Well worth a quick read.
John Maynard Keynes Knew What Occupy Wall Street Tells Us Today: “Banks and bankers are by nature blind.”
By James Galbraith
November 11 (Alternet) — Economist Friedrich Hayek is the darling of conservatives. Progressives prefer John Maynard Keynes. But when it comes to sensible policy, there’s really no contest.
Good to see this- been suggesting it for quite a while.
Working Paper No. 658, March 2011
Keynes after 75 Years: Rethinking Money as a Public Monopoly
L. Randall Wray
Economists and government policymakers fail to recognize that money is a public monopoly. The result of this misunderstanding is unemployment and inflation, says Senior Scholar L. Randall Wray. The best way to operate a money monopoly is to set the “price” and let the “quantity” float, as exemplified by Hyman P. Minsky’s universal employer-of-last-resort program.
Understanding how a monopoly money works would advance public policy formation a great deal, says Wray. And since banks are given the power to issue government money, failure to constrain what they purchase fuels speculative bubbles that are ultimately followed by a crash. The real debate should be over the proper role of government—how it should use the monetary system to achieve the public purpose.
ABSTRACT:
In this paper I first provide an overview of alternative approaches to money, contrasting the orthodox approach, in which money is neutral, at least in the long run; and the MarxVeblen-Keynes approach, or the monetary theory of production. I then focus in more detail on two main categories: the orthodox approach that views money as an efficiency enhancing innovation of markets, and the Chartalist approach that defines money as a creature of the state. As the state’s “creature,” money should be seen as a public monopoly. I then move on to the implications of viewing money as a public monopoly and link that view back to Keynes, arguing that extending Keynes along these lines would bring his theory up to date.
Interesting how much of what I say turns out to have been written by Keynes:
Greg Mankiw, Keynes and the Payroll Tax:
The Mature Keynesian Perspective II
As I previously noted, the older (and presumably wiser) John Maynard Keynes was skeptical of using infrastructure projects as a countercyclical tool. NYU economist Mario Rizzo now brings to my attention that the mature Mr Keynes also favored the payroll tax as a countercyclical policy instrument:
In correspondence with the economist James Meade in 1942 Keynes says he is “converted” to Meade’s idea of altering the social security payroll tax over the business cycle. Here are Keynes’s words:
I am converted to your proposal…for varying rates of contributions in good and bad times.
(June 16, 1942). Keynes, Collected Writings, vol. 27, p. 208.
…[Y]ou are able to show fluctuations in income of an order of magnitude which is significant in the context… So far as employees are concerned, reductions in contributions are more likely to lead to increased expenditure as compared with saving than a reduction in income tax would, and are free from the objection to a reduction in income tax that the wealthier classes would benefit disproportionately. At the same time, the reduction to employers, operating as a mitigation of the costs of production, will come in particularly helpfully in bad times.
(July 1, 1942). Keynes, Collected Writings, vol. 27, p. 218.”
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