Tuesday, June 30, 2015

The Illusion of Productivity

Regardless of what "theory of value" one subscribes to, value is a social attribute. It is an ephemeral quality. A good or a service is worth what we are willing to pay for it irrespective of what has made us willing to pay that much.

Entropy is an objective physical characteristic. You may not be interested in entropy, but entropy is interested in you.

The transformation of material through work to add value also increases entropy. This is the opportunity cost of the the production process.

Exchange of commodities is reversible. The production process is not reversible.

When a commodity loses its value -- when it becomes waste -- entropy does not decrease! One cannot produce trees by subtracting labor from lumber.

Economic production, of value, is simultaneously destruction of potential alternative useful opportunities.

Monday, June 29, 2015


Guardian, Joseph Stiglitz: how I would vote in the Greek referendum

Nobel laureate tells TIME that the institutions and countries that have enforced cost-cutting on Greece "have criminal responsibility"

Sunday, June 28, 2015

M-I-Teee... Squeeze you next week! I-M-F... Why? Because we "F" you! M-O U-S-Eeee

To be plainer, sir, how to solder, how to stop a leak, how to keep the floating carcass of a crazy and diseased finance system, betwixt wind and water, swimming still upon her own dead lees, that now is the deep design of a chief economist!

Saturday, June 27, 2015

Pay No Attention to the Plunging Stock Market Behind the Curtain

Meanwhile, elsewhere:
SHANGHAI — Share prices in China plunged on Friday in one of the sharpest sell-offs in years, accelerating a downturn this last week in what has been, for much of this year, the world’s best-performing stock market.
China’s two major market indexes fell in tandem. The Shanghai composite fell 7.4 percent on Friday. The Shenzhen composite fell even more, dropping 7.9 percent. Share prices in Hong Kong, which is regulated separately, also fell, by 1.8 percent. 
Analysts had been warning for months about the risks of a stock market bubble in China, where giddy investors have driven up stock prices by purchasing shares on margin, or with money borrowed from brokers.
The Shanghai composite is down about 18 percent from its June high. But in Shenzhen, the so-called ChiNext, a kind of Nasdaq-style board on the Shenzhen Stock Exchange for growth stocks, has dropped about 30 percent in the last several weeks, meaning it is already technically in a bear market.
Not to worry, though. The fundamentals are sound. It's a "buying opportunity"!
“This is not a bad thing,” Said Mr. Chi Lo, a senior economist covering greater China for BNP Paribas Investment Partners. “This is an opportunity for long-term investors to go back in. Many investors weren’t comfortable with those sky-high valuations.”

Tragedy of the Wages-Rut System

In a 2013 article, "Generalizing the core design principles for the efficacy of groups," David Wilson, Elinor Ostrom and Michael Cox recount Garrett Hardin's classic parable of the pasture overgrazed by farmers, each pursuing their own private interest by adding more cattle to their herd. Hardin's grim conclusion of a "tragedy of the commons" was shown to be avoidable  by Ostrom's Nobel Prize winning research, in that, "when certain conditions are met groups of people are capable of sustainably managing their common resources [emphasis in original]."

Wilson, Ostrom and Cox go on to discuss the evolutionary salience of those eight core design principles. Incidentally, Barkley Rosser was co-editor with Wilson and John Gowdy of the supplementary issue of Journal of Economic Behavior and Organization in which the article appeared and was co-author the editorial introduction to the issue, "Rethinking economics from an evolutionary perspective." I would welcome any thoughts Barkley might have on this post.

In generalizing Ostrom's core design principles from common-pool management groups to other kinds of groups, the article makes a puzzling omission: labor unions. They specify "governments, businesses, schools, neighborhoods, and volunteer organizations," but no mention  of organized labor. What makes this omission even more intriguing is that Garrett Hardin borrowed his analogy of the commons from the 19th century Oxford don, William Forster Lloyd who was using it to illustrate an argument about over-supply of the labor market and consequent unemployment and impoverishment of workers. Some Lloyd scholars have described his analysis as "proto-Marxist".

In 2010, when I was first drafting the Labor Commons Union idea, I sent a draft to Elinor Ostrom, who replied, "thanks -- had not thought about labor as a common pool that could be exhausted but now I see the similarity with resources." Paul Burkett had also seen the similarity and argued, in Marx and Nature: A Red Green Perspective, that Marx had treated labor power as a common-pool resource although he hadn't used that terminology.

So, if labor power is indeed a common-pool resource as Burkett and I argue and as Ostrom briefly acknowledged, it would seem that a common-pool resource management strategy would be more appropriate than a wages-rut system for establishing equitable compensation of labor. By the same token, the design principles identified by Ostrom and discussed in the paper by Wilson, Ostrom and Cox would be especially compelling.

