The Missing Anchor: What Happens to MMT When You Remove the Price Stabiliser
Richard Murphy understands how money is created. He just won’t follow the operational logic all the way to its conclusion.
Describing the Engine Is Not the Same as Knowing How to Drive — Let’s Be Precise
Economics is a struggle over meaning, and nowhere is that truer than in the debate about what MMT actually is.
Richard Murphy has now drawn a line in the sand: he accepts the monetary operations, he rejects the Job Guarantee, and he is prepared to find a new name for his school of thought if the academics insist on keeping the two together.
That is a principled position. It deserves a principled response.
My rule: Be explicit. Be reflective. Expose assumptions. Don’t let the taxonomy do the political work by stealth.
Because here is the thing. When you remove the Job Guarantee from the MMT framework, you are not simply decluttering an academic toolkit. You are removing the price anchor. And if you remove the price anchor, the question you have to answer — the one Murphy has not yet answered — is: What replaces it?
If the answer is silence, the NAIRU fills the gap by default. And the NAIRU is not a neutral technical arrangement. It is a political choice to maintain a buffer stock of unemployed human beings as the primary instrument of price stability.
That is the conversation we need to have.
First, the Generosity
This is a follow-up to last week’s piece on Murphy’s podcast debate with Will Thomson, and I want to maintain the same spirit: Richard Murphy is not an opponent. He is one of the most effective communicators of progressive monetary economics in the world.
Warren Mosler himself called Murphy “… the most successful proponent of MMT” in the world right now, which tells you something about the seriousness of Murphy’s role in popularising the framework.
But it goes deeper than just communication. L. Randall Wray has publicly acknowledged that Murphy helped expose a gap in the early MMT literature around tax, not at the macro level, where MMT had always emphasised the role of taxes in creating currency demand and managing inflation, but at the micro and administrative level, where tax bases, reliefs, exemptions, and non-compliance shape what tax actually does in the real world.
That is a serious contribution. It is why any pushback on Murphy’s Job Guarantee scepticism ought to come from a place of respect for someone who has genuinely improved the plumbing of the framework, even if he is now walking away from one of its constitutive policy conclusions.
Two Policies That Are Constitutive of MMT — Everything Else Is Informed by It
Here is the distinction that matters.
Understanding monetary operations — that the state is the monopoly issuer of the currency, that taxes do not fund spending, that government deficits create non-government surpluses — does not by itself constitute MMT. Those are foundational insights associated with Chartalism, functional finance, and endogenous money theory. They matter enormously, but they are still, at that level, descriptions of how the monetary system operates.
MMT’s unique contribution is what follows prescriptively from that understanding. And from the operational logic of a fiat currency system, two base structural settings emerge.
1. A permanent, low-to-zero interest rate policy.
In a fiat system, the overnight interest rate is a policy variable, not a market revelation. Mosler argues for a hard zero on logical grounds, while others in the tradition allow for a fixed low rate. The constitutive point is not the exact number. It is the end of active rate manipulation as the core macro stabilisation tool.
2. A Job Guarantee.
In a fiat system where the government issues the currency and taxes create a demand for it, the state is also unavoidably setting the terms on which that currency is obtained. The question is never whether there is a price anchor.
The question is which buffer stock performs that function: unemployment or employment.
Everything else — a Green New Deal, a carbon army, a social housing build, a National Care Service — is MMT-informed policy. These are political choices made possible by a proper understanding of the monetary system. They may be excellent choices. But they are not constitutive of MMT in the same way that the low-rate anchor and the Job Guarantee are.
You can have an industrial policy without a Job Guarantee. You cannot have a coherent MMT answer to the inflation-employment trade-off without answering the price anchor question.
The Operational Proofs: Why These Aren’t Just Preferences
To see why the low-rate setting and the Job Guarantee are not simply policy tastes bolted onto MMT, it helps to go back to the engine specs.
Proof 1: The Non-Monetary to Monetary Unemployment Argument
Unemployment is not a natural state of the human condition. In a non-monetary economy, people are producing, caring, building, foraging, farming, bartering — doing what is necessary to reproduce life. They are not sitting around unemployed in the modern macroeconomic sense.
That modern form of unemployment arises when the state imposes a tax liability that can be discharged only in its own currency. At that point, people must obtain the state’s currency to settle their obligations, and that means they must seek paid work or sales denominated in that currency. In other words, the tax-driven monetary system creates a class of people actively seeking paid access to the currency. That is the operational origin of unemployment as a monetary phenomenon.
