Paperback
Reinventing Functional Finance
Transformational Growth and Full Employment
9781845422202 Edward Elgar Publishing
This ambitious book seeks both to revive and revise the idea of ‘functional finance’. Followers of this doctrine believe that government budgets should concentrate solely on their macroeconomic impact on the economy, rather than reflecting a concern for sound finance and budgetary discipline.
Reinventing Functional Finance examines the origins of this idea and then considers it in a modern context. The authors explore the concept of NAIRU and argue that modern economies can operate at the level of full employment without provoking unmanageable inflation. They also contend that budget deficits do not have the deleterious effects commonly ascribed to them; the belief that they do rests on a misunderstanding of modern money. In this context, they highlight the relevance of Abba Lerner’s famous dictum, ‘money is a creature of the State’. The authors also debate the merits of various proposals for ‘Employer of Last Resort’ programs, which combine automatic stabilizers with the buffer stock principle.
Reinventing Functional Finance examines the origins of this idea and then considers it in a modern context. The authors explore the concept of NAIRU and argue that modern economies can operate at the level of full employment without provoking unmanageable inflation. They also contend that budget deficits do not have the deleterious effects commonly ascribed to them; the belief that they do rests on a misunderstanding of modern money. In this context, they highlight the relevance of Abba Lerner’s famous dictum, ‘money is a creature of the State’. The authors also debate the merits of various proposals for ‘Employer of Last Resort’ programs, which combine automatic stabilizers with the buffer stock principle.
More Information
Critical Acclaim
Contributors
Contents
More Information
This ambitious book seeks both to revive and revise the idea of ‘functional finance’. Followers of this doctrine believe that government budgets should concentrate solely on their macroeconomic impact on the economy, rather than reflecting a concern for sound finance and budgetary discipline.
Reinventing Functional Finance examines the origins of this idea and then considers it in a modern context. The authors explore the concept of NAIRU and argue that modern economies can operate at the level of full employment without provoking unmanageable inflation. They also contend that budget deficits do not have the deleterious effects commonly ascribed to them; the belief that they do rests on a misunderstanding of modern money. In this context, they highlight the relevance of Abba Lerner’s famous dictum, ‘money is a creature of the State’. The authors also debate the merits of various proposals for ‘Employer of Last Resort’ programs, which combine automatic stabilizers with the buffer stock principle.
The book boasts an array of eminent contributors which includes, amongst others, James Duesenberry, Robert Eisner, Robert Heilbroner, Richard Musgrave, Edward Nell and Randall Wray.
Financial economists, politicians, policymakers and bankers will welcome this provocative and refreshing book which challenges established economic thinking.
Reinventing Functional Finance examines the origins of this idea and then considers it in a modern context. The authors explore the concept of NAIRU and argue that modern economies can operate at the level of full employment without provoking unmanageable inflation. They also contend that budget deficits do not have the deleterious effects commonly ascribed to them; the belief that they do rests on a misunderstanding of modern money. In this context, they highlight the relevance of Abba Lerner’s famous dictum, ‘money is a creature of the State’. The authors also debate the merits of various proposals for ‘Employer of Last Resort’ programs, which combine automatic stabilizers with the buffer stock principle.
The book boasts an array of eminent contributors which includes, amongst others, James Duesenberry, Robert Eisner, Robert Heilbroner, Richard Musgrave, Edward Nell and Randall Wray.
Financial economists, politicians, policymakers and bankers will welcome this provocative and refreshing book which challenges established economic thinking.
Critical Acclaim
‘This book serves as a good introduction to the neglected approach to macroeconomic theory and policy developed by Abba Lerner and his followers. Graduate students will find it particularly useful, but most of the essays could be read by undergraduates in appropriate courses, and anyone interested in macroeconomics will find them profitable reading.’
– Christopher J. Niggle, Review of Political Economy
‘Grounded on the fundamental analysis of the state nature of money and the role of government in the modern capitalist economy, Reinventing Functional Finance is without any doubt a great book through which solutions to various economic problems can be sought.’
– Yan Liang, Oeconomicus
‘Nell and Forstater have put together a set of thought-provoking papers that examine Lerner’s functional finance theory, linking it to transformational growth, full employment, price stability, labour market dynamics, as well as fiscal and monetary policies . . . Reinventing Functional Finance is a must read for all scholars interested in public finance and full employment policy. Policymakers (and their economic advisers) are encouraged to read it and to consider going back to the basic insights that Abba Lerner and others brought to light six decades ago. This is an insightful, fresh, and well-overdue look at functional finance and its policy implications. The challenging task ahead is to take the principles of functional finance back to the policy arena.’
– Fadhel Kaboub, International Labor Review
– Christopher J. Niggle, Review of Political Economy
‘Grounded on the fundamental analysis of the state nature of money and the role of government in the modern capitalist economy, Reinventing Functional Finance is without any doubt a great book through which solutions to various economic problems can be sought.’
– Yan Liang, Oeconomicus
‘Nell and Forstater have put together a set of thought-provoking papers that examine Lerner’s functional finance theory, linking it to transformational growth, full employment, price stability, labour market dynamics, as well as fiscal and monetary policies . . . Reinventing Functional Finance is a must read for all scholars interested in public finance and full employment policy. Policymakers (and their economic advisers) are encouraged to read it and to consider going back to the basic insights that Abba Lerner and others brought to light six decades ago. This is an insightful, fresh, and well-overdue look at functional finance and its policy implications. The challenging task ahead is to take the principles of functional finance back to the policy arena.’
– Fadhel Kaboub, International Labor Review
Contributors
Contributors: P.G. Berglund, D. Colander, J.S. Duesenberry, W.A. Eberstadt, R. Eisner, M. Forstater, P. Harvey, R. Heilbroner, R. Majewski, P. Mehrling, W.F. Mitchell, R.A. Musgrave, E.J. Nell, I.H. Rima, L.-P. Rochon, J. Smithin, H.-M. Trautwein, L. Turgeon, L.R. Wray
Contents
Contents: Preface Part I: Introduction 1. Transformational Growth and Functional Finance Interlude I: Opening Remarks Part II: Functional Finance: The Background 2. Functional Finance, New Classical Economics and Great-Great Grandsons 3. Toward a New Instrumental Macroeconomics: Abba Lerner and Adolph Lowe on Economic Method, Theory, History and Policy 4. Neisser’s Unorthodox Quantity Theory of Money 5. Functional Finance, Past and Present Part III: Assessing the Inflation Barrier 6. The NAIRU and Fiscal and Monetary Policy for Now and Our Future: Some Comments 7. The History of Abba Lerner’s Supply-side Inflation 8. Functional Finance and Fiscal Function 9. Are These Trade-offs Necessary? Part IV: Fiscal and Monetary Linkages 10. Functional Finance and US Government Budget Surpluses in the New Millennium 11. Functional Finance and Full Employment: Lessons from Lerner for Today 12. Anchors Aweigh: From Real to Nominal Money and from Market to Government Stabilization 13. Interest Rates, Profits and Economic Growth Interlude II: Roundtable Discussion Part V: Functional Finance and Full Employment 14. Equality and Enterprise: Can Functional Finance Offer a New Historical Compromise? 15. The Operational Role of Functional Finance for Labor Market Behavior and Outcomes 16. The Job Guarantee: Full Employment and Price Stability in a Small Open Economy Part VI: The Final Hour 17. Short-run Macroeconomic Stabilization by an Employer of Last Resort 18. Transformational Growth Project Members and Conference Participants in Open Conversation Index