Evil EuRobot and Abolition Implosion of the Wages-Rut System

Another evil of the robot is the ill-will it begets between the masters and the workmen: their whole lives seem to be a constant effort, on the one hand, to see how much can be pressed out of the reluctant peasant; and, on the other, how little can be done to satisfy the terms of agreement, and escape punishment. Mutual injury becomes a mutual profit; suspicion and ill-will are the natural results. -- John Paget. Hungary and Transylvania: with remarks on their condition, social, political and economical, Volume 1, 1839.
The "robot" referred to in the preceding paragraph was not a mechanical man or other device but a system of labor rent that existed under serfdom in central Europe.

Etymology of robota (from Wikipedia):
From Russian работа (rabóta), from Proto-Slavic *orbota (“hard work, slavery”) derived from *orbь (“slave”), ultimately from Proto-Indo-European *orbh- (“to change or evolve status”), the predecessor to *h₃órbʰos (“orphan”). Cognate with German Arbeit and Dutch arbeid.
Today, June 27, is the  150th anniversary of Karl Marx's declaration that workers "ought to inscribe on their banner the revolutionary watchword: 'Abolition of the wages system!'"

Sandwichman's effort to celebrate and revive this declaration has met with incomprehension in some quarters:
"How do you abolish the wages system by degrees?" 
"And how would that work?"  
"...there might be an interesting argument here, but I cannot understand what it is."
It is beginning to dawn on me that the euphemism "wages system" is a red herring that has been throwing people off the scent. Joan Robinson once famously wisecracked, "The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all."

Sadly, Robinson neglected to clarify that the latter kind of misery was a prerequisite for the former. This was something Karl Marx had described long ago as comprising the "great beauty of capitalist production" -- "that it not only constantly reproduces the wage-worker as wage-worker, but produces always, in proportion to the accumulation of capital, a relative surplus population of wage-workers."

It is as a consequence of this relative surplus of wage workers that "the law of supply and demand of labour is kept in the right rut, the oscillation of wages is penned within limits satisfactory to capitalist exploitation." Thus it would be more accurate to call the wages system of capitalism the "wages-rut system."

Originally, I had intended to post today an updated exposition of  the Labor Commons Union as a practical proposal for the abolition of the wages system. Previously I outlined the proposal in a book chapter, "Time on the Ledger: Social Accounting for the Good Society" and had elaborated on aspects of the idea in "Hours of Labour and the Problem of Social Cost" and "Labour Power as a Common Pool Resource."

But I find it increasingly difficult to motivate such an exposition. However dissatisfied people may be with the effects of the wages-rut system, there seems to be a singular lack of interest in doing anything about the causes of those effects or perhaps a conviction that nothing can be done. I'm not here to exhort people to "do something!" or to persuade them that there is a possibility of doing something.

Part of my disdain for such cheerleading has to do with what used to be known as "the conjuncture". Observing current events, I am afraid that it is too late to speak of abolishing the wages-rut system. Capitalist production is no longer "beautiful" enough to produce a surplus population adequate to the exponentially-expanding accumulation needs of finance capital. A deeper rut must be imposed by fiat by the central authorities. In essence, this is a return to the labor rent system of feudalism -- the robot. The "euthanasia of the rentier" has been overtaken by the erection of a monstrous life-support system for finance capital.

Euthanasia Life Support System of the Rentier

...how to keep the floating carcass of a crazy and diseased finance capital, betwixt wind and water, swimming still upon her own dead lees, that now is the deep design of a central banker!

Friday, June 26, 2015

A People’s Economic Alternative: Lord, Won't You Buy Me A Mercedes-Benz?

I had a friend who wanted to drive a Mercedes-Benz. His reasoning was that rich people drove Mercedes, so if he drove one, people would think he was rich and would make deals with him to make him rich. I am sure there are examples of this strategy succeeding. And many, many more examples of it failing.

John Quiggin has posted a draft statement of principles for a People's Economic Alternative, endorsed by around 20 Australian unions and community groups. Principle number one is "Economic growth is not an end in itself, but is a means to better the lives of the Australian people, including future generations." Who could object to that?

Is economic growth a means to better the lives of people? Show me the evidence. And, no, I don't mean correlations. Correlation does not imply causality. Just because living standards have improved (from a particular perspective) in an era where there has been economic growth doesn't mean the growth has caused the improvement in living standards.

There appears to be a rule in economics that if you ignore a refutation long enough, it goes away. If that doesn't work, knock down a straw man caricature of the critique and that'll proves your point. A logical fallacy becomes a self-evident truth if repeated stubbornly enough.

Principle number one takes an imaginary step forward in acknowledging that economic growth ought not to be an end in itself. But you know what? NOBODY says economic growth is an end in itself. Nobody markets their beer on the promise that if you drink lots of it you'll get drunk. I've seen the ads. Growth puts smiles on the faces of young children. It makes the sun shine brighter.

In short, principle number one of the People's Economic Alternative affirms the conventional dogma as a self-evident truth. What is alternative about that?

Instead of the conservative slogan, “Economic growth is a means to better the lives of the Australian people, including future generations…” a people’s movement should inscribe on their banner the revolutionary watchword: “Abolition of the growth imperative!

