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Working Paper No. 1065

Resource Constraints and Economic Policy

Originally issued as EDI Working Paper No. 09, 2023 This paper explains the MMT approach for evaluating the affordability of spending programs, contrasting it with the mainstream approach. Using the examples of the Green New Deal, Medicare-for-All, and Build Back Better, it argues that rethinking spending and taxes as claims on, and releases of resources, […]

Working Paper No. 1064

Seismic Shifts in Economic Theory and Policy from the Bernanke Doctrine to Modern Money Theory

Originally issued as EDI Working Paper No. 08, 2022  This paper evaluates the relationship between monetary and fiscal policy and the relative effectiveness of macroeconomic stabilization through the lens of Modern Money Theory (MMT). We articulate previously-neglected aspects of monetary sovereignty to offer a new interpretation of the Bernanke Doctrine that emerged in the wake of […]

New Assistantship in Labor Studies

The Research Assistantship in Labor Studies provides support to Levy Institute graduate students to conduct research on issues of employment, unemployment, and fiscal policy. Applicants who are awarded this assistantship will also engage with the work and unpublished papers of Robert Prasch, a longtime friend of the Institute and scholar of institutional thought and labor issues. Made possible […]

Working Paper No. 1063

Fiscal and Monetary Policy in an SFC Model of the Italian Economy

Following the Great Financial Crisis of 2008–9, there has been a shift in mainstream economic policy modeling toward “realism,” with dynamic stochastic general equilibrium (DSGE) models partly diverging from the representative agent framework, and large-scale, New-Keynesian structural models addressing real-financial interactions in greater detail. Still, the need for tractability of the former, and the lack […]

Working Paper No. 1062

The Value of Money

This paper examines heterodox theories of the determinants of the value of money. Orthodox approaches that tie money’s value to relative scarcity of money or to the price level are rejected as inconsistent with the monetary theory of production embraced by heterodox traditions linked to Marx, Veblen, and Keynes. This paper examines and integrates (1) […]

Working Paper No. 1061

Modern Money Theory on Fiscal and Monetary Policies

Originally issued as EDI Working Paper No. 04, 2022 Drumetz and Pfister make several claims about the inadequacy and fallacies of Modern Money Theory (MMT) and conclude that MMT is nothing more than a political manifesto; there are no theoretical and empirical foundations behind it. This paper addresses this last point by focusing on the […]

Working Paper No. 1060

The Job Guarantee

Originally issued as EDI Working Paper No. 02, 2022 Orthodox economic theory presents the policy maker with an impossible choice: eradicate unemployment at the cost of undesirable inflation or keep prices stable by maintaining some level of involuntary unemployment. This is the canon, as embodied in the natural rate of unemployment theory and the Non-Accelerating […]

Working Paper No. 1059

Three Lessons from Government Spending and the Post-Pandemic Recovery

Originally issued as EDI Working Paper No. 01, 2021 The central lesson of the COVID-19 fiscal response is that money is not scarce. Without delay, governments around the world appropriated budgets that dwarfed any other postwar crisis policy. In 2020, Japan passed a stimulus package equal to 54.8 percent of GDP, while in the U.S., […]

Working Paper No. 1058

The Origins of the Platonic Approach to Monetary Systems

A monetary approach that combines Chartalism, Nominalism, and Command origins of monetary systems is often deemed to have emerged only recently, while the Aristotelian approach (Commodity, Metallism, and Market origins of monetary systems) is the only one that existed until the end of the eighteenth/early-nineteenth century. In the major studies of the history of monetary […]

Policy Notes

Trump Wins While Americans Vote for Progressive Policies

On November 5, 2024, American voters sent Donald Trump back to the White House. In 2020, he lost his bid for reelection to Joe Biden, after winning in 2016 against Hillary Clinton (but only thanks to the electoral college). This time, however, Trump won the popular vote. All the new energy that surrounded the Harris-Walz campaign […]

Strategic Analysis

Economic Challenges of the New U.S. Administration

On the eve of the 2024 US presidential election, the authors share their latest macroeconomic projections using the Levy Institute’s tailored stock-flow consistent model and evaluate two alternative policy scenarios, depending upon the next occupant of the White House: (1) a significant increase in import tariffs and decrease in the marginal tax rate, and (2) a substantial increase in government expenditure paired with an increase in the marginal tax rate.

Policy Notes

Inflation

Edward Lane surveys some of the main potential contributors to the recent period of elevated inflation rates in the US economy—focusing on supply disruptions, inflation-adjusted consumer spending, and consumer spending attributable to price markups—­and outlines prominent proposals being made by the 2024 presidential candidates that may have an impact on inflation.