If the state creates unemployment by imposing the tax obligation, then it also bears responsibility for ensuring there is a means of obtaining the currency required to settle that obligation. The Job Guarantee is the cleanest way to satisfy that responsibility. To impose the tax but refuse a public employment floor is to create unemployment and then moralise about its consequences.
The formal case for this is developed in Forstater’s Tax-Driven Money, which draws on colonial and historical evidence, and in his Levy Institute paper Functional Finance and Full Employment, which links the logic directly to full-employment policy design.
Proof 2: The Logic of the Zero Settling Point and the Buffer Stock Choice
In an interbank market flooded with excess reserves, banks attempt to lend their surplus to one another to earn a return. But because the system as a whole is in surplus, there are no borrowers. This competition to lend into a market with zero demand drives the overnight rate downward. Left to itself, the system settles at zero. That is why Mosler and Forstater describe zero as the natural rate of interest in a sovereign fiat system: Any positive rate must be actively maintained by state intervention.
The same operational logic applies to labour. If the state must choose a nominal anchor, there are only two broad buffer stock options: a pool of unemployed workers disciplined by joblessness, or a pool of employed workers maintained through a Job Guarantee. Mitchell and Mosler frame this directly as the choice between the orthodox NAIRU buffer stock and an employment buffer stock.
So, whether the question is interest rates or labour-market stabilisation, the deeper MMT point is the same:
Stop treating the existing institutional arrangement as natural.
It is chosen.
And if it is chosen, it can be changed.
For the formal derivation of zero as the natural rate, the clearest open-access source is Mosler and Forstater’s The Natural Rate of Interest Is Zero. For the buffer stock argument and the Job Guarantee response to critics, Mitchell & Mosler’s Fiscal Policy and the Job Guarantee and Mitchell & Watts’ Full Employment Through a Job Guarantee remain the core texts.
The Category Error Murphy Keeps Making
Murphy’s position is now explicit: MMT describes how the economy works; the Job Guarantee is, in his view, just one optional policy choice.
That contains a partial truth. Not every policy built on MMT’s descriptive insights requires a Job Guarantee. A government could understand monetary sovereignty perfectly well and still refuse to implement one for political reasons.
But that is exactly the problem. Once the Job Guarantee is treated as optional, the burden of proof shifts immediately to the next question: What anchors the system instead?
The Role of Public Investment in Building Productive Capacity
In recent years, there has been a growing recognition of the crucial role that public investment plays in building productive capacity and fostering sustainable economic growth. As an economist working within the framework of Modern Monetary Theory (MMT), I believe it's essential to highlight how government spending on infra…
Murphy’s practical answer appears to be targeted public investment — a carbon army, nationalised industries, direct strategic employment. Those may all be worthwhile. But they are not directly buffer stock mechanisms. They do not automatically expand in a downturn and contract in an upswing. They do not perform the nominal-anchor role that the Job Guarantee is designed to perform.
That is the category error. Sectoral interventions are not the same thing as a macroeconomic stabiliser. If the stabiliser is removed and nothing replaces it, the NAIRU remains in place by default, whether acknowledged or not.
Analytical Hygiene, Not Dogma
Murphy has accused MMT academics of treating the Job Guarantee as a kind of purity test and of turning MMT into a sectarian dispute rather than a useful economics.
That frustration is understandable at a human level. Academic communities can become tribal. No tradition is immune from that.
But almost every essay I write begins with the same Veblenian framework: The economy is a perpetual struggle between Ceremonial habits (institutional status, optics, and rigid orthodoxies) and Instrumental functions (solving real problems and sustaining life). Systemic failures occur when Ceremonial rules are allowed to suffocate Instrumental flows.
We must apply that exact framework here. The Job Guarantee is not a Ceremonial loyalty oath to an academic tribe. It is an Instrumental answer to a technical question:
What is your price anchor?
If someone rejects the Job Guarantee and offers no alternative mechanism beyond discretionary industrial policy, pointing out that this fails to answer the question is not dogma. It is analytical hygiene.
The irony is that Murphy’s complaint about cultism actually obscures the substantive issue. The disagreement is not over a badge or a tribe. It is over whether a monetary production economy can reach full employment without relying on an unemployment buffer stock. That is a technical dispute with immense human consequences, not a branding exercise.