Wednesday, June 24, 2015

A World Without Work and the Image of Limited Good

Derek Thompson has a feature (slathered with Shell ads) at the Atlantic Monthly this month, once again traversing the well-trodden territory of the alleged Luddite/lump-of-labor fallacy (see also Foreign Affairs "Will Humans Go the Way of Horses"):
The end-of-work argument has often been dismissed as the “Luddite fallacy,” an allusion to the 19th-century British brutes who smashed textile-making machines at the dawn of the industrial revolution, fearing the machines would put hand-weavers out of work.
Thompson's take on the "boy who cried robot" fable is that this time -- perhaps, after so many false alarms -- the wolfish robot really is at the door. Overall, aside from referring to rioting 19th century laborers as "brutes," it's not such a bad survey of views on the issue -- citing Sandwich-pals, Robert Skidelsky, Ben Hunnicutt and Peter Frase, among others.

But Thompson's excursion takes a weird detour when he asserts that Skidelsky's, Hunnicutt's and Frase's vision of a post-work society is "problematic" because "it doesn’t resemble the world as it is currently experienced by most jobless people." WTF? Proposals for change are invalidated by their lack of conformity to the status quo? Night cannot follow day because it is dark and day is light? Different is impossible because it is not the same?

Thompson then devotes several paragraphs to rounding up the usual suspects of what might be termed as post-work work: 3-D printing, maker spaces and the internet enabled "sharing" economy of Ubers and Task Rabbits. After rambling on discursively for a few thousand more words, Thompson winds up back in Youngstown, Ohio, where his essay started, with the story of Howard Jesko, a 60-year old graduate student:
If Jesko had taken a job in the steel industry, he might be preparing for retirement today. Instead, that industry collapsed and then, years later, another recession struck. The outcome of this cumulative grief is that Howard Jesko is not retiring at 60. He’s getting his master’s degree to become a teacher. It took the loss of so many jobs to force him to pursue the work he always wanted to do.
And they all lived happily ever after! I suppose that's how you sell a story to the Atlantic Monthly. 

Don't get me wrong. It's nice that Howard Jesko will get to pursue work he always wanted to do. I got to teach university at age 64 after working as a clerk in a grocery store for six years. My point though, is that Howard Jesko's happy ending is... not uh... statistically significant. I mean it is not even illustrative of any findings of any research, qualitative or quantitative. It is a weightless anecdote plucked out of thin air. Very thin air. A vacuum.

Besides, seeing all those Shell ads juxtaposed with the article kept depletion of cheap fossil fuel resources and climate change on my mind.

May I let you in on a secret? We're not hurtling inexorably toward a comedic denouement. That's fantasy. Wishful thinking. The Sandwichman offers abolition of the wages system and reduction of working time as harm reduction strategies, not as miracle cures. Got that? Harm reduction. Gonna be a world of hurt.

When the fossil interlude comes to an end, propping up the illusion of perpetual, exponentially-increasing prosperity won't be worth the bother. It will only annoy the pigs you are trying to teach to sing. It is not that there is "only so much work to go round." There are only so many cheap, readily-accessible material resources at hand to work with.  Working, it turns out is always working with.

Lionel Robbins famously defined economics as "the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses." One may quarrel with Robbins's ghost about whether that is what economics ought to study but it must be admitted that the concept of scarcity plays a minor role in contemporary economics discourse. Scarcity has become a side-show that is presumably always solvable by substitution. There is even a "built-in mechanism" that makes it so! In truth, though, there is no built-in mechanism to substitute happy endings for the exhaustion scarce means. When the junk is gone, the party is over. 

Ending? Yes. Happy? Not so much.

Back in the 1960s an anthropologist named George Foster studying the peasants of Tzintzuntzan, Mexico, wrote that those peasants had the foolish notion that there was only a limited amount of good in the world. If one person got more land or water or crop yield or conjugal bliss then somebody else would have to suffer with less. A zero-sum game. Foster thought this was an outmoded idea that had to be dispelled so people could enjoy the boundless booty of modern technology.

Foster's hypothesis was popular for a while in anthropology but also controversial. Eventually its prestige faded. In "Revisiting the Image of Limited Good: On Sustainability, Thermodynamics, and the Illusion of Creating Wealth," Paul Trawick and Alf Hornborg have revived the concept of the image of limited good but with a twist. The peasants were right and Foster was wrong. 

In their essay, Trawick and Hornborg contrasted real wealth and virtual wealth, arguing that what grows are claims on real wealth generated by the expansion of credit. Meeting those claims necessarily involves the destruction of natural resources in the course of converting them into commodities with exchange value. An increase in exchange value thus always entails an increase in entropy -- that is, a decrease in available energy. The amount (or intensity) of this increase in entropy can be modified by technological efficiency improvements but its direction remains unchanged. "Real wealth, unlike its virtual counterpart, is something that human beings do not and cannot create in godlike fashion the way they create ideas and symbolic phenomena such as value."

This strikes at the heart what seems to be an unshakeable article of faith among economists. The economy can grow because value doesn't have to consist of stuff. Well, yeah, value isn't stuff. So what? The creation of value is the creation of claims that may be redeemed for stuff. 

