<< 1 >>
Rating: 
Summary: Highly unorthodox economics
Review: Wray disputes many accepted tenets of modern economics. Conventional theory holds that modern mediums of exchange, i.e. money, appeared because they were more efficient that transactions by barter. Wray suggests money gained value because governments wanted to levy taxes on the population and the public demanded money in order to fufill their tax obligations. He also takes issue with the intellectual underpinnings of modern monetary and fiscal policy. Government spending is not depedent on the aggregate amount in taxes collected and bonds sold. Rather, the government prints and spends money to purchase necessary goods and services. Tax liability encourages the population to provide such goods and services. The selling of bonds (public debt) is for the purpose of draining excess hoarding of cash in the economy. But if Wray rejects the usually justifications for fiscal and monetary actions by government, the results are the same. Spending in excess of some limit can devalue the currency. Wray's central point, that government fiscal deficits are really the norm has some validity. Convential economists would suggest as long as the aggregate size of the debt is kept reasonable relative to the size of the economy, it follows that annual deficits are acceptable, although Wray's reverse view of cause and effect is unconvincing. It is also easy to see how this view of the world could lead to "free-lunch" thinking that we can spend all we want and tax very little. This same thinking has lead to numerous financial crises and defaults in the third world. His views lead him to conclude government can eliminate unemployment by becoming the employer of last resort (ELR). He waves away any concern that there may not be enough useful demands for the labor to be provided. He cites New Deal era "workfare" programs as an example. However, workfare never presumed zero unemployment and it wouldn't be too much of leap for Wray's ELR program to become a reincarnation of the old welfare system with more recipients. Although he insists the participants be expected to work, once public policy established a gauranteed income stream to all, that same mindset can steadily rationalize away work requirements. The biggest weakness to Wray's argument is why it hasn't been tried outside the US where governments are far more open to the type of agressive government economic management he proposes. His book was recommended by William Greider but apparently there aren't many others who subscribe to Wray's view of the world.
<< 1 >>
| 