It is over whether a monetary production economy can reach full employment without relying on an unemployment buffer stock. That is a technical dispute with immense human consequences, not a branding exercise.
Where Murphy Actually Lands: Post-Keynesian Structuralism
Here is the honest taxonomy.
Murphy accepts endogenous money.
He accepts functional finance.
He accepts that the state is the currency issuer and that there is no financial constraint on public spending in a sovereign currency system.
He accepts that fiscal policy is primary and monetary policy is secondary.
He accepts that full employment is achievable and desirable.
But when it comes to the inflation anchor, he prefers discretionary, targeted structural intervention over an automatic employment buffer stock. That places him much closer to a Post-Keynesian structuralist position than to a full MMT position as developed by Mosler, Mitchell, Wray, and others.
There is no shame in that. Post-Keynesian structuralism is a serious tradition. It views the economy as a matrix of competing class and sector interests requiring surgical industrial policy. As Lance Taylor’s work demonstrates, it views inflation primarily as an ongoing distributional conflict over wages, profits, and import costs, rather than a problem requiring a universal employment buffer stock.
Minsky, Godley, Kalecki, and Robinson are all working in related territory, and Murphy cites Minsky and Godley approvingly. It is an excellent diagnostic tool for identifying capacity constraints.
But it is not MMT. And Murphy’s willingness to accept Mosler’s praise while rejecting Mosler’s price anchor is a tension that needs to be named clearly.
Structuralism is fantastic for diagnosis, but without the macroeconomic floor of an automatic Job Guarantee, the structuralist approach quietly accepts a reserve army of the unemployed as the ultimate shock absorber.
If the Job Guarantee is optional, then the NAIRU is not being replaced — it is simply being ignored. And ignoring the NAIRU does not make it go away. It makes it invisible. An invisible buffer stock of unemployed people is still a buffer stock of unemployed people.
And here is the harder point — one Murphy has not yet been asked to answer directly. His preferred structural programmes, a carbon army, nationalised industries, strategic public investment, are not merely compatible with a Job Guarantee. They depend on one for their full effect.
Discretionary fiscal programmes suffer from recognition lag, legislative lag, and impact lag — they routinely take twelve months or more to reach the people who needed them two years ago. Countries with stronger automatic stabilisers have consistently required smaller, less politically fraught discretionary interventions precisely because the floor did the initial work.
Without a Job Guarantee beneath them, Murphy’s programmes float on top of an NAIRU that the next government can tighten at will — each programme politically exposed, each subject to defunding in a budget cycle, each dependent on the goodwill of a parliament that may not survive.
With a Job Guarantee beneath them, the macroeconomic floor is statutory, which means Murphy’s Green New Deal, his care system, his industrial strategy all operate in a labour market where unemployment cannot be weaponised against workers mid-programme. That is what Kalecki actually warned about: not just that capital resists full employment, but that it resists the permanence of full employment — because permanence removes the sack as a disciplinary tool across the entire economy, not just in the public sector.
Murphy’s structuralism, without the automatic floor, remains permanently vulnerable to exactly the political backlash Kalecki predicted. The Job Guarantee is not a rival to his programme. It is the foundation that makes his programme durable.
Murphy’s Own Words Contain the Answer
What makes this debate especially striking is that Murphy’s earlier writing pointed almost in the opposite direction.
In his 2020 Brave New Europe piece, Murphy wrote that if the aim of managing the economy is full employment, then MMT does permit the government to pursue full employment at fair wages, and that governments should be held to account if they choose unemployment instead.
That is very close to the MMT position. The whole point of the Job Guarantee is that it operationalises the refusal to choose unemployment as a policy tool.
Murphy’s later objection is that the Job Guarantee is administratively unworkable and therefore should not be constitutive of the framework.
But implementation complexity is not the same thing as theoretical dispensability.
Implementation complexity is not the same thing as theoretical dispensability.
Public education, public health, care systems, and public infrastructure are all administratively complex. Their complexity does not make them conceptually optional. It just means the institutional design work has to be done.
For those who want to see that institutional design work, my 2024 Fabians paper, A Robust Job Guarantee for Economic Stability and Opportunity, addresses the delivery architecture directly, including wage-setting, labour protections, skills pathways, and the CDEP precedent from Australia’s history.
The Pub Test and The Kalecki Warning
Apply the pub test: Who benefits when the Job Guarantee is dropped and the price-anchor question is blurred?