I give you a massage so I can buy a steak with the money you give me. The value of the service is only immaterial when viewed in isolation from my motivation for performing it. No beef, no rub. This is the distinction between real wealth and virtual wealth that economists seem incapable of grasping. Virtual wealth is indeed virtually immaterial -- until the claims that arise from that virtual wealth are redeemed. If those claims are not redeemable for real wealth, they are worthless.

The Wages-Fund Doctrine for Dummies

 Wages-fund doctrine simplified:
1. Wages increase when the wages-fund increases. 
2. The wages-fund increases when profits increase. 
3. Profits increase when wages are kept low.
Thus the way to increase wages is to lower them.
Wages-fund doctrine updated:
1. Full employment requires economic growth. 
2. Sustained economic growth requires low inflation. 
3. Controlling inflation requires limiting wage demands. 
4. Limiting wage demands requires a non-accelerating inflation rate of unemployment (NAIRU).
Thus the way to achieve full employment is to circumvent it.

Tuesday, June 23, 2015

Cotton, Abolition and the Lash of Hunger

"The idea that the commodification and suffering and forced labor of African-Americans is what made the United States powerful and rich is not an idea that people necessarily are happy to hear. Yet it is the truth." -- Edward Baptist, The Half Has Never Been Told: Slavery and the Making of American Capitalism
Marx's "revolutionary watchword," abolition of the wages system, plays on analogy and allusion. The allusion to wages slavery as analogous to chattel slavery was a commonplace in both pro-slavery and anti-slavery rhetoric in 1840s America:
How much better than slaves are laborers forced by the lash of hunger to toil for the mere minimum of human subsistence? And what right has England to read us a lecture on slavery? Let her look at home. The great mass of her population are reduced to a state of moral and physical degradation unknown in any other European country.
Orestes A. "Lash" Brownson
This metaphorical "lash of hunger" appeared in a disingenuous tract by Orestes A. Brownson who professed to despise slavery but maintained that Secretary of State John C. Calhoun's justification of it, in an official letter to British ambassador Richard Pakenham, was not a defense of slavery, "it is said Mr. Calhoun entered into a defence of slavery. He did no such thing. He offers in his letter not one word in defence of slavery."

In truth, Calhoun's infamous letter offered not one but 2,259 words in defence of slavery -- including explicit, albeit diplomatic hints of war arising from the United States' "sacred obligation" to defend and protect slavery as "a political institution, essential to the peace, safety, and prosperity of those States of the Union in which it exists."

Theodore Sedgwick, writing under the pseudonym of "Veto" in the New York Evening Post, offered this less "nuanced" interpretation of the Calhoun letter:
It is evident that this presents to the people of the Union a question entirely new and which they cannot avoid. This issue is not as to abolition of slavery in the southern States, the District, nor the Territories of the Union, but whether this government shall devote its whole energies to the perpetuation of slavery; whether all the sister republics on this continent which desire to abolish slavery, are to be dragooned by us into the support of this institution.... Hitherto the watch-word has been non-intervention in the domestic affairs of the South. Now it is intervention with foreign nations to protect, extend and perpetuate those institutions.
At the other end of the spectrum from Brownson and Calhoun, Free Soil (later Republican) Congressman George Washington Julian of Indiana offered the following rationale for the Homestead Bill in 1847:
The freedom of the public lands is therefore an anti-slavery measure. It will weaken the slave power by lending the official sanction of the Government to the natural right of man, as man, to a home upon the soil, and of course to the fruits of his own labor. It will weaken the system of chattel slavery, by making war upon its kindred system of wages slavery, giving homes and employment to its victims, and equalizing the condition of the people. 
George Washington Julian
In a later speech to the Indiana state convention of the Free Soil Party (1853), Julian took note of the hypocrisy of pro-slavery politicians justifying their "peculiar institution" on the grounds of the social evils of the wages system:
Such an argument in defense of slavery is infamous, besides being the baldest sophistry. The free States do not justify the social evils that have grown up in their midst. They do not cling to them as to the corner-stone of the Republic. They do not invoke in their behalf the divine sanction, nor threaten to dissolve the Union if they should be abolished. It is especially true of anti-slavery men, that whilst they wage war against chattel slavery in the South, they wage war against wages slavery in the North (emphasis added).
The "lash of hunger" is a metaphor. But is the "kindred system of wages slavery" really an analogy? After all, as the Sandwichman reported previously, Simon Kuznets warned against the dangers of analogy, citing Sidney Hook as authoritative. For his part, Hook scorned analogies as "formally worthless and never logically compelling."

