Comment on : Fiscal policy and the job guarantee

Mitchell and Mosler (M&M) in their paper provide a critique of neoclassical remedies for unemployment and recommend a job guarantee scheme that they argue would lead to permanent full employment. The fundamental underpinning of their analysis is that unemployment is due to a lack of aggregate demand. I have much sympathy with their arguments: I believe (as they do) that the costs of unemployment are large and not worth incurring to attack inflation, see Junankar and Kapuscinski (1992). Like M&M I believe that active goverrunental policies (including demand management) should be used to increase employment and decrease unemployment. However, I have some reservations about the Job Guarantee (IG) scheme proposed by them that I shall outline in this brief paper. Mitchell and his various co-authors often compare their Job Guarantee scheme with the Wool buffer stock scheme that existed in Australia until recently. Besides being a bad analogy since the wool scheme collapsed under mounting losses it is important to rmember that unlike most goods labour (services) cannot be stored. One of the main problems I found in discussing this paper is that no formal macroeconomic model is presented. This paper is structured as follows: firstly, I shall summarise their paper in section 2, provide a critique in section 3, and then in section 4 raise some important questions in labour economics and political economy that have been neglected. Section 5 concludes this paper.