Sunday, March 24, 2013

The Moon Belongs to Everyone

Dorning Rasbotham, Esq., was a friend of the poor. Nay, from the bottom of his heart, he was a friend of the poor! He felt tenderly for the poor man and his family. After all, what would become of the rich if there were no poor people to till their fields, pay their rents and manufacture their goods?

Squire Rasbotham laid down the following principle in a pamphlet he published in 1780: "A cheap market will always be full of customers." Let's not waver from that principle as we consider the facts in the following table:

"Hours" in the above table refers to billions of hours of paid employment in the U.S. in each of the specified years. "GHGs" refers to billions of tons of greenhouse gas emissions. Both totals increased from 1990 to 2011 and those increases were 88% synchronized between the two variables. If one went up, the other went up. If one went down, the other went down -- 88% of the time!

Correlation does not imply causation. In this case, though, the correlation is exactly what theory would predict. The correlation here is not "implying" anything. It is evidence in support of a theory that existed long before people even thought of measuring greenhouse gas emissions.

That theory is an extended version of Squire Rasbotham's principle that a cheap market is always full of customers. In 1865, William Stanley Jevons applied that same principle to the economy of fuel:
As a rule, new modes of economy will lead to an increase of consumption, according to a principle recognised in many parallel instances. The economy of labour effected by the introduction of new machinery, for the moment, throws labourers out of employment. But such is the increased demand for the cheapened products, that eventually the sphere of employment is greatly widened.... 
Now the same principles apply, with even greater force and distinctness, to the use of such a general agent as coal. It is the very economy of its use which leads to its extensive consumption....

And if such is not always the result within a single branch, it must be remembered that the progress of any branch of manufacture excites a new activity in most other branches, and leads indirectly, if not directly, to increased inroads upon our seams of coal.
This theory is known as the Jevons Paradox or the rebound effect. Substitute "fossil fuel" for coal and the theory predicts pretty accurately the results presented in the above table.

Fast forward to today. We want more jobs -- that is to say more hours of work --but we want less greenhouse gas emissions. We face not only a paradox but a dilemma. The horns of this dilemma are yoked together, not just "in principle" but in the physical, mechanical agent of both the economy of fuel and the economy of labor: the machine. "When we try to pick out anything by itself, we find it hitched to everything else in the Universe," is how John Muir put it.

It gets rather tedious watching one group of experts "solve" one side of the dilemma while completely ignoring the other side while yet another group of experts "solves" the other side while ignoring the first. "Crackpot realism" was C. Wright Mills's name for it but there's nothing realistic about it. It's just plain old crackpot.

So what's the solution, then? I'll tell you after the break. Listen to this song first.

The moon belongs to everyone,
The best things in life are free;
The stars all shine for everyone,
They're shining for you and me.

The flowers in Spring,
The birdies that sing,
The sunbeams that shine,
They're yours--they're mine.

The sky belongs to everyone...
And that's not just the lyrics to an old song any more. That's the ruling of Judge Gisela Triana, of the Travis County, Texas, District Court in July 2012. From the Boston Globe, July 12, 2012:
The lawsuit was brought by the Texas Environmental Law Center, and is part of a court campaign in a dozen states by an Oregon-based nonprofit, Our Children’s Trust. The group is using children and young adults as plaintiffs in the lawsuits — some state and some federal — filed in Alaska, Arizona, California, Colorado, Iowa, Minnesota, Montana, New Jersey, New Mexico, Oregon, Texas, and Washington.

By relying on ‘‘common law’’ theories, the group hopes to have the atmosphere declared a public trust for the first time, granting it special protection. The doctrine has been used to clean up rivers and coastlines, but many legal experts have been unsure if it could be used successfully to combat climate change.
As David Morris reported in On the Commons, Peter Barnes proposed treating the sky as a public trust in his 2001 book, Who Owns the Sky. Barnes's idea was the basis for a "cap-and-dividend" bill proposed in the U.S. House of Representatives in 2009.

Cap-and-dividend is a variation on the cap-and-trade concept of a market-based emissions regulatory mechanism. Some of the main criticisms of such market-based schemes have to do with enforcement mechanisms, non-compliance, transparency and regulatory capture.