Analogy? What analogy? The cotton picked by slaves in the South was not "similar" to the cotton subsequently spun and woven in Manchester with the aid of steam-powered machinery. It was the same cotton. Alf Hornborg has documented that "investments in steam technology in nineteenth-century Britain, for instance, were indissolubly connected to the Atlantic slave trade and the cotton plantations in the American South":
"...capital, however much it tries, will never be able to ‘delink’ itself from labor and land. The rationale of machine technology is to (locally) save or liberate time and space, but (crucially) at the expense of time and space consumed elsewhere in the social system."
Chattel slavery and the wages system were thus constituent parts of a single, vertically integrated production process -- cogs in the same machine, so to speak! And speaking of machines... in a more recent book chapter, "The Fossil Interlude," Hornborg referred to the notion of "energy slaves" as "more than a metaphor."
If the category 'slavery' is defined not primarily in terms of being victims of immediate violence, but more fundamentally in terms of being coerced to perform alienating, low-status tasks for the benefit of a privileged elite, a significant part of the world’s population would qualify as slaves. Seemingly neutral concepts such as 'technology' and the 'world market' organize the transfer of their embodied labour and resources to an affluent minority. From this perspective, the operation of technology represents the deflected agency (the labour energy) of uncounted millions of labourers, harnessed for the service of a global elite.
Machinery, in Hornborg's view doesn't simply enhance the productivity of the laborer using the machine. It does so by displacing a great deal of the work time and effort to someplace else where it can be performed more cheaply and invisibly. The beneficiaries of this unequal exchange have failed to discern that what they enjoy as a gain is actually an inequitable distribution of costs and benefits. Resource exhaustion and constraints from climate change make the sustainability of this illusion doubtful.

What happens, then, when the wages system -- temporarily spared the lash of hunger through its insatiable consumption of fossil fuel and displacement of "degrading, low wage toil" to an out-of-sight, out-of-mind periphery -- runs out of cheap fuel to power the displacing machinery? Will we see a return to the metaphorical lash of hunger or to the overseers' actual lash? Or perhaps some combination of the two?

If people are not happy to hear that slavery is what made the U.S. rich and powerful, they'll be choked to find out it wasn't a one-shot, lasts-forever deal.

Monday, June 22, 2015

The globalization of the technocratic paradigm

From Encyclical Letter Laudato Si’ of the Holy Father Francis, On Care For Our Common Home:
The basic problem goes even deeper: it is the way that humanity has taken up technology and its development according to an undifferentiated and one-dimensional paradigm. This paradigm exalts the concept of a subject who, using logical and rational procedures, progressively approaches and gains control over an external object. This subject makes every effort to establish the scientific and experimental method, which in itself is already a technique of possession, mastery and transformation. It is as if the subject were to find itself in the presence of something formless, completely open to manipulation. Men and women have constantly intervened in nature, but for a long time this meant being in tune with and respecting the possibilities offered by the things themselves. It was a matter of receiving what nature itself allowed, as if from its own hand. Now, by contrast, we are the ones to lay our hands on things, attempting to extract everything possible from them while frequently ignoring or forgetting the reality in front of us. Human beings and material objects no longer extend a friendly hand to one another; the relationship has become confrontational. This has made it easy to accept the idea of infinite or unlimited growth, which proves so attractive to economists, financiers and experts in technology. It is based on the lie that there is an infinite supply of the earth’s goods, and this leads to the planet being squeezed dry beyond every limit. It is the false notion that “an infinite quantity of energy and resources are available, that it is possible to renew them quickly, and that the negative effects of the exploitation of the natural order can be easily absorbed”

"The technocratic paradigm also tends to dominate economic and political life. The economy accepts every advance in technology with a view to profit, without concern for its potentially negative impact on human beings. Finance overwhelms the real economy. The lessons of the global financial crisis have not been assimilated, and we are learning all too slowly the lessons of environmental deterioration. Some circles maintain that current economics and technology will solve all environmental problems, and argue, in popular and non-technical terms, that the problems of global hunger and poverty will be resolved simply by market growth. They are less concerned with certain economic theories which today scarcely anybody dares defend, than with their actual operation in the functioning of the economy. They may not affirm such theories with words, but nonetheless support them with their deeds by showing no interest in more balanced levels of production, a better distribution of wealth, concern for the environment and the rights of future generations. Their behaviour shows that for them maximizing profits is enough. Yet by itself the market cannot guarantee integral human development and social inclusion. At the same time, we have “a sort of ‘superdevelopment’ of a wasteful and consumerist kind which forms an unacceptable contrast with the ongoing situations of dehumanizing deprivation”, while we are all too slow in developing economic institutions and social initiatives which can give the poor regular access to basic resources. We fail to see the deepest roots of our present failures, which have to do with the direction, goals, meaning and social implications of technological and economic growth.”

Sunday, June 21, 2015

Take it down! Now.

