Recommended Reading: Robert Hockett, "Financing the Green New Deal"

[jke...@pobox.com]

I have previously cited the work of Cornell Law professor Robert C Hockett on this list.  His Forbes Magazine column was quiet over the summer, but a few hours ago he posted a new column, "The Fed Is A ‘Development Bank’ – Make It Our Development Bank Again."  In this article he calls for a reform of the Federal Reserve System, in some ways to return it to its original purpose of being a 'national development bank' whose "... mandate originally was and remains that of a facilitator of local business and productive community bank lending across the entire nation, not a bottomless liquidity hole for Wall Street high rollers."

The Robert Hockett work I really want to discuss today is a small book published by Palgrave MacMillan earlier this year, "Financing the Green New Deal:  A Plan of Action and Renewal."  This book started life as a report commissioned by Rep. Alexandria Ocasio-Cortez's staff in conjunction with the Green New Deal resolution she and Senator Ed Markey introduced into Congress in February 2019.  It relies heavily on Hockett's earlier legal monographs as well as his Forbes columns and collaborations with others.

Hockett shares the same urgency about needing to address climate change that we saw in Nersisyan and Wray's "How to Pay for the Green New Deal," published by the Levy Institute last year.  Nersisyan and Wray showed that (a) it was possible to model GND-induced changes in the flows of income and expenditure in the economy; and (b) there was a whole range of macroeconomic policy measures the government could take if GND spending resulted in inflationary pressures.

Hockett is more concerned with the institutional changes which will be needed at different levels of government in order to effect the GND.  He argues that the GND must "... marshal and channel both efforts and resources" (xviii) and that in a market-based economy financing is what does that marshaling and channeling.  A GND financing plan, he states, must be "... the action equivalent of a single big balance sheet's worth of resrouce and effort allocation." (xix)  He sees this book as an attempt to map out a 'flow-structure' for the GND.

The institutional changes Hockett proposes have two main aspects.

First, create a National Investment Council, modelled on the Reconstruction Finance Corporation and, in some ways, on the first Bank of the United States, to coordinate GND activity across fourteen GND "project fields", multiple levels of government and in both the public and private sectors.

Second, transform the Federal Reserve System from "an old-fashioned 'bank to the banks,' ... to a modern and state-of-the-art 'bank of the people' ...." (48)  Create digital "wallets" for all citizens at the Fed, thereby eliminating the problem of "the underbanked."  The Fed currently conducts open market operations to prevent volatility in interest rates -- "money rental prices." (24)  Hockett proposes that the Fed create a 'People's Portfolio' "... with a view to limiting volatility in respect of more systemically significant prices than just interest rates.  Labor costs, commodity prices, fule prices and others all can be added according as seems necessary or proper in future." (57)

Hockett also sees merit in the creation of state and regional public banks.  He urges consideration of so-called complementary currencies at the state and local levels.

It should be apparent that creative ideas about institutional reform flow out of Hockett's brain like water over Niagara.

The one complaint I have about this book -- apart from one glaring typo in the first paragraph of the Introduction -- is with its footnotes.  They are done in the style one would expect for the law journals in which Hockett frequently publishes, but they can be mystifying for a lay person.  For example in a discussion of complementary currencies on page 73, at the very end of Chapter 3, footnote #77 reads, "See again Hockett, Rousseauvian Money, supra note 66."

Now, I know that 'supra' means 'above'.  But where exactly above?  Footnote 66 in the same chapter makes no mention of Rousseauvian money, nor does anything on page 66 of this book.  There is no list of references at the end of the paper in the way an academic working paper -- say, something published by the Levy Economic Institute -- in which to quickly look up "Rousseauvian Money."  I had to hunt back until page 26 of the book where I found a URL referring to a 2018 Hockett working paper with that name.  I opened up the PDF at that URL -- but there was neither a footnote 66 nor a page 66 within that document!