The idea of trading pollution allowances originated in Ronald Coase's "The Problem of Social Cost" and was further developed by J. H. Dales in Pollution, Property and Prices. Coase's article centered on a critique of the "Pigouvian tradition" that advocated a prominent role for the state in taxation to offset the effects of environmental externalities.

In his critique, Coase didn't consider that there was both an environmental and a labor component to Pigou's analysis. Pigou's analysis of the labor question was not reducible to the environmental one and relied at a key point on Sydney J. Chapman's theory of the hours of labor. I have discussed this in detail in "The Hours of Labour and the Problem of Social Cost."

I mention this to emphasize that the hours of work is not just some random, unconnected variable that I've pulled out of a hat. It is fundamental to the analysis of social cost. It stands to reason that it should also be fundamental to the resolution of problems arising from social cost shifting.

I have therefore proposed a friendly amendment to the cap and dividend proposition that I will provisionally call The Lump-of-Labor Rebound GHG Cap and Trade Remedy.

I will just sketch a rough outline of how such a policy might operate followed by some remarks on how it can be integrated with a community-based valuation of the "temporal commons":

According to our table above, there were 6.7 billion tons of GHGs emitted in the U.S. in 2011 and 225.6 hours worked. That same year the adult population in the U.S. was about 240 million. Suppose that the government adopted a target of cutting emissions by two-thirds by the year 2040. To do so would require a 3.7% annual reduction in greenhouse gas emissions.

The best greenhouse gas reduction on record (apart from economic fluctuations) in the period 1990 to 2011 was a little less than 2.5%. The average annual reduction was about 0.5%. Taking an average of the two gives a 1.5% reduction as something that is feasible but ambitious. To get from a 1.5% reduction to a 3.7% reduction would then require a reduction in aggregate hours of work of 2.2%.

Dividing the reduced hours number by the adult population produces an annual transferable hours credit of 936. If we assume that the labor force participation remained constant, the hours transferred from those outside of the labor force would raise the average annual hours of those in the labor force to 1460 hours, although it is conceivable that some recipients might chose to neither use nor transfer their credits. In that case, the hours reduction and the associated greenhouse gas reduction would be steeper than planned.

This is not to assume that the benchmark GHG reduction of 1.5% will occur automatically or that the further reduction in GHGs as a result the reduction of work hours will be proportional to the reduction of hours. These are targets only and there need to be programs put in place to try to meet them and monitoring to evaluate how successful those efforts were.

So far the discussion has focused on a policy that could only be implemented by a government with radically different priorities than those that any actually existing government of a wealthy industrial country has. It is a political Utopia. But the gist of this policy proposal is not restricted to a global emissions reduction strategy. My own research project began some 15 years ago by looking at collective bargaining practices and how they might be modified to promote job creation through the redistribution of working time.

One of the fruits of that project, "Time on the Ledger" examined how employment can be considered as a common-pool resource. A different valuation of benefits of leisure time and of unpaid work and of the costs of unemployment and of environmental damage could lead to a very different set of priorities in collective bargaining and those different goals could reignite a labor movement in place of a marginalized, ineffectual and increasingly irrelevant organized labor.

Tuesday, February 26, 2013

The New Charter of Industrial Freedom

The Image below is NOT the old "Charter of Industrial Freedom." It is instead an editorial by Samuel Gompers that appeared in the A.F. of L. Federationist lauding the labor provisions of the Clayton Antitrust Act as the Charter of Industrial Freedom -- an "industrial Magna Carta," no less! As Charters go, the memorable part was the proclamation in Section 6, "That the labor of a human being is not  a commodity or article of commerce." It was a noble sentiment but, as discussed previously, had negligible traction as legal doctrine.
For the New Charter of Industrial Freedom, I'm going to suggest something entirely different from lofty phrases and woolly intentions. In fact, I'm going to take liberties with the notion of a "Charter" and suggest something more akin to a chart of accounts than to a manifesto.

The trouble with manifestos or any other sort of persuasive journalism is that they are indelibly marked with the sign of the commodity. The popular press was no less a product of the new industrial conditions that emerged during the 19th century than were the boot polish, stomach pills or packaged cereals whose advertisements filled the columns of the newspapers.

