Monday, May 30, 2011

An Underton Window?

The "Overton Window", named after its originator, Joseph Overton, describes the respectable range of political discourse. The idea of "moving the window" suggests promoting fringe proposals so that an idea previously considered radical seems sensible by comparison.

So, if there's an Overton Window, why not an Underton Window? The idea here would be narrowing the range of acceptable discourse by progressively abandoning one's own position for a "more moderate" one and in the process dismissing formerly acceptable ideas as beyond the realm of possibility. See also, "Shoulda, Coulda, Woulda."

Sunday, May 29, 2011

1871 Newcastle Engineers' Strike

One-hundred and forty years ago today, May 29, 1871, workers in the engineering industry in Newcastle, England went on strike for the nine-hour day. John Burnett, the leader and chronicler of the strike called it "one of the most determined struggles for a good object, which has ever been entered into by any portion of the working community of this kingdom.' The strike lasted about four and a half months and concluded with a near total victory for the workers. The engineers' success at Newcastle inspired a nation-wide wave of agitation for the nine-hour day, many of which demands were met without further need for strike action.

I discussed the Newcastle engineers' strike at length in Chapter One of Jobs, Liberty and the Bottom Line.

John Burnett, "Trade Unions as a Means of Improving the Conditions of Labour" (1886):
In a word, Unions are formed that by the strength of combination results may be achieved which individual effort will be for ever powerless to obtain. For this men join together, and the individual gives up somewhat of his individualism for the common good of all.

One illustration is sufficient to show the full force of this position. The bundle of sticks is doubtless apposite but is somewhat antiquated. I take reductions of the hours of labour as being one of the most effective methods of improving the position of labour, but in this direction it is evident that individual effort can do nothing. The unit may occasionally force up his own wages, but it is impossible for him to get his own day's work down to eight or even nine hours while his fellows work ten. Therefore it is only, and can be only, by the force of concentrated effort that the hours of toil have been or can be reduced.

Saturday, May 28, 2011

True or False?

1. Violence, terror and intimidation are the foundation of all popular combination.

2. The real cause of a high rate of wages is a high rate of profit.

Discuss.

Monday, May 23, 2011

Is Capitalism Too Productive?

Well, is capitalism too productive?

No. Capitalism is too addicted to social domination and waste. Calling social domination and waste "productivity" doesn't make capitalism productive.

Sunday, May 22, 2011

Lies, Damn Lies and Empirical Evidence

In a comment at Crooked Timber, John Quiggin stated:
Most economists would regard it, on the basis of the empirical evidence, as being generally true for employment and generally false for energy.
Now, "most economists" is an empirical claim. Are there any survey research data backing the statement? The Sandwichman is skeptical and frankly finds the "most economists regard" formula somewhat suspect. Here is a list of things economists agree on Greg Mankiw published a few years ago. It is based on "various polls of the profession."
  1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
  2. Tariffs and import quotas usually reduce general economic welfare. (93%)
  3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
  4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
  5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)
  6. The United States should eliminate agricultural subsidies. (85%)
  7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)
  8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
  9. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
  10. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
  11. A large federal budget deficit has an adverse effect on the economy. (83%)
  12. A minimum wage increases unemployment among young and unskilled workers. (79%)
  13. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
  14. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)
A few years earlier Robert Whaples published a similar list with some overlap. The thing about both of these lists is that they don't specify to what degree the generally agreed upon views were based on empirical evidence. See "most economists agree that a minimum wage increases unemployment among young and unskilled workers."

Or, in the Whaples survey "most economists agree that gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged" and "the best way to deal with Social Security's long-term funding gap is to increase the normal retirement age." I'm sure that's based on "empirical evidence" -- a selective interpretation of selected evidence.

