Thursday Open Thread | 36 comments (36 topical, editorial, 0 hidden)

And my reply:

I think the key issue preventing MMT and Environmental Economics from being seen as compatible (which I think they ultimately are) is that it is extremely easy for Environmental Economics to fall into the position that what we need is thermodynamic accounting and that the fiat money system, which is by and large conflated with the fractional reserve banking system, is unable to properly incorporate thermodynamic accounting because money values are arbitrary (fiat). Therefore, a theromodynamic standard (energy, thermodynamic free energy, entropy, ore some similar quantity) for money is often proposed as the solution to all our economic woes. Anyone who takes MMT seriously will recognise that an energy standard is just as deflationary in terms of employment as a gold standard or any other commodity standard. The resolution of the dilemma is to point out that employment does not need to mean high-environmental-impact employment. Clearly employing people in personal services has a much lower environmental impact than employing the same people in resource extraction, energy-intensive manufacturing, etc. And the economy can "grow in nominal terms' while not growing in environmental impact by an adjustment in the mix of goods and services consumed, in the direction of lower resource intensity goods and services.
A lot of people come into Environmental Economics from engineering or natural science, and such a background predisposes one against social convention ("fiat" money, nominal accounting) and for objective measures (real accounting, hence commodity money, gold standards, and thermodynamic money standards). "Money as a thing" is one of the most engrained concepts in our culture and it dovetails with the engineer/scientist tendency to prefer a commodity standard for money.
At present, monetary austerity is being used as an argument for environmental business as usual ("we cannot afford the investment needed to transition to a green energy economy"). This is a conceptual mistake of mixing resource austerity with money austerity, but if you believe money should map resources, you can't break the link between money austerity and resource austerity. The fact is that MMT through "functional finance" provides a way to justify that yes, we do (if only we have the political will) have the money to mobilize the resources necessary for the massive investment involved in a wholesale transition to a green energy future. This is akin to Keynes' quip that
"Thus we are so sensible, have schooled ourselves to so close a semblance of prudent financiers, taking careful thought before we add to the 'financial' burdens of posterity by building them houses to live in, that we have no such easy escape from the sufferings of unemployment".

We may in fact paraphrase Keynes: "Thus we are so sensible taking careful thought before we add to the financial burdens of posterity by building them windfarms to power their society, that we have no escape from the sufferings of environmental destruction".
To be sure, I personally agree that "a forward-looking, progressive macroeconomics - such as Modern Monetary Theory (MMT) - requires economic activity to be in balance with the natural environment", but I think it is really important, to address and break the easy conceptual link between Environmental Economics and Commodity Money.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Thu Jan 3rd, 2013 at 04:19:24 PM EST
[ Parent ]

Brilliant. (none / 0)

Have you said this before? I don't recall this thesis in this particular form.

paul spencer

by paul spencer (paulgspencer@gmail.com) on Fri Jan 4th, 2013 at 12:58:44 AM EST
[ Parent ]

Re: Brilliant. (4.00 / 2)

I have said it here on ET in bits and pieces, and I said something similar - but longer - in the questions period of a lecture by Matt Forstatter at the Minsky seminar in June last year.

The Keynes paraphrase is new, though.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Fri Jan 4th, 2013 at 02:03:53 AM EST
[ Parent ]

Re: Brilliant. (none / 1)

Re: Matt Forstater, Bill Mitchell writes in the blog above:

At an early Centre of Full Employment and Equity Conference (CofFEE) held in 1999 in Newcastle, Australia, I presented a paper, which probed the question of the "Future of Work" and the environmental constraints facing capitalist economies. This conference paper was subsequently published as W.F. Mitchell (2000) `The Job Guarantee in a Small Open Economy'. Economic and Labour Relations Review, Vol. 11, supplement). A scanned copy is available - The Job Guarantee in a Small Open Economy.
At the same conference, UMKC MMT colleague Mat Forstater gave an exceptional paper - Full Employment and Environmental Sustainability - where he outlined the way in which the central themes of MMT (with respect to policy implications) were consistent with the goal of environmental sustainability.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Fri Jan 4th, 2013 at 06:10:34 AM EST
[ Parent ]

Re: Brilliant. (none / 1)

Thanks for the link. I see that Forstater's thesis adviser was Robert Heilbroner - one of my favorite social analysts of the '60s.

