Does the 1% lurk around Walmart sneaking items into people's shopping carts? Does the 1% whisper in your ear when you're shopping on Amazon?

Read up on...

1. Concentrated benefits and diffuse costs
2. Privatizing profits and socializing losses
3. Socialism for the rich and capitalism for the poor

What would happen in a pragmatarian system? Could you have concentrated benefits and dispersed costs? Could you have socialism for the rich and capitalism for the poor? How would that be possible?
 

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Why is wealth unequally distributed?

It's mostly the result of unequal of negotiating power, but of course inheritiance, corruption, cronieism, luck, stupidity, and various other factors also play into it.
 

JP Hochbaum

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How you spend your money reflects everything that you know and value. If you take everybody's money and give it to one person...then how that one person spends everybody's money will not reflect what everybody knows and values.

Now tell me...does what everybody know and value matter to how society's scarce resources are used?
You are treating tax revenues as a scarce resource, when they aren't. A good chunk of what you debate here is based off things that aren't true. Money is not scarce in a monetarily sovereign nation.
 

Xerographica

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It's mostly the result of unequal of negotiating power, but of course inheritiance, corruption, cronieism, luck, stupidity, and various other factors also play into it.

Are any two ways of using a limited resource equally beneficial to society?
 

Xerographica

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You are treating tax revenues as a scarce resource, when they aren't. A good chunk of what you debate here is based off things that aren't true. Money is not scarce in a monetarily sovereign nation.

So...can I have your money?
 

JP Hochbaum

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How you spend your money reflects everything that you know and value. If you take everybody's money and give it to one person...then how that one person spends everybody's money will not reflect what everybody knows and values.

Now tell me...does what everybody know and value matter to how society's scarce resources are used?



How would it create a more equal society?

It doesn't matter whether taxes are being used to help pay for government programs...or whether you're printing money to help pay for government programs...the fact of the matter is...however the government spends "its" money will modify how society itself has chosen to distribute its resources.

Markets work because it's the epitome of a group effort. Millions and millions of people use their dollars to influence how society's resources are used. If somebody wants you to purchase their product...you have the freedom to say "no deal". And because we all have the freedom to boycott nonsensical trades...it's a given that the distribution of resources makes sense to society which is why it maximizes the benefit for society.
You are again basing your entire argument on the bolded part. You make claims that are religious ideology in nature. There is no evidence that society maximizes the benefits for itself.

Stop linking to OP ED pieces, I won't respond to them. Opinions mean nothing in economics. What matters is empirical data and history and what that history has shown to work and not work.

So stop with the ideology crap, I don't care about ideology I care about results only.

Show me results or consider yourself ignored, it aint worth the effort anymore.
 
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