Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principles and chartalism.
[1] 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.
[citation needed] The principal ideas behind functional finance can be summarized as:[2] Lerner postulated that government's fiscal policy should be governed by three rules:[2]