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How mainstream economics has led to clueless governments

October 4, 2018

How mainstream economics has led to clueless governments

It’s time to consider a better economic plan (Image edited by Dan Jensen)

Governments of all stripes base their policies on mainstream economics. Powerful challenges to the mainstream, especially from ecological economics and modern monetary theory, explain why we are in a hole and can’t seem to get out.

If this article is largely correct, we can conclude that the economics profession is a major cause – directly or indirectly – of most modern evils.

In saying that, I draw heavily on the work of Australian academic economists Professor Robert Costanza, Associate Professor Philip Lawn, Professor Bill Mitchell and Dr Steven Hail.

Taken together, their work – in conjunction with colleagues overseas – claims that mainstream economics is fundamentally wrong left, right and centre — although I don’t mean to imply that these four scholars agree on every point.

Mitchell – a co-originator of modern monetary theory (MMT) – shows that we could have full employment quickly with a job guarantee, that federal budget deficits are normal and desirable, that the federal government never needs to borrow money, and that federal taxes do not fund anything.

The Federal Government should focus on non-inflationary full employment and not budget outcomes, because we can run deficits forever without borrowing.

In short, the Federal Government does not have the budget constraints of a household, business, or state government, because it can create unlimited money — but should spend prudently to avoid inflation and ecological overshoot.

For ecological economists like Lawn, increasing the size of high-GDP economies is now producing uneconomic growth rather than economic growth, because these economies are past their optimum size, as measured by a marginal cost-benefit analysis.

…click on the above link to read the rest of the article…

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