Persuasion in the resulting "free market of idea" presupposes that there is indeed a market of idea, that it is free and that that is a good thing. The treatise, pamphlet, article, book or blog post thus takes its place proudly as a commodity on this market, confident that it will find just as many buyers as it is intrinsically worth. Or it takes its place grudgingly in some forlorn niche, resentful of the puffery and commercial pandering that  propels unworthy screeds to the top of the ideological heap.

Hold that thought while I check my stats to see if this has gone viral yet.

The point is that criticism cannot win the free-market-of-ideas lottery because even if it does momentarily that only goes to show that the lottery wasn't rigged after all. Catch 22. The manifesto affirms at the level of metalanguage what it denies manifestly.

Framing The New Charter of Industrial Freedom as a chart of accounts (with liturgical undertones) aims beyond superficial persuasion to deeper layers of inculcation, confession, calculation and reflection. I won't go into a detailed rationale here for the framing but instead will briefly reference a couple of sources that underlie that rationale: James Aho's The Religious, Moral and Rhetorical Roots of Modern Accounting and Rob Bryer's "Accounting and Control of the Labour Process."

Bryer wrote of a capitalist mentality, inculcated by the accounting process, which uses the accounting information to control the labor process and minimize costs “by holding the collective worker accountable for the rate of return on capital.” In its broader historical context, as recounted by Aho, that bookkeeping originated with a moral and confessional purpose quite distinct from the purposes and mentality that evolved from it. One might even say that the evolved capitalist mentality glorifies and defends precisely those motives and actions that bookkeeping was invented to expunge as sinful (see also Weber's pessimistic conclusion: "fate decreed the cloak should become an iron cage.").
Almighty and most merciful Auditor, We have followed most faithfully the devices and desires of our own pocketbooks. We have not strayed from thy bottom line. We have left unpaid those social costs which we could shift to others and we have amassed revenues from doing those things which we ought not to have done... And thereby we have successfully maximized return on investment and shareholder value. Amen!
This is not to chastise the capitalist mentality for moral hypocrisy, though, but only to stress the efficacy of the bookkeeping technology at focusing and refining the "devices and desires" of those who employ it. But it is only efficacious insofar as its objects are conceived as commodities. A counter-mentality -- whether it calls itself socialist, trade unionist, ecological or anti-capitalist -- cannot be founded on the commodity-principle derived from the capitalist bookkeeping. But neither can it be founded on pure negation.

In "Time on the Ledger," I have sketched a prototype of what such a social accounting process might look like. It is only an outline -- a stick-figure that can only be fleshed out through a broad collaborative effort. It is due to be published in May as Chapter 11 in Toward a Good Society in the Twenty-First Century: Principles and Policies. Also in May, I have been invited to participate in the Economics and the Commons Conference in Berlin.

What I proposed in "Time on the Ledger" is a social accounting framework for evaluating the net social productivity of different hours of work arrangements. The basic idea is that first, there are fixed social cost to labor that are not reflected in capitalist accounting and the way that employers can shed their labor costs by laying off workers and second, there is a technologically-determined optimal length of working time per worker exceeding which subtracts from net social product over the longer period. The information from this process can guide collective bargaining and public policy advocacy while at the same time inculcating a commons mentality in practitioners. It is not enough to translate back and forth between capitalist accounting perspective and a commons ideal. One must become fluent in a new social accounting language.

I would like to conclude these introductory remarks on the New Charter with a digression on prayer and confession. Karl Marx concluded his letter to Arnold Ruge of September 1843 with the following, "What is needed above all is a confession, and nothing more than that. To obtain forgiveness for its sins, mankind needs only to declare them for what they are." A confession! My little parody above was paraphrased from the general confession in the morning and evening prayer of The Book of Common Prayer. An entire book of commons prayer may be too ambitious an undertaking. But perhaps a reworking of that morning and evening prayer...

What appeals to me particularly about that liturgy is that it is performed as a dialogue between the minister and the congregation. It is, to be sure, a scripted and rehearsed dialogue -- a set piece, so to speak. Aside from any specific religious content, the ritual of this dialogue performs a vital centering purpose, opening up the mind and heart to a deeper level of receptiveness. It seems to me that such a centering ritual would be entirely appropriate for a group assembled to carry out a social accounting analysis.

