From a modern perspective, “Functional finance” is really cavalier in its discussion of monetary policy. Functional finance takes the following positions: [It] prescribes… the adjustment of total spending… to eliminate both unemployment and inflation… the adjustment of public holdings of money and of government bonds… to achieve the rate of interest which results in the most desirable level of investment… the printing, hoarding, or destruction of money as needed…. Promoting Public Understanding of Money & Finance . However, over time, inflation became a serious concern, and Lernerproposed a form of wage and price controls to constrain inflation that hebelieved would result as the economy nears full employment. This policy would push the government budget into deficit. April 25, 2013 at 06:29 in #economichistory, #economics, #monetaryeconomics | Permalink As long as the public is willing to keep on lending… there is no difficulty, no matter how many zeros are added to the national debt. In applying this first law of Functional Finance, the government may find itself collecting more in taxes than it is spending, or spending more than it collects…. NEWSLETTER sign up. In two remarkable papers in 1941 and 1943, Abba Lerner wrote down the rules that he thought should govern macroeconomic policy in a monetary economy where wages and prices are too sticky to keep all markets in the neighbourhood of a (Walrasian) general equilibrium. This might be desirable if otherwise the rate of interest would be reduced too low… and induce too much investment, thus bringing about inflation…. Recent global economic developments invite a reconsideration of orthodox macroeconomic theory and policy and encourage a revisiting of the ideas of unorthodox thinkers of the past. Si l'une ou l'autre des deux premières règles entre en conflit avec les principes de l'équilibre du budget ou de la limitation de la. An interesting, and to many a shocking, corollary is that taxing is never to be undertaken merely because the government needs to make money payments…. Functional Finance Reading list  Learn about the economic principles, rules and history of Functional Finance and economist Abba Lerner . Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principles and chartism. THE STRUCTURE OF FUNCTIONAL FINANCE The structure of Functional Finance (Lerner, The Economics of Control, 1944, Ch. Abba Lerner on Functional Finance and Ricardian equivalence 18 Feb, 2015 at 10:19 | Posted in Economics, Politics & Society | 6 Comments. Abba Lerner (1903-1982) was not considered a … Global Institute for Sustainable Prosperity 732 views 103) - Functional Finance - Duration: 9:26. Comments (9). The almost instinctive revulsion that we have to the idea of printing money, and the tendency to identify it with inflation, can be overcome if we calm ourselves and take note that this printing does not affect the amount of money spent…. The good news is that MMT seems to be pretty much the same thing as Abba Lerner’s “functional finance” doctrine from 1943. Functional Finance is a body thought that was originally proposed by the economist Abba P. Lerner. In my view, the most interesting part of the article is that it contradicts the commonly made assertion that there is very little new in MMT (which Krugman hints at in the article as well). La dernière modification de cette page a été faite le 4 octobre 2020 à 21:50. In every case Functional Finance provides a simple, quasi-automatic response. He called the rules Functional Finance – functional because The state … En empruntant de l'argent lorsqu'il souhaite augmenter le taux d'intérêt et en prêtant de l'argent ou en remboursant la dette lorsqu'il souhaite réduire le taux d'intérêt, le gouvernement maintiendra ce taux d'intérêt qui induit le montant optimal de l'investissement. Les gouvernements doivent intervenir dans l'économie laquelle n’est pas autorégulatrice ; Le principal objectif économique de L’État devrait être d'assurer une économie prospère ; L'argent est une créature de l'état ; Il doit donc être géré par celui-ci ; La politique budgétaire devrait être dirigée compte tenu de son impact sur l'économie, et le budget devrait être géré en conséquence, c'est-à-dire que vouloir équilibrer les revenus et les dépenses n'est pas important; c’est la prospérité qui est importante ; Le gouvernement doit maintenir un niveau de demande raisonnable en tout temps. [The] government should borrow money only if it is desirable that the public should have less money and more government bonds…. La finance fonctionnelle est une théorie économique proposée par Abba P. Lerner, fondée sur les principes de la demande effective et le chartalisme. Abba Lerner (1943): "Functional Finance": The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce. It is presented here as one extreme of the debate concerning the surpluses and deficits of a national government. It can reduce total spending by spending less itself or by raising taxes…. [The] result might be a continually increasing national debt…. 24) can be summarized as follows: The function of public expenditures is to render public services at the level required for efficient resource use at full employment. Title: FUNCTIONAL FINANCE AND THE FEDERAL DEBT Created Date: 20190212220639Z [In] the latter case it would have to provide the difference by borrowing or printing money. These lessons, which fall under the general categories of functional finance and full employment, are as relevant … [This] possibility presented no danger… so long as Functional Finance maintained the proper level of total demand for current output; and… there is an automatic tendency for the budget to be balanced in the long run as a result of the application of Functional Finance, even if there is no place for the principle of balancing the budget…. It argues that the main principles of functional finance were relatively widely held in the immediate postwar period. Abba Lerner's Functional Finance Abba Lerner articulated a fiscal strategy for the Federal Government which traces Keynesian macroeconomic analysis to its logical conclusion. Lerner (1943) proposed a program of "functional finance" to counteract the business cycle. Tweets by @functionalmoney. Receive our monthly newsletter with analysis, updates and calls to action. Jobs, Money, Debt: Economic Common Sense (Vlog No. Elle affirme que le gouvernement devrait s’ autofinancer (via sa Banque Centrale) pour atteindre des objectifs explicites, tels que la maîtrise du cycle économique, la réalisation du plein emploi, la croissance et une faible inflation. https://fr.wikipedia.org/w/index.php?title=Finance_fonctionnelle&oldid=175294061, licence Creative Commons attribution, partage dans les mêmes conditions, comment citer les auteurs et mentionner la licence. This all reminded me of Abba Lerner and his notions of functional finance. Please enable JavaScript if you would like to comment on this blog. Abba Lerner (1943): "Functional Finance": The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce. Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principles and chartalism. S'il y a trop de dépenses, le gouvernement doit empêcher l'inflation en réduisant ses propres dépenses ou en augmentant les taxes. If the public becomes reluctant to keep on lending… [and] the public hoards, the government can print the money to meet its interest and other obligations, and the only effect is that the public holds government currency instead of government bonds, and the government is saved the trouble of making interest payments. When Lerner first formulated the functional finance approach (in theearly 1940s), inflation was not a major concern—the US had recently livedthrough deflation in the GreatDepression. According to Abba Lerner, the purpose of public debt is “to achieve a rate of interest which results in the most desirable level of investment.” He also maintained that an application of Functional Finance will have a tendency to balance the budget in the long run: By contrast, the function of taxation does not provide such necessary finance. Yet Lerner’s functional finance theoretical model is far too simple to be acceptable, even as a rough guide for policy. You are here. Such a conceptualization of the means-ends relation is also found in Lerner's functional finance. 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