What School of Economics is Woj From?

     As I said recently, it's great to have a Macro guy like him, who's actually accessible to ask some questions of him.

      http://diaryofarepublicanhater.blogspot.com/2012/12/joshua-wojnilower-and-steve-horrowitz.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

      Speaking of Woj, on a few occasions Nanute has asked me what Woj is-economically speaking. I always answer that he's an MMTer-or Post Keynesian-but Nanute has the impression that he's an Austrian.

      Just reading some posts there recently tells me that it's actually a bit of both. Which is interesting-you normally think of MMTers and Austrians to be diametrically opposed antipodes. However, Woj, who I did know even previously is something of an eclectic thinker takes something from both schools. Here he elaborates this:

       "Steve  Horwitz explains how

       The  work of Friedrich Hayek shows why EU governments cannot spend their way out of
the Eurozone crisis:

       "Politicians and bureaucrats lack the knowledge to know which pieces fit with which pieces as they cannot know the nature of the idled resources and what consumers want. They are unable to know what is needed to create a sustainable recovery. One of the most fundamental insights of Hayek and the Austrians was that prices, profits,  and losses serve as knowledge surrogates to coordinate the decentralised
decisions of producers and consumers, themselves often based on knowledge that
they could not communicate any other way."

       "Politicians who are structurally unable to know how best to allocate stimulus resources will inevitably distribute them to those persons and groups who will give them the most electoral support. The Austrian caution about the limits of politicians’ knowledge suggests that no matter what is drawn up on the blackboard, the politicisation of stimulus spending is not an accident and cannot be avoided.
Stimulus spending that goes to groups that will provide the most votes will
ensure that the right combinations of capital and labour will not be
formed."

       http://bubblesandbusts.blogspot.com/2012/08/hayekian-limits-of-knowledge-in-post.html

       This is surprising in a way. For if anything seems to define MMT/Post Keynesianism it's the need for government spending.  Woj clarifies his views:

        "On this blog I often outline my views of the macro-economy based on the Post-Keynesian
tradition (including MMT, MR, circuitists, horizontalists, etc) because I believe they offer the most accurate version of monetary operations and a stock-flow consistent approach. Where I generally depart from these economic sects relates to their specific policy prescriptions. On these matters, I more frequently side with Austrians for the reasons highlighted by Horwitz  above.

       "To explain my position in a bit more detail, I agree that government deficits can
help sustain growth and employment while the private sector attempts to increase
its savings. This view, however, does not imply that government spending should
increase or that it will be productive. Aside from the difficulty of knowing
what to produce, government spending and deficits are often prone to corporate
favoritism that serves to enlarge the income inequality gap. From my
perspective, these concerns too often go unaddressed in proposals for larger
deficits and increased public spending. The Post-Keynesians may hold the upper
hand regarding causal relationships among macroeconomic factors but they could
learn a thing or two about the limits of knowledge.

      I'm still not sure where this leaves us policy wise. How can you support government deficits to fight a recession and yet argue against inreased government spending? I'm not sure. Hopefully Woj will clarify. So Nanute and I were both half right. Woj is both-an Austrian Post Keynesian! Talk about something you don't see every day.

      It's a very interesting amalgamation: but I'm not sure how you practically can choose between policy prescriptions if you are both skeptical about government spending for malinvestment reasons and yet agree that fiscal deficits are necessary at least countercylically.

      Incidentally, while the MMTers favor government spending, it's not welfare but workfare they want to see-something like FDR's WPA but permanently. Indeed, not all the jobs as they imagine it would be government jobs-some would, but there would also be private sector jobs and not for profit jobs. The government would be responisble to make sure you have a job if you want one, not necessarily to be the one who pays the salary.

     For a hint to Woj's feeling about the MMT Job Guaratee (JG):

     "The other day I offered thoughts on Furthering  the Post-Keynesian View of Wealth and Income Concentration, which entailed some great discussion within the comments. A question that I
posed regarding a Job Guarantee is, how will it interact with the current market
structure? The above post suggests a similar approach should have been
considered with the ACA. Yes it will increase access to health insurance, but
what if it also leads to larger unemployment and inequality? There is no
question that trying to quantify these effects is difficult and imprecise, at
best. The end result may have even been the same. All I’m saying is that I would
generally prefer to see these macro-policy decisions examined in a broader
context"

      http://bubblesandbusts.blogspot.com/2012/12/bubbling-up12612.html

      It's hard for me to see how increasing health insurance access will increase unemployment and inequality-is the answer to not provide them in the hope of holding on the current status quo-as if it's anything to write home about?

      If we increase health insurance access then in at least one important way we've increased equality-access to basic health insurance. Even more, in the discussion of JG-how would getting people jobs lead to more inequality and unemployment?

      "As frequent readers of this blog are well aware, my approach to understanding
business cycles is most closely associated with the Post-Keynesian
sub-disciplines of Monetary Realism (MR) and Modern Monetary Theory (MMT). The
order of appearance is intentional since I find myself more frequently in
disagreement with MMT when its proponents stray too far from their monetary
operations expertise into the realm of policy recommendations. Though I support
the government’s ability to offset private sector deleveraging with budget
deficits, I find it troubling that more specifics on the distribution of funds
and current tax laws are often omitted from the discussion."
    "Although these disagreements are meaningful, they do not discount the shared goal of
promoting multi-sectoral analysis of business cycles"

     http://bubblesandbusts.blogspot.com/2012/11/furthering-post-keynesian-view-of.html

      Over time, I've come to see that I agree with much of the MMT approach-I prefer the term Post Keynesian to MMTer myself. I could never call myself an MMTer, it sounds so coltish. Even if I agree with much of what they advocate, I myself often find the style rather offputting. They do tend to think of themselves as having the truth on their side and those that won't follow without question are Right wing flat earthers. This attitude can sometimes be seen at New Economics Perspectives for example-though I like the blog overall-as well as from time to time at Naked Capitalism-not sure if that's an MMT site or just that lots of MMTers read over there.

     I like the idea of JG and if it makes things like UI less important in the future-or even redundant, though there I'm skeptical-then great. I find some other ideas like that the wage paid to JG workers will be low-like $8 an hour-to restrain wage growth in the economy a bit more questionable at least-not that I know it won't work but just that I have questions.

     While we're talking about how Woj seems to combine some seemingly mutually exclusive ideas, it's interesting that Minsky himself-essentially the father of PK-or MMT if you prefer-actually believed in:

      1). Ending the minimum wage or at least scaling it back. In any case he saw it's usefulness as having been long since outgrown.

       2). Ending corporate taxes altogether: Sumner has completely closed his mind to all things MMT, yet Minksy is a kindred spirit there.

       3) Ending UI and other transfer payments.

       4) When he wrote his big tome on financial instability in 1986, he called for government spending to be limited to 20% of GDP-or something like I don't remember the exact number but he saw it as something that should be limited.

       I hardly know that I could support many of those things without being pretty convinced of some things first.