Monday, February 18, 2013

Labor is (not) a Commodity

"Labour is a commodity like every other, and rises or falls according to the demand." – Edmund Burke
"Labour is not a commodity." – International Labour Organization, Declaration of Philadelphia
"We must now examine more closely this peculiar commodity, labour-power." – Karl Marx
Organized labor’s millennium lasted exactly six years, two months, two weeks and five days. On October 15, 1914, U.S. President Woodrow Wilson signed the Clayton Antitrust Act. Samuel Gompers, founding president of the American Federation of Labor, hailed the labor provisions of that law as "the most comprehensive and most fundamental legislation in behalf of human liberty that has been enacted anywhere in the world", "the foundation upon which the workers can establish greater liberty and greater opportunity for all those who do the beneficent work of the world" and the "industrial Magna Carta upon which the working people will rear their structure of industrial freedom." Gompers gushed that the words contained in Section 6 of the Act, "That the labor of a human being is not a commodity or article of commerce," were "sledge-hammer blows to the wrongs and injustices so long inflicted on the workers."

On January 3, 1921, in the case of Duplex Printing Press Co. v. Deering, the U.S. Supreme Court ruled that "there is nothing in the section to exempt such an organization [i.e., union] or its members from accountability where it or they depart from its normal and legitimate objects and engage in an actual combination or conspiracy in restraint of trade," thereby confirming an opinion long held by objective observers that the labor provisions of the Clayton Act didn't actually exempt unions from court injunctions. In the meanwhile, Gompers journeyed to Paris to lobby for virtually identical language in the Treaty of Versailles, affirming the official non-commodity status of workers everywhere: "Labour should not be regarded merely as a commodity or article of commerce." In 1944, the International Labour Organization reiterated as the first principle of its Declaration of Philadelphia that "Labor is not a commodity."

The everyday experience of working people, economic policies of governments, bargaining priorities of trade unions and theoretical models of economists refute the idealistic maxim that labor is not a commodity. An early rationale for the proposition was given in 1834 by William Longson of Stockport in his evidence to the House of Commons Select Committee on Hand-Loom Weavers:
…every other commodity when brought to market, if you cannot get the price intended, it may be taken out of the market, and taken home, and brought and sold another day; but if a day's labour is offered on any day, and is not sold on that day, that day's labour is lost to the labourer and to the whole community…
Longson concluded from these observations of labor's peculiarities that, "I can only say I should be as ready to call a verb a substantive as any longer to call labour a commodity."

Karl Marx was emphatic about the peculiar historical nature of labor – or, more precisely, labor-power – as a commodity. Rather than reject the label outright, though, he chose to examine it more closely. Marx observed that for labor-power to appear on the market as a commodity, the sellers must first be free to dispose of it (but only for a definite period) and also must be obliged to offer labor-power for sale because they are not in a position to sell commodities in which their labor is embodied.

Connecting Longson's observation to Marx's, it would seem as though, aside from moral strictures, one of the qualities that most distinguishes labor-power from other commodities – its absolute and immediate perishability – is what compels its seller to submit unconditionally to the vagaries of demand. To paraphrase Joan Robinson, the misery of being regarded as a commodity is nothing compared to the misery of not being regarded at all.

So if labor-power is not a commodity, or is only one due to peculiar and rather disagreeable circumstances, what is it, then? Consider the idea of labor-power as a common-pool resource. Labor-power can be distinguished from labor as the mental and physical capacity to work and produce use-values, notwithstanding whether that labor-power is employed. Labor, then, is what is actually performed as a consequence of the employment of a quantity of labor-power.

Human mental and physical capacities to work have elastic but definite natural limits. Those capacities must be continuously restored and enhanced through nourishment, rest and social interaction. "When we speak of capacity for labour," as Marx put it, "we do not abstract from the necessary means of subsistence." It is the combination of definite limits and of the need for continuous recuperation and replacement that gives labor-power the characteristics of a common-pool resource. As Paul Burkett explains, Marx regarded labor power not merely as a marketable asset of private individuals but as the "reserve fund for the regeneration of the vital force of nations". "From the standpoint of the reproduction and development of society," Burkett elaborates, "labor power is a common pool resource – one with definite (albeit elastic) natural limits."