"Driving Dixie Down: Removing the Confederate Flag from Southern State Capitols," James Forman Jr., Yale Law Journal, 505 (1991)

On April 9, 1865, General Robert E. Lee conceded, “[T]here is nothing left for me to do but go and see General Grant.” The Confederate Army surrendered, and Dixie, the Confederate battle flag, ceased to fly. But only temporarily. In 1956, for the first time in nearly a century, Georgia resurrected the Confederate symbol by changing its state flag in symbolic opposition to Brown v. Board of Education. South Carolina followed suit six years later, hoisting the flag above its state capitol. The following year, Alabama revived Dixie, with Governor George Wallace raising the flag as part of his “Segregation Forever” campaign. Brown is still the law of the land, yet Dixie remains entrenched. 
Last year, in NAACP v. Hunt, the Eleventh Circuit rejected the National Association for the Advancement of Colored People’s (NAACP) claim that the Constitution of the United States and federal statutes mandate the removal of the flag from the Alabama state capitol. Central to the court’s conclusion was the notion that the Hunt plaintiffs’ problem involved neither the flag nor the law, but their “own emotions.” Moreover, the court held that “[t]here is no unequal application of the state policy; all citizens are exposed to the flag. Citizens of all races are offended by its position.” In sum, the court told the plaintiffs to turn elsewhere for relief, because “the federal judiciary is not empowered to make decisions based on social sensitivity.” 
This Note takes issue with the Hunt court. It proceeds in two parts. Part I argues that the Alabama government’s flying of the rebel flag violates the Equal Protection Clause of the Fourteenth Amendment because the flag was raised with the intent to discriminate against blacks. Part II argues that flying the flag violates the First Amendment because it is a form of racist government speech that chills the speech rights of blacks.

Friday, June 19, 2015

Szalámitaktika: How do you abolish the wages system by degrees?

Step one: Do not forget. Marx advised not to forget that in everyday struggles you are fighting with effects, not with the causes of those effects. Not forgetting requires a lot of attention to history. It also requires a keen awareness that there is a well-funded industry devoted to making us forget.

Step two: Our own accounting. Standard double-entry bookkeeping looks at profit and loss from the perspective of the business enterprise whose purpose is defined as monetary profit seeking. Making a profit is not the purpose of people or of nations. Labor is not a commodity. Labor power is a common-pool resource.

Step three: Build (or transform) organizations dedicated to not forgetting and our own accounting. The model for this is a hybrid that borrows both from traditional trade unionism and from common-pool resource management. The precedents are there. What needs to be done is to synthesize from those experiences.

Step four: Bargain collectively. Collective bargaining is not synonymous with the administrative model of bargaining established under the Wagner Act. Eric Hobsbawm, for example, called the Luddite actions "collective bargaining by riot." Theodore Ave-Lallemant wrote an obscure article nearly a hundred years ago in which he distinguished between the collective labor contract based on cooperation and the more standard form of contract bargaining which "seeks no more than to stipulate the terms of individual contracts of employment."

Step five: Work less. The wages system is effectively abolished in each hour workers collectively withdraw from the labor supply. Limitation of the hours of work is abolition of the wages system by degree. This explains why employers have fought so tenaciously for two centuries against the reduction of working time.

Thursday, June 18, 2015

Let's talk about... abolishing the wages system

Does that phrase, abolition of the wages system, bring to mind "abolition of the law of gravity" or "proposals for the speedy extinction of evil and misery"? This is unfortunate and misleading because unlike gravity, evil and misery, the wages system is a relatively recent innovation. That is not to say that wages were unheard of before they became systematic. Only that they weren't the principal means of subsistence for a large proportion of the population until recent centuries.

The telegraphic version of my argument against the wages system is that it is based on a false accounting analogy, just as national income accounts are based on a false accounting analogy.

The analog is the business enterprise with its system of double-entry bookkeeping. For the profit-seeking firm, monetary receipts and expenditures transit a boundary that corresponds, by definition, with the legal entity of the firm. For the individual employee and for the nation, there is no such obvious correspondence between exchange transactions and welfare. In both cases, the accounting analogy ignores the contribution to public and private welfare of non-market work and environmental amenities and effectively double counts remedial costs -- such as medical expenses and commuting costs -- by what Hueting calls "asymmetric entering": counting expenditures to restore a loss as income with no offsetting entry for the loss.

It turns out that these accounting anomalies are advantageous for some parties in the transactions. That is the "beauty" of capitalist production -- beautiful from the perspective of the capitalist. As Joan Martinez-Alier paraphrases K.W. Kapp, negative social and environmental externalities "are not market failures, they are cost-shifting successes." There is nothing inevitable, universal or eternal in the use of an inappropriate accounting analogy. It is not gravity.

Wednesday, June 17, 2015

For the Abolition of the Wages System!

Once more, with feeling:
Instead of the conservative motto: "A fair day's wage for a fair day's work!" they ought to inscribe on their banner the revolutionary watchword: "Abolition of the wages system!"
With that sentence Karl Marx concluded the second part of his address on the topic of wage-labor, prices and profit to the Central Council of the International Workingmen's Association. To the end of his exposition, Marx appended three proposed resolutions, the last of which proclaimed:
Trades Unions work well as centers of resistance against the encroachments of capital. They fail partially from an injudicious use of their power. They fail generally from limiting themselves to a guerilla war against the effects of the existing system, instead of simultaneously trying to change it, instead of using their organized forces as a lever for the final emancipation of the working class, that is to say, the ultimate abolition of the wages system.
In his address, Marx refuted the wages-fund doctrine of classical political economy, four years before John Stuart Mill famously recanted his defense of the doctrine in reply to William Thornton's critique. Three years later, the final nail was hammered into the coffin of classical political economy with the publication of Thomas Brassey's Work and Wages, whose conclusions Alfred Marshall predicted "will be found to exercise a very complicating influence on the theory of Distribution."

