Functional Finance is largely associated with the Old Keynesian Abba Lerner, and is one of the key intellectual roots of Modern Monetary Theory (MMT). THE STRUCTURE OF FUNCTIONAL FINANCE The structure of Functional Finance (Lerner, The Economics of Control, 1944, Ch. It involves making decisions about the deficit and the money supply with regard to their functionality, not some abstract moralistic premise. S'il y a trop de dépenses, le gouvernement doit empêcher l'inflation en réduisant ses propres dépenses ou en augmentant les taxes. Sign up here. 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. NEWSLETTER sign up. It is presented here as one extreme of the debate concerning the surpluses and deficits of a national government. You are here. Comments (9). Such a conceptualization of the means-ends relation is also found in Lerner's functional finance. 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). 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. Abba Lerner's Functional Finance Abba Lerner articulated a fiscal strategy for the Federal Government which traces Keynesian macroeconomic analysis to its logical conclusion. Receive our monthly newsletter with analysis, updates and calls to action. Global Institute for Sustainable Prosperity 732 views Functional Finance is largely associated with the Old Keynesian Abba Lerner, and is one of the key intellectual roots of Modern Monetary Theory (MMT). According to this proposal government officials would reduce tax revenue and/or increase public spending during times of recession. This policy would push the government budget into deficit. Améliorez sa vérifiabilité en les associant par des références à l'aide d'appels de notes. Downloadable! Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principles and chartalism. 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. It argues that the main principles of functional finance were relatively widely held in the immediate postwar period. Lerner (1943) proposed a program of "functional finance" to counteract the business cycle. 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. Jobs, Money, Debt: Economic Common Sense (Vlog No. By contrast, the function of taxation does not provide such necessary finance. 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. [citation needed Yet Lerner’s functional finance theoretical model is far too simple to be acceptable, even as a rough guide for policy. La finance fonctionnelle est une théorie économique proposée par Abba P. Lerner, fondée sur les principes de la demande effective et le chartalisme. If total spending is allowed to go above this there will be inflation, … | Taxation should therefore be imposed only when it is desirable the taxpayers shall have less money to spend… [to avoid] inflation…. 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. 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…. 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…. Abba Lerner on Functional Finance and Ricardian equivalence 18 Feb, 2015 at 10:19 | Posted in Economics, Politics & Society | 6 Comments. 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. Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principles and chartism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation. From a modern perspective, “Functional finance” is really cavalier in its discussion of monetary policy. In response to these two challenges a reappraisal of the functional finance approach of Abba Lerner and of the financial instability hypothesis of Hyman Minsky seems to be a relevant way of reconsidering the pitfalls of the working of capitalist economies. [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…. Abraham "Abba" Ptachya Lerner (also Abba Psachia Lerner; 28 October 1903 – 27 October 1982) was a Russian-born British economist.. Born in Bessarabia, Russian Empire, Lerner grew up in a Jewish family, which emigrated to Great Britain when Lerner was three years old. Views of Hyman Minsky and Abba Lerner to contrast with sound finance '' …, Debt: economic Sense! A été faite le 4 octobre 2020 à 21:50: 9:26 of recession an... Finance - Duration: 9:26 en les associant par des références à l'aide d'appels de notes and the problems his... Duration: 9:26 immediate postwar period government budget into deficit and more government bonds… contrast! 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