"Common pool resource" is not the terminology Marx used; Burkett has adopted it from Elinor Ostrom's research. For Ostrom, common pool resources are goods that don't fit tidily into the categories of either private or public property. Some obvious examples are forests, fisheries, aquifers and the atmosphere. Relating the concept to labor is especially apt in that it illuminates, as Burkett points out, "the parallel between capital's extension of work time beyond the limits of human recuperative abilities [including social vitality], and capital's overstretching of the regenerative powers of the land." That parallel debunks the hoary jobs vs. the environment myth.

The basic idea behind common-pool resources has a venerable place in the history of neoclassical economic thought. It can't be dismissed as some socialistic or radical environmentalist heresy. In the second edition of his Principles of Political Economy, Henry Sidgwick observed that "private enterprise may sometimes be socially uneconomical because the undertaker is able to appropriate not less but more than the whole net gain of his enterprise to the community." In fact, from the perspective of the profit-seeking firm, there is no difference between introducing a new, more efficient production process and simply shifting a portion of their costs or risks onto someone else, society or the environment. The opportunities for the latter may be more readily available.

One example Sidgwick used to illustrate this was "the case of certain fisheries, where it is clearly for the general interest that the fish should not be caught at certain times, or in certain places, or with certain instruments; because the increase of actual supply obtained by such captures is much overbalanced by the detriment it causes to prospective supply." Sidgwick admitted that many fishermen may voluntarily agree to limit their catch but even in this circumstance, "the larger the number that thus voluntarily abstain, the stronger inducement is offered to the remaining few to pursue their fishing in the objectionable times, places, and ways, so long as they are under no legal coercion to abstain."

In the case of labor-power, "fishing in the objectionable times, places and ways" manifests itself in the standard practice of employers considering labor as a "variable cost." From the perspective of society as a whole, maintaining labor-power in good stead is an overhead cost. The point is not to preach that firms ought to treat the subsistence of their workforce as an overhead cost. That would no doubt be as effectual as proclaiming that labor is not a commodity. As with Sidgwick's fishery, a greater advantage would accrue to firms that didn't conform to the socially-responsible policy.

Ostrom explained the differences between various kinds of goods by calling attention to two features: whether enjoyment of the good subtracts from the total supply still available for consumption and the difficulty of restricting access to the good. Private goods are typically easy to restrict access to and their use subtracts from total available supply. Public goods are more difficult to restrict access to and their use doesn't subtract from what is available for others. Common-pool goods are similar to private goods in that there use subtracts from the total supply but they are like public goods in that it is more difficult to restrict access to them.

If it were merely a matter of selling to employers, then labor-power would have the uncomplicated characteristics of a private good. Working for one employer at a given time precludes working for another. Hypothetically, the worker can refuse to work for any particular employer thereby restricting access. But here we need also to contend with that peculiarity of labor-power noted by the silk weaver, William Longson that a day's labor not sold on the day it is offered is "lost to the labourer and to the whole community."

"If his capacity for labour remains unsold," Marx concurred, "the labourer derives no benefit from it, but rather he will feel it to be a cruel nature-imposed necessity that this capacity has cost for its production a definite amount of the means of subsistence and that it will continue to do so for its reproduction." This contingency and urgency of employment effectively undermines the worker's option of refusing work, so that in practice labor-power has the features of a common-pool good rather than of a private one. Collectively, the choice of refusing work is further weakened by competition from incrementally more desperate job seekers – a population Marx called "the industrial reserve army."

So is labor a commodity or is it not? The arch, paradoxical answer would be "both." Examined more closely, the capacity for labor – labor-power – reveals itself as a peculiar commodity that exhibits the characteristics of a common-pool resource rather than a private good. An actual Charter of Industrial Freedom must address these peculiar characteristics rather than bask contentedly in the utopian platitude that labor is not a commodity.

NEXT: The New Charter of Industrial Freedom