NAIBER

NAIBER is an acronym for non-accelerating inflation buffer employment ratio and refers to a systemic proposal for an in-built inflation control mechanism devised by economists Bill Mitchell[1] and Warren Mosler,[2] and advocated by Modern Money Theory as replacement for NAIRU (non-accelerating inflation rate of unemployment). The concept of NAIBER is related to the idea of a Job Guarantee aimed to create full employment and price stability, by having the state promise to hire unemployed workers as an employer of last resort (ELR).[3][4]

Description

If the Phillips curve displays hysteresis - that is, if episodes of high unemployment raise the NAIRU - the NAIRU analysis is especially problematic.[5] This could happen, for example, if unemployed workers lose skills so that employers prefer to bid up of the wages of existing workers when demand increases, rather than hiring the unemployed. Economists as Abba Lerner and Hyman Minsky have argued that a similar effect can be achieved without the human costs of unemployment via a Job Guarantee (JG), where rather than being unemployed, those who cannot find work in the private sector should be employed by the government. This theory, and the policy of the JG replaces the NAIRU with the NAIBER (non-accelerating inflation buffer employment ratio).[6]

The buffer employment ratio (BER) is the ratio of JG employment to total employment. The BER conditions the overall rate of wage demands. When the BER is high, real wage demands will be correspondingly lower. If inflation exceeds the government’s announced target, tighter fiscal and monetary policy would be triggered to increase the BER, which entails workers transferring from the inflating sector to the fixed price JG sector. Ultimately this attenuates the inflation spiral. So instead of a buffer stock of unemployed being used to discipline the distributional struggle, the JG policy achieves this via compositional shifts in employment. Replacing the current non-accelerating inflation rate of unemployment (NAIRU), the BER that results in stable inflation is called the non-accelerating inflation buffer employment ratio (NAIBER). It is a full employment steady state JG level, which is dependent on a range of factors including the path of the economy.[7]

See also

Footnotes

  1. ↑ W.F. Mitchell (1998) "The Buffer Stock Employment Model - Full Employment without a NAIRU" Journal of Economic Issues 32(2), 547-55
  2. ↑ W.B. Mosler (1997-98) "Full Employment and Price Stability" Journal of Post Keynesian Economics, 20(2), 167-182
  3. ↑ L. Randall Wray, "Job Guarantee"
  4. ↑ Phil Lawn: “Globalisation, Economic Transition and the Environment -Forging a Path to Sustainable Development”, Edward Elgar Publishing, 2013
  5. ↑ Ball, Laurence (2009), Hysteresis in Unemployment: Old and New Evidence (PDF)
  6. ↑ William Mitchell, J. Muysken (2008), Full employment abandoned: shifting sands and policy failures, Edward Elgar Publishing, ISBN 1-85898-507-2
  7. ↑ W.F. Mitchell and J. Muysken (2008). Full Employment Abandoned: Shifting Sands and Policy failures,. Edward Elgar: Cheltenham. Revised: January 2009

References

  • Febrero, Eladio (2009), "Three difficulties with neo-chartalism" (PDF), Journal of Post Keynesian Economics, M.E. Sharpe, Inc., 31 (3): 523–541, doi:10.2753/PKE0160-3477310308
  • Lerner, Abba P. (1947), "Money as a Creature of the State", American Economic Review
  • Minsky, H.P. (1965), The Role of Employment Policy, in M.S. Gordon (ed.), Poverty in America, San Francisco, CA: Chandler Publishing Company.
  • Mitchell, Bill (2009), The fundamental principles of modern monetary economics in "It’s Hard Being a Bear (Part Six)? Good Alternative Theory?" (PDF) . Introduction to modern (as of 2009) Chartalism.
  • Wray, L. Randall (2000), The Neo-Chartalist Approach to Money (Working Paper No. 10), UMKC Center for Full Employment and Price Stability
  • Wray, L. Randall (2001), The Endogenous Money Approach (Working Paper No. 17), UMKC Center for Full Employment and Price Stability
  • Wray, L. Randall (December 2010), Money (Working Paper No. 647), Levy Economics Institute of Bard College
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