Saturday, April 28, 2012

An Interesting Idea From a Dubious Source

Much of the talk on the econ blogs I follow revolves around the idea of a Job Guarantee (JG). This is an idea deeply imbedded into the MMT macro view. Some say its a necessary component and that "You are not an MMTer if you dont endorse the idea". Others are less dogmatic about it but it cant be denied that full employment, defined as anyone who wishes to earn an income is able to, is a primary goal of the MMT macro view. The other part of the trick is price stability though and the macroeconomists within the MMT school argue that price stability is best achieved by a wage anchor. The design of a JG can run anywhere from a fully federally controlled "make work" type program to a subsidy of private businesses at whatever level is necessary to "hire" everyone.  The common denominator in both ends of the spectrum is recognizing the reality that the govt, as currency issuer, can fully fund a full employment economy. There are tradeoffs in every system but there is no saying "we dont have the money to do this". Thats a huge hurdle for a large portion of the population. Many believe the govt would run out of money if such a venture were tried.

 One idea that has been offered involves an income guarantee, payable through a paypal debit card account. Here is the originator of the idea (as far as we know, the originator) Morgan Warstler;

  Using a clone of Paypal and Ebay platforms, the US govt. should establish a Guaranteed Wage of $240 per week. Anyone who wants to work registers, receives a Debit Card,and each Friday has their GI deposited. All recipients have their labor weeks auctioned online. Bidding begins at $40 per week ($1 per hour). Bid increases by .50 cents per hour ($20 increments). Recipients keep 50% of the top bid, if they take it. If they opt for a lesser bid outside certain boundaries there are penalties (fraud measure). Recipients cannot be made to work outside a radius of a couple miles. Bidders must deposit money into system before they bid. They must accurately describe the job. Feedback will be given both ways. If you are familiar with Ebay, you understand what this accomplishes. There are no taxes paid, there are basic workplace protection requirments. Umbrella insurance is sold on site for folks bringing labor into their home. Expect 30M to register so approx $345B is our cost assuming 30M are auctioned at $1 (The govt. is picking up $5.50 and bidders are in for $1) At an avg. bid of $4 per hour, avg. worker is making $8, and the govt. is spending $250B a year. There is no more UI. There is no more minimum wage. That’s why there are 30M in program.

I would have to say that normally I would be 75-100% behind the idea. Its simple, it allows choices, there is a lot of bottom up thinking to it, the framework for it is in place already and I do think many people on both sides of the spectrum could get behind it. My primary reservation is knowing who came up with it. Not that I really KNOW Mr Warstler. He's as anonymous to me as Arthur Shipman or Mike Sax, guys on the internet I talk to with my keyboard. I wouldnt know any of these three if they walked in my house but I have read a lot of what they have to say on the sites I visit. I feel like I know them and know what kind of people they are. Mr Warstler is NOT good people, as they say.

First off Morgan is a fan of and I think a contributor to the late (yea!!) Andrew Breitbarts site. I'm not sure who is (was) a more despicable person, Breitbart or Limbaugh. Its close. So anyone who contributes to anything that guy did is only making the world worse. Not that bad people cant come up with good ideas, and vice versa, but in general I prefer ideas that come from people who at least seem to not be psychopaths.

 Turns out Im not the only one who thinks Morgan Warstler reads like a toxic personality. Here is Raul Groom at "The Vanishing Dollar":

  As many who read this blog (if any section of this blog's readership can be usefully called "many") probably already know, there is a person out in Internet-land who calls himself Morgan Warstler. He's a blogger for the odd, ugly, and mostly useless righty politics site Big Government (full name: "Andrew Breitbart presents Big Government featuring editor in chief Mike Flynn," and no I am not making that up). He's a gadfly on several well-known economics blogs including Scott Sumner's The Money Illusion, but most of my dealings with him have been at Yglesias' place over at ThinkProgress. All in all, the guy is a nutcase, and I really don't recommend listening to him, reading him, or talking to him at all. It will just make you angry and confused. That said, the Warstler may well be a genius. He's fallen in with the wrong people and has couched his policy recommendations in politically toxic, morally bankrupt packages. But the man is onto something. I know, I know. Forty-two loyal Yglesias fans (the entire readership of this blog, sadly) just threw up a little in their mouths. But Morgan's Guaranteed Income plan is sort of on to something. I'll explain later. Just wanted to warn you, sort of an econ version of the "trigger warnings" on sites that focus on social issues. I will be taking up a lukewarm defense of Warstler this week. Consider yourself on notice.

Dan Kervick, one of my favorite posters of late says; "I call Morgan Warstler a "Darth Vadar Marxist". Those are folks who seem to accept a whole bunch of Marx's theorizing about class warfare, but who then try to encourage everyone to join the dark side of the greedy capitalists"

 Obviously Ive made the point that I think he's a terrible guy, but he's also afflicted with some really poor economic thinking. He thinks the whole problem with our unemployment problem is simply too high of wages (Yes if we all made even less more of us would default at the debt levels we've achieved..... making the banks really happy then). He views the economy as a zero sum game where the only way someone who doesnt have something can get it is by depriving someone else of that thing (which would mean in his world the only way the "haves" got it was by getting it at the expense of the "have nots"....... try making the argument that the US is rich only because theyve made Africa, Mexico and Central America poor... I dare ya!). He also in one of his comments at someones site made the statement that consumption was "bad".  Bad? Tell that to the worlds manufacturers who are just looking for someone to consume their  product  How can something which is the other side of the coin from production be bad?  Putting a label on an economic variable like that strikes me as religious zealotry. Puritanic.

