Working Paper No. 273

William Vickrey's single-minded commitment to full employment is evident in a series of papers written in the last years of his life (Vickrey, 1992a, 1992b, 1993a, 1993b, 1993c, 1994, 1996, 1997). In this work, Vickrey formulated an assets-based approach to macroeconomic analysis with definite implications for budgetary and employment policy. In Vickrey's approach, the difference between desired and actual holdings of net financial assets—or net nominal savings— is the crucial relation in understanding macroeconomic processes, and the government budget is the key policy instrument in the necessary recycling of net nominal savings to bring the desired and actual levels into equality at the full employment level of output and income. Vickrey believed that the major task for economists and policymakers was to devise the means whereby the necessary recycling of net nominal savings can take place without unexpected changes in the rate of either inflation or deflation. This paper proposes government deficit-financed guaranteed public employment as an automatic stabilizing policy instrument capable of serving as just such a means.