The past of functi̇onal fi̇nance and the present of it i̇n the poi̇nt of Post Keynesi̇an vi̇ew

According to functional finance that fiscal instruments should be assessed in terms of effects and results on general economy, this approach argued by A.P.Lerner which was based on Keynes's general theory. States don't need taxes for financing government spending but taxation is essential to create money demand from the view point of functional finance. State takes an active role through fiscal policy which aims to perform price stability and full employment at the same time. In the mid 1970s, it has been criticized on the grounds that fiscal policy has short-term impact on production and employment besides causing inflation in the long term. The other criticism reasons against fiscal policy are crowding out affect and policy lags therefore the link between full employment and fiscal policy was separated each other. But the chronic problems of market economy as unemployment and poverty continue nowadays, so the need of state intervention raises. There are two different views on how to achieve economic stability in Post-Keynesian approach based on functional finance, full employment through aggregate demand or the intervention of state as employer which is called "Employer of Last Resort" (ELR). The expectation of full employment after investment and economic growth provided by aggregate demand channel may not result in full employment because of inflationary pressure. However, state as employer of last resort generates elastic labor demand which is assure employment and also minimum wage implementation acts as anchor for inflation may secure price stability. Key Words: Functional Finance, Fiscal Policy, Full employment, Employer of Last Resort(ELR), Tax Driven Money(TDM).