Modern Money Theory and Distributive Justice

Abstract:

Modern money theory is a conjecture concerning fiscal spending and the nature of money. I show that modern money theory provides two interesting insights into distributive justice that have not been addressed in the recent Anglo-American distributive justice literature: (i) that the nature of a sovereign fiat currency allows for some distributive conflicts to be avoided; and (ii) that recent Anglo-American distributive justice theories assume that the economy is at capacity. Based on this, I consider whether the policy results of modern money theory can help foster a sense of justice.

Keywords::

• modern money theory
• philosophy
• welfare

JEL Classification Codes::

• A12
• E12
• I3

Notes

¹ Stephanie Bell (2000), Mathew Forstater (1999), Fadhel Kaboub (2013), Warren Mosler (1997–1998), and William Mitchell and Joan Muysken (2008).

² A sovereign currency could be loaned into existence, such as when firms borrow at the Federal-Reserve discount window.

³ Beardsley Ruml (1946a, 36) held a similar position: “All federal taxes must meet the test of public policy and practical effect. The public purpose which is served should never be obscured in a tax program under the mask of raising revenue.”

⁴ The job guarantee is widely discussed by MMT authors, I will note the reasons why shortly. L. Randall Wray (1999, 2012) discusses the policy in both of his books on MMT. His views can also be found in several articles (e.g., Tcherneva and Wray 2005; Wray and Forstater 2004). William Mitchell also has several lengthy treatments (the two notable ones being Mitchell and Muysken 2008; Mitchell and Watts 2004). Michael J. Murray and Mathew Forstater (2013) edit a volume of articles on the topic of job guarantee. Harvey (1989) provides a thorough book-length treatment of the job guarantee (see also Forstater 1999; Kaboub 2013; Minsky 2013; Mosler 1997–1998).

⁵ Philip Harvey (2013, 45) recommends that the wages offered by a job guarantee be comparable to market rates.

⁶ L. Randall Wray (2012, 226) notes that there would be a one-time increase in wages and prices when the job guarantee is introduced.

⁷ William Mitchell and Martin Watts (2004, 7) suggest that job-guarantee workers could have their wages supplemented by additional social services at “adequate levels of public education, health, child care, and access to legal aid.”

⁸ These goals are explicitly part of the distributive justice systems of John Rawls (1993, 1999), G.A. Cohen (2008), Ronald Dworkin (1981), John Roemer (1988), Amartya Sen (1992, 1999), Michael J. Sandel (2012), Elizabeth Anderson (2010), and Paul Gomberg (2007). Even in the work of Robert Nozick (1974), who is a distinctive dissenting voice, one could find overtures to these kinds of equality. Nozick (1974) relies on market transactions to achieve non-coercive outcomes and the preservation of a kind of equality of opportunity (on the latter point, see Nozick’s comments on “catastrophe” [1974, 180]).

⁹ Hyman Minsky (2013) provides an outline for a similar program, having in mind the political difficulty of transfers to reduce inequality. He advocates a public employment program where the participants would receive much of their wage from the public goods they create (2013, 46).

¹⁰ Or, really, they cannot be created from Rawls’s perspective. In what follows, I show that MMT authors have a more nuanced outlook concerning capacity constraints.

¹¹ Ervin Staub (2004) presents a theory of such a negative satisfaction of social psychological needs.

¹² The terminology I use in this article is different from that used by Clarence E. Ayres (1961). In particular, I use the term “institution” to describe technological and ceremonial functions (Ayres 1978, xv-xvii and 99). Thus, a direct comparison with Ayers is difficult in the space provided. Nonetheless, there is a strong overlap between Ayres’s notion of the technological continuum as the means and end of the development of abundance, freedom, and equality and the use of MMT to provide for both full employment and a sense of justice (Ayres 1961).

¹³ James Galbraith (2013) discusses the increase of fraud and decrease of trustworthiness as part of the third crisis of economics. If fraud is necessary to maintain profitability, a shift in the mode of accumulation is required to reestablish profitability and trustworthiness. Such a shift requires an economic and social action similar to my argument in this article.

Additional information

Notes on contributors

Justin P. Holt

Justin P. Holt teaches philosophy at Wright College in Chicago.