Before Mill recanted the wages-fund doctrine, it had been the chief "scientific" weapon for denying the legitimacy of trade unionism and the possibility of raising real wages through collective action. After Mill recanted the doctrine, the chief propaganda weapon against unions, higher wages and shorter hours became the claim that the unionists clung to a version of the discredited wages-fund doctrine. This supposed mistaken belief was eventually given the name of the Theory of the Lump of Labour.

In short, until around 1869, unions were wrong because they didn't subscribe to the wages-fund doctrine. After 1870, unions were wrong because they did subscribe. One things was certain. They were always wrong no matter what they believed.

June 27, 2015 is the one-hundred and fiftieth anniversary of Marx's call for the abolition of the wages system -- a fitting occasion for renewing that call:
We do not forget that we are fighting with effects, but not with the causes of those effects; that we are retarding the downward movement, but not changing its direction; that we are applying palliatives, not curing the malady. We shall not, therefore, be exclusively absorbed in these unavoidable guerilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market. We understand that, with all the miseries it imposes upon us, the present system simultaneously engenders the material conditions and the social forms necessary for an economical reconstruction of society. Instead of the conservative motto: "A fair day's wage for a fair day's work!" we inscribe on our banner the revolutionary watchword: "Abolition of the wages system!"

Tuesday, June 16, 2015

Trigger Warning! The Wage Prisoner's Dilemma

At Foreign Affairs, Erik Brynjolfsson and Andrew McAfee trot out the legendary Luddites and the proverbial lump-of-labor fallacy as they ask, "Will Humans Go the Way of Horses?"

Humans, stuffed and mounted?
In their penultimate paragraph, B. and M. make a welcome call for discussion about "what kind of society we should construct around a labor-light economy" and ask "How should the abundance of such an economy be shared?"

It's a good question. It's actually quite a simple question, if it weren't for a dense propaganda smokescreen, this magazine of untruth, laid down over more two centuries.

There are three issues here. One is that reducing the hours of work would be a marvelously effective way of sharing the abundance of a "labor-light economy." That's the good news. The second issue is that it takes materials and energy to construct and operate robots. Did someone mention greenhouse gas emissions and climate change? I didn't think so. The third issue is that the good news answer to the first issue is a taboo "fallacy" according to the lump-of-labor smokescreen.

Karl Marx, to whom Brynjolfsson and McAfee refer in their second paragraph, described the "great beauty of capitalist production" as consisting of the fact that "it not only constantly reproduces the wage-worker as wage-worker, but produces always, in proportion to the accumulation of capital, a relative surplus population of wage-workers [emphasis added]."

By "beauty," I don't think Marx meant aesthetically pleasing. More like "it's a feature, not a bug." The relative surplus population of workers, the reserve army of the unemployed, is not incidental to capitalist production. It is not a "market failure" or an "externality." It is how the system works. To solve the problem of a relative surplus population of workers would require abolishing the wages system -- thus Marx's declaration, in the June 27, 1865 conclusion to his speech on Value, Price and Profit to the First International Workingmen's Association:
...the working class ought not to exaggerate to themselves the ultimate working of these everyday struggles. They ought not to forget that they are fighting with effects, but not with the causes of those effects; that they are retarding the downward movement, but not changing its direction; that they are applying palliatives, not curing the malady. They ought, therefore, not to be exclusively absorbed in these unavoidable guerilla fights incessantly springing up from the never ceasing encroachments of capital or changes of the market. They ought to understand that, with all the miseries it imposes upon them, the present system simultaneously engenders the material conditions and the social forms necessary for an economical reconstruction of society. Instead of the conservative motto: "A fair day's wage for a fair day's work!" they ought to inscribe on their banner the revolutionary watchword: "Abolition of the wages system!"
Abolish the wages system? But how?

Conveniently, the beneficiaries of the wages system (those FT monkeys) have been telling us how for 235 years. Only they have been screaming, "Don't!" Why is the reduction of the hours of work denounced as being based on a fallacy? Because ultimately, eventually, it could lead to the abolition of the wages system! We wouldn't want that to happen, would we?
Thus the law of supply and demand of labour is kept in the right rut, the oscillation of wages is penned within limits satisfactory to capitalist exploitation, and lastly, the social dependence of the labourer on the capitalist, that indispensable requisite, is secured...
To the naked eye, abolition may look like a one-shot, all or nothing proposition. Not so. Abolition can be incremental. It can proceed in stages. The first stage can consist of simply not forgetting that in their everyday struggles over wages "they [the working class] are fighting with effects, but not with the causes of those effects."