Anyway, here is a collection of various things "most economists regard":
Most economists regard price as the driving force in the marketplace. Most economists regard division of labor and globalization as strategies that can continue to be expanded far into the future. Most economists regard monopoly as an exceptional case in a modern economy. Most economists regard competitive markets as the ideal type of market for economic activity. Most economists regard the free market as the best mechanism for allocating… Most economists regard their discipline as a science; since, in the common understanding, physics is the best developed of the sciences, economics ought to… Most economists regard deflation as bad news. Most economists regard this as highly unlikely. Most economists regard the general equilibrium approach as highly controversial for business cycle analysis. Many, if not most, economists regard the Paretian optimum as almost self… Most economists regard the spending spree that Americans indulged in throughout the postwar decades as an unambiguous blessing, on the assumption that more… Most economists regard the end to deflation as important for economic growth, although the Japanese economy has managed to achieve mild… Why, then, do most economists regard immiserizing growth, where growth actually hurts the growing country, as unlikely in practice? Somewhat inexplicably, most economists regard evidence about expectations drawn from public opinion surveys as scientifically contemptible… Truth be told, most economists regard Homo economicus as a useful approximation to plug into their models, not a representation of how… Most economists regard high unemployment and low income as distinct problems, arising out of different sets of causes and requiring different policies and… Significantly, however, the conference did not address the issue that if most economists regard the history of economics as unimportant, perhaps historians… Most economists regard this crisis as the worst for farmers since the 1920s and 1930s. Most economists regard free trade as largely positive because it reduces the need for domestic subsidies, encourages formation of capital investment… Most economists regard that method, called the payroll survey, as more reliable and comprehensive than the bureau's household survey… Most economists regard this as very unlikely, as long as… But most economists regard a substantially higher unemployment rate as appropriate, at least for now, because they believe so low a rate would mean… Most economists regard the formation and accumulation of capital as essential for industrialization. Most economists regard exchange markets as highly efficient, but information is costly, and some interval must pass between the receipt of new information… Nevertheless, most economists regard bribery as a bad thing because it encourages rent seeking behaviour. Most economists regard the problem of job creation mainly as a matter of encouraging more employment with the existing stock of capital…

Thursday, May 19, 2011

Skidelsky Channels Sandwichman

Over at Project Syndicate, Keynes biographer, Professor Lord Robert Skidelsky knocks a chunk out of the venerable lump-of-labour fallacy claim:
So, are we doomed to a jobless recovery? Is the future one in which jobs are so scarce that many workers will have to accept a pittance to find any employment, and become increasingly dependent on social transfers as market-clearing wages fall below the subsistence level? Or should Western societies anticipate another round of technological wizardry, like the Internet revolution, which will produce a new wave of job creation and prosperity?

It would be foolish to rule out the last possibility a priori. Capitalism has a genius for reinventing itself. It has seen off all of its challengers, and there are no new ones in sight. Moreover, no one can predict the discovery of new knowledge; if they could, it would already have been discovered. But there is also a more troubling possibility: if, by proceeding on our current profligate path, we succeed in making natural resources scarce, we will require a new wave of technology, regardless of the cost, to rescue us from calamity.

But let’s put these grim prospects aside, and ponder what a civilized solution to the problem of technology-driven unemployment would look like. The answer, surely, is work-sharing. To the Anglo-American economist, any such proposal is anathema, because it smacks of the dreaded “lump of labor” fallacy – the idea, once popular in trade-union circles, that there exists only a certain amount of work, and it should be shared out fairly.

Of course, this is a fallacy when resources are scarce, but even economists never thought that growth would continue forever. The discipline’s founders expected that, at some point in the future, mankind would attain a “stationary state” of zero growth. Then we would require only a certain amount of work – much less than we perform now – to satisfy all reasonable needs. The choice would then be between limitless technology-driven unemployment and sharing out the work that needed to be done.

Only a workaholic would prefer the first solution. Unfortunately, such people seem to be in charge of policy in the United States and Britain. Many other European countries are adopting the second solution. Work-sharing schemes, in many different forms, are becoming the norm in Holland and Denmark, and have made inroads in France and Germany.

Take note, Keynesians. Skidelsky's skewering of the fallacy claim is accord with Keynes's own view, as discussed by Skidelsky over a decade ago.

