Publications

Mathew Forstater

  • Working Paper No. 668 | May 2011
    Functional Finance and Full Employment

    Forty-five years ago, the A. Philip Randolph Institute issued “The Freedom Budget,” in which a program for economic transformation was proposed that included a job guarantee for everyone ready and willing to work, a guaranteed income for those unable to work or those who should not be working, and a living wage to lift the working poor out of poverty. Such policies were supported by a host of scholars, civic leaders, and institutions, including the Rev. Dr. Martin Luther King Jr.; indeed, they provided the cornerstones for King’s “Poor Peoples’ Campaign” and “economic bill of rights.”

    This paper proposes a “New Freedom Budget” for full employment based on the principles of functional finance. To counter a major obstacle to such a policy program, the paper includes a “primer” on three paradigms for understanding government budget deficits and the national debt: the deficit hawk, deficit dove, and functional finance perspectives. Finally, some of the benefits of the job guarantee are outlined, including the ways in which the program may serve as a vehicle for a variety of social policies.

  • Policy Note 2005/1 | January 2005
    The job numbers in the United States and around the globe continue to look bleak. Not only are the absolute numbers dismal, but also job growth has dragged on with no hope for a substantial change in prospects. This situation supports the view that we are facing a long-term problem that requires critical and creative problem-solving responses. Since unemployment is the major cause of poverty, many of our most pressing social problems are directly or indirectly related to joblessness. Forstater argues that not only the quantity but also the quality of jobs is at issue.

  • Working Paper No. 413 | October 2004
    Heilbroner's Worldly Philosophy, Lowe's Political Economics, and the Methodology of Ecological Economics

    Ecological economics is a transdisciplinary alternative to mainstream environmental economics. Attempts have been made to outline a methodology for ecological economics and it is probably fair to say that, at this point, ecological economics takes a "pluralistic" approach. There are, however, some common methodological themes that run through the ecological economics literature. This paper argues that the works of Adolph Lowe and Robert Heilbroner can inform the development of some of those themes. Both authors were aware of the environmental challenges facing humanity from quite early on in their work, and quite ahead of time. In addition, both Lowe's Economics and Sociology (and related writings) and Heilbroner's "Worldly Philosophy" (itself influenced by this work of Lowe) recognized the endogeneity of the natural environment, the impact of human activity on the environment, and the implications of this for questions of method. Lowe and Heilbroner also became increasingly concerned with issues related to the environment over time, such that these issues became of prime importance in their frameworks. This work deals directly with ecological and environmental issues; both authors also dealt with other issues that relate to the environmental challenge, such as technological change. But it is not only their work that explicitly addresses the environment or relates to environmental challenges that is relevant to the concerns of ecological economists. Both Heilbroner's "Worldly Philosophy" and Lowe's "Political Economics" offer insights that may prove useful in developing a methodology of ecological economics. Ecological economists have taken a pluralistic approach to methodology, but the common themes in this work regarding the importance and nature of vision, analysis (including structural analysis), scenarios, implementation, the necessity of working backwards, the role for imagination, rejecting the positive/normative dichotomy, and so on, all are issues that have been elaborated in Lowe's work, and in ways that are relevant to ecological economics. The goal of the paper is actually quite modest: to make ecological economists aware of the work of the two authors, and get them interested enough to explore the possible contribution of these ideas to their methodological approach.

  • Working Paper No. 273 | July 1999
    An Assets-based Approach to Full Employment and Price Stability

    William Vickrey's single-minded commitment to full employment is evident in a series of papers written in the last years of his life. In these works Vickrey formulated an assets-based approach to macroeconomic analysis that has definite implications for budgetary and employment policy. For Vickrey the relation between desired and actual holdings of net financial assets--or net nominal savings--is crucial to understanding macroeconomic processes, and the government budget is the key policy instrument in the necessary recycling of net nominal savings to bring the desired and actual levels into equality at the full employment level of output and income. Vickrey believed that the major task for economists and policymakers was to devise the means whereby the necessary recycling of net nominal savings can take place without unexpected changes in the rate of either inflation or deflation. This paper proposes government deficit-financed, guaranteed public employment as an automatic stabilizing policy instrument capable of serving as just such a means.

  • Working Paper No. 272 | July 1999
    Lessons from Lerner for Today?

