Re: Full Employment is what?

[Paul Davidson <pdavidson@xxxxxxx>]

At 05:12 PM 5/30/01 -0500, you wrote:
> Bill Mitchell wrote:
>
> >we can also truly see the government as an infinite life unit.
>
> If I understand this correctly, this is an extremely important point.  It
> relates to what Bill wrote in his paper "The Job Guarantee in a Small Open
> Economy" in E. Carlson and W. F. Mitchell (eds.): THE PATH TO FULL EMPLOYMENT
> AND EQUITY, The Economic and Labour Relations Review, Vol. 11, supplement,
> 2000:
>
> "Even if it were possible to expand demand enough to promote growth sufficient
> to keep pace with labour force growth and productivity growth and mop up the
> huge stocks of long-term unemployment, how could the natural ecosystems,
> already
> under great strain, cope? There is a need to change the composition of final
> output toward environmentally sustainable activities.  It is not increased
> demand per se that is necessary, but increased demand in certain areas of
> activity." (Mitchell, 2000, p. 113 n8)


As someone who was a biochemist (teaching at the University of Pennsylvania
Medical school) and served in the Medical Corrps of the US Army and
therefore has some understanding of biological processes as well as someone
who has written extensively on Natural resources and economics
principles(not only for Eichner's POST KEYNESIAN ECONOMICS  but also for
BROOKINGS PAPERS ON ECONOMIC ACTIVITY, the FORD FOUNDATION, AMERICAN
ECONOMIC REVIEW, NATURAL RESOURCE JOURNAL,  etc.) my only response is to
quote a sage "Those who do not study history are doomed to repeat its
errors".  And the above quoted text illustrates what I mean when
good--hearted people ignore principle of biology as well as economics.



> ...Whereas private firms are compelled by competitive pressures to choose the
> method of production that will maximize profits, government is not so
> constrained. For any given activity, choice of technique can be based not on
> cost minimization but on impact on the system as a whole. For example, more
> labor-intensive methods may be chosen even where more capital-intensive
> methods
> are available and might be chosen under different conditions, and alternative
> technical means may be utilized to ease pressures on natural resources or the
> assimilative capacity of the environment."


Yes as in the Soviet Gulag ! The soviet system should have been sufficient
evidence that make work projects run independent of markets do not deliver
the goods -- and result in a lower standard of living than GDP per capita
statistic would suggest. The great thing about the entrepreneurial system
is that when aggregate demand is high, it can deliver the goods that the
people want to make their lives a little better.

 Make work simply to keep idle hands busy is not a great public policy --
when there are many poor people , not only in the US but around the globe
whose standard of  living could be increased substantially if we were
to  stimulate private aggregate effective demand., The two major faults of
the entrepreneurial system in which we live is , as Keynes noted, its
inability to maintain full employment (via private sector spending) and its
arbitrary and inequitable distribution of income and wealth.  Stimulating
private effective demand not only can eliminate the first ault, but it can
go a long way to solving the second-- as the international record
on  global employment and income distribution (outside the IRON CURTAIN)
from the end of the second world war to 1973 demonstrates.  As Irma
Adelman's empirical analysis has shown this period was truly, in her words,
"A Golden Age".

Paul
Paul Davidson
Holly  Chair of Excellence in Political Economy
Editor, Journal of Post Keynesian Economics
Economics Department - 523 SMC
University of Tennessee
Knoxville, Tennessee 37996-0550
phone # (865) 974-4221
fax # (865) 974-1686
home phone and fax # (865) 692-0802
http://econ.bus.utk.edu/Davidson.html