 Now all of this, again,is not to say that he hasnt hit on something quite good. He may very well have. I dont have large objections to it but whenever someone who thinks like an Austrian economist, is friendly to the likes of Andrew Breitbart and is smart (cunning may be a more appropriate description) I think one should look real hard at ANYTHING he proposes.

 Im pretty sure that over 90% of the time if Morgan Warstler likes it........ I wont.


  1. Greg! Finally the tables are turned! Didn't know you had a blog but am now a member.

    Warstler's defintely a character. I knew he was a Breitbart man but not that he actually writes at Big Government.

    My dealings with him are mostly at Sumner's Money Illusion.

    I'm not clear how Warstler's plan is better than the MMT JG.

    Mind you I do agree that the MMTers while I have learned a good deal from and agree with on many things can be-some of them-a little dogmatic. Not Dan Kervick though, and many of them are cool.

    I do often think that if they improved their peronality they might win more converts. Even when people flatter them-and are sincere-sometimes they still bite their heads off.

    A little trick of education is that sometimes even dull witted students need a little encouragment-calling somebody hopelessly ingnorant and perhahps with malign motives probably scares some away.

    Again they're not all like that but it is a little categorical over the JG. I like the idea in principle-I have long called for a return to the PWA. Still you can debate some of the technicalities of how the JG would work partiucarly as an anchor in the economy.

    Interesting this idea is sort of like NGDP as the JG is supposed to anchor aggregate spending much as the NGDP target is supposed to do this for the Market Monetarists.

    As for Wasrtler I always tell him that the thing I like about him is that unlike most conservatives he doesn't pee on your leg then tell you it's raining, he simply pees on your leg.

  2. Any way now you can't say you don't have any idea what I look like!

  3. I should also add Greg that overall it was a real good post with one defect-it talked much too much about old Morgan Warstler and not nearly enough about your buddy Mike! LOL

  4. Thanks for taking the time to comment Mike.

    One thing I didnt delve into in my post is that I think that Warstlers idea fits well into the MMT idea of a JG. Warstler calls it something else but Randy Wray is quite clear, the design of the JG can be a myriad of ways. I see no real reason this plan wouldnt be consistent with the JG principles as set forth by the MMT macroeconomists.

    Using the Ebay and Paypal framework is slick I think. The thing is the money to fund this still comes form the govt and isnt "paid for" by new taxes. In fact by eliminating UI it actually lowers taxes on businesses. I'd be interested to see Randys critique of the plan. Im sure he will think of things I havent thought of. One question I have is how much does Paypal get to skim off this? We shouldnt have to pay a private company to do things which the govt can do them selves like deposit money in an account or pay a medical bill. The private company ads no value to the process and its just graft. Private companies that add value should be rewarded not those that are doing exactly what the govt can do but only more expensively.

    I agree about finding the right personality to present MMT. It is making its way forward in spite of itself I suppose, a real testament to its truth I think. Warren Mosler has the best grasp and the simplest descriptions. He's somehwat of a savant I think, but he is not strong in front of a microphone or camera, he doesnt wow you. Wray is brilliant but acerbic and Mitchell comes off as a cranky old guy sometimes. I like to listen to/watch Marshall Auerback. British accent, nice looking, always smiling and quite witty too. He would be my choice to put on the Sunday talk shows to go head to head with the present economic talking heads. Id love to see Jon Stewart get him on or Steven Colbert. Bill Maher might be a good place to get on too.

  5. Hey Greg! Yeah I have in the past noted there were similarities between Warstler and the JG.

    Still I think the theme of your post is right-be wary of the source. I feel sort of the same way about Sumner even though I have learned stuff from reading him. I appreciate him but respect hiim enough to be wary of him.

    For starters with Warstler: no way should we give up UI or the minimum wage. That's already a major Trojan Horse. I'm sure there's a lot more but I have to remind myself more about how his plan works.

  6. As far as MMT they do have some good materials to learn from but I like expecailly to go to the source-easily 98% of what they do is direct from Minsky right down to the JG.

    What's interesting about JG is that it's kind of like NGDP-it has the same role as an anchor to prices.

    The one guy who is really good and has some actual personality-he's not strict MMT though but he gets all this stuff-MMT, MM, New Keynesian, etc.-is Steve Waldman at Interfluidity.

    If you really want to learn he's the place to go to-I find anyway.

  7. Oh Ive been going to Interfluidity for 3+ yrs. I definitely think SRW is very good.

    Another site you should put on your list is "Winterspeak". I actually got my introductionm to MMT through him about 3-4 years ago.

  8. Cool. To me Interfludity is about as great a resource as you can find-I'm actually much newer to it. Greg it's kind of crazy but: what is your last name? LOL. Or do you prefer to just be known as Greg?

    I'm actually thinking about writing a post about this post of yours with a link to your blog.

  9. Bickley is the last name but most places Im just Greg, or gbgasser . Ive even posted as gizzard before.

    A post about my post? Might get me traffic...... traffic might get me comments..... comments might make me respond to the comments.... I could be at my own site a lot more.... hmmmmm.