Another was Bill Domhoff. Mirta and I are driving south in April to try to catch the Canyonlands area in Spring bloom, and I am working on a lunch date with him in Santa Clara. I want to discuss the next phase of trying to recapture the Democratic Party.

paul spencer

by paul spencer (paulgspencer@gmail.com) on Fri Jan 4th, 2013 at 11:50:11 AM EST
[ Parent ]

Re: Brilliant. (none / 1)

I want to discuss the next phase of trying to recapture the Democratic Party.

From a comment by Warren Mosler on Bill Mitchell's blog post:

I also recall presenting on at your conferences on how often the cause of environmental degradation is unemployment. When the govt. doesn't spend enough to cover its tax liabilities and residual `savings desires' the economy will cut down trees, pollute the air and water, and in general do whatever it takes to avoid the non payment penalties.
...
Also, let me suggest the only reason we are mmt and not pk [postkeynesian] is because the remaining pk's failed to ingest `the currency is a public monopoly' and run with it as we did.
Also interesting is how the only progressives left standing are mmt. All the `out of paradigm progressives'/deficit doves/logically deficient/etc. have turned regressive, supporting US FICA tax hikes and cap and trade, VAT, and other highly regressive taxation, as well as `entitlement cuts' and export led growth policy.

I am reminded of how a certain DNC attack dog blogger uses "progressive" as a term of abuse...

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Fri Jan 4th, 2013 at 06:42:06 PM EST
[ Parent ]

Re: Brilliant. (none / 1)

And thanks again for the additional link.

Yes, DNC probably all think that way but leave it to the designated attack-dogs to say it. Out here in the WA state sticks, though, our Progressive Caucus is supported by about 40% of the State Party organization on almost any subject and often can field a majority. Same in California and Oregon.

paul spencer

by paul spencer (paulgspencer@gmail.com) on Fri Jan 4th, 2013 at 09:04:17 PM EST
[ Parent ]

Re: Brilliant. (none / 1)

Well, Warren Mosler runs a hedge fund, which provides more narrative fodder for people who would want to attack 'progressives' from the "left".

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Sat Jan 5th, 2013 at 03:25:36 AM EST
[ Parent ]

Re: Brilliant. (none / 1)

I have posted a reply to Warren Mosler's comment, too

@ Warren Mosler:
You write
I also recall presenting on at your conferences on how often the cause of environmental degradation is unemployment. When the govt. doesn't spend enough to cover its tax liabilities and residual `savings desires' the economy will cut down trees, pollute the air and water, and in general do whatever it takes to avoid the non payment penalties.
and today I read The environmental impact of austerity
The Greek state without any real understanding of the needs of its people, without any understanding of the consequences of its actions imposed another tax on heating oil which increased its price by 48%. The consequences?
A lot of fuel businesses will close which will result in further unemployment
People are freezing in their homes with disastrous consequences for vulnerable groups like the elderly, the disabled and the sick
School students in the north of the country are freezing
The smog in urban areas is reaching dangerous levels (scientists at the University of Athens are talking about a further 5,000 premature deaths per year in the area of Athens alone)
The few remaining woodlands of Greece are being looted by illegal logging.
The irony is that the state has been unable to collect even 1/5 of the projected tax revenues. So, what has come out of this initiative that is endangering the health of the population and is an ecological disaster? Nothing. Another blunder that is making the Greek people suffer, another blunder of the incompetent people that govern us. Where will it all end?
I am also reminded that one of the many themes of David Graeber's recent book on Debt is that indebted people are prone to committing atrocities in a flight forward as they raise the stakes trying to get out of debt by striking it lucky. Graeber's dramatic example is the Spanish conquistadors in Central and South America, but obviously "environmental destruction for the purpose of avoiding the penalties of debt nonpayment" reflects the same social and (a)moral dynamics.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Sun Jan 6th, 2013 at 05:33:21 PM EST
[ Parent ]

Re: Brilliant. (none / 0)

Migeru: