Public policy and government finance: A comparative analysis under different monetary systems (Abba P. Lerner).

摘要

This dissertation seeks to revive an approach to public policy that was introduced by Abba P. Lerner in the middle of the last century. Despite impressing the great British economist John Maynard Keynes, Lerner's approach, dubbed “functional finance,” never succeeded in challenging the dominance of so-called “sound finance,” which continues to dominate public policy both in theory and practice.; Lerner recognized that the government's fiscal and monetary operations could be broken down into a series of accounting debits and credits. This recognition led him to conclude that extant theory did not take full advantage of the government's power to manage the economy. According to Lerner, who focused specifically on the U.S. government, it was possible to conquer one of the two great failures of capitalism—its failure to provide for full employment—by implementing policy according to his two principles of functional finance. However, Lerner did not buttress his analysis by demonstrating clearly how and why the government could carry out policy according to these principles, nor did he point out that functional finance could be adopted only by countries whose monetary systems were configured in a particular way. Rectifying these shortcoming is one of the primary objectives of this dissertation.; An important conclusion that is reached in this dissertation is that a country's sovereignty in the sphere of public policy is contingent on its sovereignty in the monetary sphere. This conclusion is reached through an application of Lerner's principles to a variety of distinct monetary systems, including the U.S. system, which is characterized by flexible exchange rates, the new monetary system that now governs the eleven countries that have adopted the Euro, and a host of countries that have implemented a fixed exchange rate by adopting a currency board. Although the thrust of this dissertation would almost certainly be categorized as non-mainstream, a crucial element of the argument supports the mainstream contention that it is preferable to maintain flexible exchange rates. The dissertation provides both theoretical and empirical support for the full employment proposals that have recently been put forward by Edward Nell, Alain Parguez, Jan Kregel, and L. Randall Wray.