Not the long-term unemployed person in a deindustrialised region.
This brings us to the core political reality of the debate, captured perfectly in Michał Kalecki’s 1943 essay, Political Aspects of Full Employment.
Kalecki warned that even if governments know exactly how to achieve full employment (through functional finance), the capitalist class will ultimately resist it. Why? Because tight labour markets remove “the sack” as a disciplinary tool. Mass unemployment is the weapon that keeps the workforce compliant and wages suppressed.
But the threat to capital goes even deeper. A Job Guarantee does not merely eliminate involuntary unemployment; it establishes a non-discretionary wage and condition floor. It forces private employers to compete with a dignified public option, structurally shifting the distribution of income away from profits and back toward wages.
When Murphy advocates for discretionary structural interventions instead of an automatic Job Guarantee, he inadvertently leaves capital’s primary disciplinary weapon—unemployment—in place.
He leaves the capital’s primary disciplinary weapon—unemployment—in place.
The NAIRU is not a natural law. It is a political choice to use human misery as the inflation-control device. Every day that choice remains in place, it imposes real costs on real people — wasted labour, lost output, damaged lives, and social fracture.
We do not have to choose between Murphy’s structuralist industrial policy and the MMT Job Guarantee; a truly progressive political economy demands a Macroeconomic Synthesis.
We need targeted, discretionary structural policies (such as a Green New Deal and National Care Service) to direct the long-term productive capacity of the State, underpinned by the permanent, automatic stabilisation floor of a Job Guarantee.
Replacing the NAIRU with an employment buffer stock is not an academic indulgence. It is one of the most concrete ways to turn monetary realism into social justice.
The Lexicon
Fixed Low-Rate Policy: The MMT base case for monetary policy. The overnight rate is set permanently at or near zero, ending the ritual of active rate fine-tuning as the main stabilisation tool.
Job Guarantee: The MMT price anchor. A buffer stock of employed labour that expands automatically in downturns and contracts in recoveries, replacing the NAIRU unemployment buffer stock.
NAIRU (Non-Accelerating Inflation Rate of Unemployment): The orthodox buffer stock. A policy regime that uses involuntary unemployment to discipline wages and stabilise prices.
MMT-Constitutive Policy: The permanent low-rate setting and the Job Guarantee — the two structural settings that follow directly from MMT’s operational logic.
MMT-Informed Policy: Public-purpose programmes made possible by a correct understanding of monetary operations — social housing, care systems, Green New Deals, industrial policy, public investment. Political and design choices, not structural necessities.
Post-Keynesian Structuralism: A position that accepts many MMT monetary insights but relies on discretionary structural intervention rather than a Job Guarantee buffer stock for stabilisation. Serious, important, and distinct from MMT.
A Genuine Invitation, Again
Richard Murphy is not wrong about everything. He is right that the Job Guarantee raises hard institutional questions. He is right that serious public investment in climate, care, and infrastructure is necessary. He is right that economic arguments must translate into the real world, not remain trapped in seminar rooms.
But the price-anchor question cannot be wished away. It has to be answered.
If Murphy wants to help build a new school of thought that keeps the monetary insights of Knapp, Keynes, Lerner, Minsky, and Godley but drops the Job Guarantee, that is his prerogative. But the distinction should be made honestly.
That is not MMT in its full policy architecture. It is a different tradition with a different answer — or perhaps no clear answer yet — to the inflation and employment anchor problem.
What there is no room for is claiming the MMT engine while discarding the part of the engine that does the stabilisation work — and then telling the engineers who built it that they are not living in the real world.
The people in the Centrelink queue are in the real world. The question is whether our economics is built to reach them.
What’s your take on the price anchor debate? Is the Job Guarantee a structural necessity or a design preference? Drop a comment — I want to know what you think.
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Great read. This is the best response to Murphy that I’ve read to date.
Thanks for a fair and well-argued article. There are many who could benefit from adopting this unheated approach!
4 points for clarification:
What is a price anchor?
What is a buffer? ( I have some knowledge of economics but have not come across these terms in this context before)
You seemed to be arguing that the JG was the best way to provide an anchor but that still sounds like a preference rather than a logical conclusion (a preference I am very much in favour of btw)
The zero interest rate makes sense if there is more than enough money in the banking system but is the excess money in this sector a feature of a fiat-based monetary system? My gut tells me this is a variable unless controls are employed to ensure this state of affairs. I'm willing to be wrong!