    Recent global economic developments invite a reconsideration of orthodox macroeconomic theory and policy and encourage a revisiting of the ideas of unorthodox thinkers of the past. This paper reviews fifteen lessons to be learned from the work of Abba Lerner. These lessons, which fall under the general categories of functional finance and full employment, are as relevant today as they were when they were first put forward some five decades ago. They include insights into the workings of the macroeconomy that provide a basis for analyzing current macroeconomic developments and for formulating effective macroeconomic policies.

  • Public Policy Brief Highlights No. 50A | February 1999
    The Job Opportunity Approach to Full Employment
    Central banks, national governments, and international organizations have resisted policies that would promote full employment because high employment and high capacity utilization are associated with structural rigidities that result in sluggish growth, inflationary pressures, and other undesirable consequences. What has been almost entirely overlooked is the way in which public sector activity can enhance flexibility with regard to labor, capital goods, natural resources and environmental protection, methods of production, and location of economic activity. The job opportunity approach makes strategic use of public sector activity to create truly full employment, thereby reducing the social and economic costs of unemployment, and to promote projects designed to be consistent with broad macroeconomic goals and social values.

  • Public Policy Brief No. 50 | February 1999
    The Job Opportunity Approach to Full Employment

    Central banks, national governments, and international organizations have resisted policies that would promote full employment because high employment and high capacity utilization are associated with structural rigidities that result in sluggish growth, inflationary pressures, and other undesirable consequences. What has been almost entirely overlooked is the way in which public sector activity can enhance flexibility with regard to labor, capital goods, natural resources and environmental protection, methods of production, and location of economic activity. The job opportunity approach makes strategic use of public sector activity to create truly full employment, thereby reducing the social and economic costs of unemployment, and to promote projects designed to be consistent with broad macroeconomic goals and social values.

  • Working Paper No. 254 | October 1998
    Abba Lerner and Adolph Lowe on Economic Method, Theory, History, and Policy

    This paper argues that the ideas of Abba Lerner and Adolph Lowe contain overlapping and complementary insights and themes that may contribute to the development of a new approach to macroeconomics. They also have rather specific practical policy implications. Lerner's notions of functional finance and money as a creature of the state are combined with Lowe's structural analysis to forge an approach to macroeconomic theory and policy that considers both aggregate proportionality and balance and sectoral relations and that addresses issues regarding monetary production and effective demand as well as ongoing structural and technological change. Such a "new instrumental macroeconomics," focusing on full employment, price stability, and a decent standard of living for all, has important points of contact with recent proposals promoting job opportunities through direct job creation with a public service corps that benefits communities while serving as a buffer stock of labor providing price stability.

  • Working Paper No. 221 | December 1997
    Exploring the Tacit Fringes of the Policy Formulation Process

    Economist Adolph Lowe's instrumental analysis examines the process of policy formulation as a regressive procedure of discovery. Taking as given a predetermined desired end state, the task of an innovator is to discover the technical and social path from the present position to the end state. The role for the economist in policy formulation, therefore, is not simply to examine the results of current policy, but to discover the means that will lead to the desired end state. Lowe cites others before him who had held a similar perspective—philosopher Charles Sanders Peirce, mathematician George Polya, and chemist Michael Polanyi—but Lowe does not elaborate on the connection between his analysis and theirs. Visiting Scholar Mathew Forstater, of Gettysburg College, investigates the relationship between the work of these scientists and Lowe's instrumentalism.

  • Working Paper No. 218 | December 1997

    Flexibility is a desirable feature of an economic system. Structural rigidities can result in sluggish growth and inflationary pressures; many economic models, however, display considerable system flexibility because of the use of unacceptably unrealistic assumptions. The primary "real-life" features endowing the system with flexibility are unemployment and excess capacity. While realistic, unemployment is economically costly and socially undesirable. In economic theory, there appears to be a trade-off between flexibility and realism. In reality, there appears to be a trade-off between flexibility and full employment. What has not been adequately recognized, however, is the degree to which policies are available that can promote higher levels of employment—and even full employment—without resulting in deleterious rigidity.

Publication Highlight

Summary Vol. 27, No. 1
Summary Winter 2018
Author(s): Elizabeth Dunn, Michael Stephens
January 2018

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