Wednesday, May 18, 2011

Wage Story, Even Longer Term

Jared Bernstein calls attention to a recent decline in real wages since October of last year. In response to comments, he posted further observations on the longer term increase in income and wealth inequality since the 1970s.

I'd like to suggest an "even longer term" story. Historically, the secular trend of growth in wages was matched with a secular decline in the normal hours of work. In 1957, Bureau of Labor Statistics economist, Joseph Zeisel wrote that the long term decline of the industrial work week was "one of the most persistent and significant trends in the American economy in the past century." But that secular decline of weekly hours in manufacturing came to a halt in 1945 and the decline in average annual hours began to actually reverse in the early 1980s.

Theory suggests that wages and hours are connected much as the early trade unionists had claimed in Mary Steward's doggerel, "whether you work by the piece or work by the day, reducing the hours increases the pay." Two factors contribute to an association between long hours and lower pay. One is that, all other things being equal, hourly productivity can be increased by reducing the hours of work. The other factor is that unemployment is higher with longer hours, which forces wages down. Of course, with lower wages, people work even more hours to "make ends meet" and we see a vicious cycle of longer hours, higher unemployment, lower productivity and lower wages...

I'd be curious to hear what Jared thinks of the novel argument that the end of the secular decline in hours has been a significant contributor to the stagnation of wages (see my January 2009 Submission to the White House Task Force).

Sunday, May 15, 2011

Clive Crook: His Plate Boileth Over

Clive Crook recites a familiar, if tired, refrain at the Financial Times:
That is the organising principle of the entire mess and it is the oldest economic error in the book: the lump of labour fallacy. There are only so many jobs to go around, according to this view; let in more, or indeed any, immigrants and you are taking jobs away from Americans. The idea is nonsense. The US refutes it more plainly than any other country in history. The quantity of jobs is not fixed. Immigrants bring their jobs with them. Roughly speaking, each new immigrant creates one new job. Immigration expands the economy.

So here is how to make a paper "mouthpiece" dummy: 1. Download a picture file of the dummy from the internet.


2. Clip out a talking mouth piece and and overlay for the top of the face.


3. Attach the mouthpiece to the face base.


4. Cover with the top of face overlay.


Now you can pull on the tab and make the dummy talk! It can also be lip synced with a text to speech file containing the original boilerplate.

Friday, May 13, 2011

Fiendishly Clever Foregone Conclusions

This just in from The Economist (thanks to Google alert):
The lump of labour fallacy is seductive, and in times of economic hardship it becomes very difficult to convince people that more competition for scarce jobs will make their lives better.
It's "counter-intuitive" innit? The unemployed would be better off if there were more people competing for fewer jobs than if there were fewer people competing for more jobs. I wonder why it is so hard to convince people of such a fiendishly clever foregone conclusion? Stupid people. Maybe it's because it just ain't so?

The editors of The Economist magazine must get some kind of product placement bonus for mentioning the lump of labour claim every chance they get. Last month it was a cover story on the idea that postponing pension eligibility until age 70 will make lives better for older folks, as well as for 20-25 year olds for whom there will be more jobs if the old folks don't retire. "A potential barrier to older people staying on in the workforce is the “lump-of-labour fallacy”—the belief that there is only so much work to go around."

Stupid people! Don't they know that the worse things get for them the better it will be for everyone (including themselves)? Don't they realize that fiendishly clever foregone conclusions are indisputably true by virtue of being fiendishly clever AND foregone? ...and repeated adnauseum?

Wednesday, May 11, 2011

Dean Baker: "The Only Real Solution for Budget Deficits: Growth"

Dean is right, of course. But does he have to be so smug about it? Historically it was economic growth that transformed a projected budget deficit in 2000 into a budget surplus. But it wasn't just generic "growth" that happened in the 1990s. It was dot.com bubble growth, which, following the stock market crash in March 2000, was leveraged into less robust and thus deficit-enhancing housing bubble growth. And we know how that turned out.

Dean never tires of skewering those who couldn't foresee the housing bubble and its inevitable comeuppance. But history didn't start in 2001. The housing bubble and the dot.com bubble were joined at the hip. How does that deficit-slaying growth thing look if there was no post-bubble bubble? In a word, "unsustainable."

Of course the point of Dean's argument is to show that the deficit and inflation hawks now hogging the Very Serious People discourse in D.C. are barking mad, which they are. And nuance won't even shine your shoes in the big boys' policy debates. But Dean's narrative leaves the impression that economic growth of whatever quality is a panacea and Clinton-era growth is the model for that cure. That may not be what Dean intends to say but, in the stark absence of qualifiers or reservations, it's a fair interpretation.

I won't say that a reprise of Clinton-era growth is an impossibility, although it seems to me prohibitively implausible. What I will say is that an implausible solution is not a real alternative -- even to lunacy. Dean has previously proposed the elements of what could be a real solution but it seems like the monumental silence in response to his work-sharing proposal has persuaded him there is no traction for such a counter-orthodox approach. Too bad.

Sunday, May 8, 2011

"Only a Certain Amount of Work to be Done"

Curiouser and curiouser. The page clip below is from William Thornton's 1846 Over-population and its Remedy or, an inquiry into the extent and causes of the distress prevailing among the labouring classes of the British Isles and into the means of remedying it. In the passage cited below, Thornton actually asserts that "there is only a certain amount of work to be done, and only a certain amount of capital to pay for it." But there was a context for the claim: the restriction on the movement of workers imposed by the administration of the Poor Laws.

Saturday, May 7, 2011

An Open Letter to Paul Krugman

UPDATE (June 13, 2013): the earliest prototype of the "lump-of-labor fallacy" that I have now been able to document occurs in Dorning Rasbotham's 1780 pamphlet, Thoughts on the Use of Machines in the Cotton Manufacture.

Dear Professor Krugman,

I am writing to you because three times over the last 14 months your authority has been invoked to me on behalf of the assertion that people who advocate shorter working time as a remedy for unemployment are guilty of a "lump-of-labor fallacy" assumption that there is only a fixed quantity of work in the world. As did John Maynard Keynes, I believe that working less is one of "three ingredients of a cure" for unemployment. I find it odd to learn that I (and presumably Keynes) am thereby assuming a palpable absurdity: that the amount of work to be done is invariant.

Breaking: Bear Suspected of Depositing Feces in Forest

What? Groundhog Day again?

Brad DeLong cites Mark Thoma citing Dean Baker beating on the Washington Post for an editorial "We Dare Not Let This Happen [but don't support doing anything about it]."

UPDATE: Paul Krugman joins the chorus. See also an open letter to Professor Krugman.

Huh? Dog bites man is news?

Over here in Sandwichland, we have an old saying, "If it walks like a duck and quacks like a duck, it's a duck. But if it sheds crocodile tears while eating the unemployed, it's a fucking crocodile." You wanna know how to stop the croc from eating the unemployed? Kill the beast.

Dean says, "the buffoons running economic policy who could not see the largest asset bubble in the history of the world are still there running economic policy."

Mark says, "I think the potential benefits of trying to do something exceed the costs by a safe margin."

Brad says, "Once again the Washington Post making absolutely no sense at all."

Bull. Shit.

The "buffoons" running economic policy are not buffoons. Or, they are not merely buffoons. They are stewards of a system that requires unemployment to keep the buffoons on top on top. Whether the potential benefits of doing something exceed the costs is irrelevant. Benefits to WHOM? Costs to WHOM? Cui bono. The Washington Post editorial makes total sense from the perspective of the buffoons at the top.

Have Dean, Mark and Brad never read Michal Kalecki's "The Political Aspects of Full Employment"?
Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of 'sound finance' is to make the level of employment dependent on the state of confidence.
Kalecki said that in a lecture delivered in spring of 1942. That's 69 years ago and they didn't even have the Internet. Some news travels fast. And some doesn't.