Going beyond not forgetting, I have proposed a form of unionism, the "labor commons", that regards labor power as a common-pool resource to be collectively managed rather than as a commodity to be sold by each individual worker. Conceiving of labor as something other than an extension of and thus the private property of the individual worker is a tall order. The principle of labor as private property is enshrined in chapter five, "Of Property," of John Locke's Second Treatise of Civil Government:
...every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his.
Except for the most part we are not talking about "the labour of his body, and the work of his hands." We are referring to a complex division of labor, co-operation and means of production that dwarfs the manual labor of a person. Regarding labor power as a common-pool resource recognizes the greatly-enhanced social productivity of labor. The wages system is calculated to siphon off the lion's share of that social productivity and award it to the owners of capital.

How does that happen? Consider the wage prisoner's dilemma: given a choice between working long hours for more money and working short hours for less money, many will chose to work longer hours. But if a preponderance of workers choose (or are compelled) to work long hours, they will oversupply the labor market, depressing wages. They may end up working longer hours for less money.

This is not rocket science. It is elementary supply and demand: an observed regularity. And, no, it does not imply or assume "a fixed amount of work to be done." If I flood the market with bananas, it is likely the price of bananas will fall even if the demand for bananas increases in response to the lower price. It is conceivable that the temporarily lower price could instigate a banana craze that subsequently overwhelms the initial price decline. But as a rule...

Imagine the following scenario: 

One hundred workers are fully employed for 40 hours a week. The current wage is $10 an hour. Due to some inscrutable technical feature of the production process, it is determined that optimal scheduling requires workweeks of either 36 hours or 44 hours.

After adjustment to the new schedules, the uniform wage rate will be adjusted to somewhere between $9.09 and $11.11 an hour, depending on the proportion of workers who choose each schedule. Weekly pay will thus range between $328 and $400 for those working a 36-hour week and between $400 and $488 for those working a 44-hour week.

If half the workers choose a 36-hour week and half choose a 44-hour week, hourly wage will remain at $10 and thus the weekly pay will be $360 and $440 respectively. If a majority of more than 55% of workers chose the 44-hour schedule, some workers will have to be laid off, starting with those who have opted for the 36-hour schedule. That should be about enough information to figure this out.

Which schedule would you choose?

Monday, June 15, 2015

It Takes a Leak

 Guardian: "UK under pressure to respond to latest Edward Snowden claims"
The reports first appeared in the Sunday Times, which quoted anonymous senior officials in No 10, the Home Office and security services. The BBC also quoted an anonymous senior government source, who said...
Milton: Of Reformation in England, the Second Book
To be plainer, sir, how to solder, how to stop a leak, how to keep the floating carcass of a crazy and diseased monarchy or state, betwixt wind and water, swimming still upon her own dead lees, that now is the deep design of a politician!

Sunday, June 14, 2015

Some Kind of an Index -- No Normative Connotations

Paul Samuelson,"Evaluation of Real National Income,"1950
Production possibilities as such have no normative connotations. We are interested in them for the light they throw on utility-possibilities. This is why economists have wanted to include such wasteful output as war goods in their calculations of national product; presumably they serve as some kind of an index of the useful things that might be produced in better times.
Or to paraphrase George Orwell, "If this boot wasn't stamping on your face, you could put it on your foot and it would keep your toes warm -- FOREVER!"

Four-fifths of the "Economy" is a Complete Waste of Time

There are really two questions we are dealing with here. First, do inputs to production earn their marginal product? Second, do the owners of non-rival ideas have market power or not? -- Dietz Vollrath "What Assumptions Matter for Growth Theory?"
Dietz Vollrath has a new post that goes a long way toward clarifying the battle lines in the fight over the foundations of growth theory. -- Paul Romer, "The Assumptions in Growth Theory"
Huh? These fellows omit the main assumption, the analogy -- "growth is a concept whose proper domicile is the study of organic units..." (Kuznets, 1947). Kuznets cited with approval Sidney Hook's discussion of the dangers of the use of this analogy.
As an argument it is formally worthless and never logically compelling. An argument from analogy can be countered usually with another argument from analogy which leads to a diametrically opposed conclusion.... The belief that society is an organism is an old but fanciful notion. It can only be seriously entertained by closing the eye to all the respects in which a group of separate individuals differs from a system of connected cells, and by violently redefining terms like 'birth,' 'reproduction,' and 'death.'
Growth "theory" gets around this objection to the uncritical use of analogy by ignoring it -- by 'closing the eye' to explicit caveats in the seminal contribution to the measurement of growth. Let's pretend that the economy really is an organism that grows perpetually but never dies.

Name one.

Carry on, growth theorists.

Saturday, June 13, 2015

Dean Baker is right about growth... (and a three-card monte game doesn't have to be a scam)

It's all in how the game is played.

Dean Baker wrote:
...growth is not necessarily bad for the environment. And, as a practical matter the only way we will be able to advance environmental goals is by tying them to a growth strategy.
O.K. let's play a game called "[pick a number] myth[s] about [fill in the blank]" "three myths about growth."

Myth: "When people hear the term 'growth' they tend to think of physical objects such as houses, cars, and refrigerators. Growth can mean more of these products."

Reality: "Newer and better treatments for cancer and other diseases are also growth. So is an increase in the number of people going to college or other getting other types of education. Better software is also growth."

Truth: Services don't run on breathair. Services employ workers and require infrastructure. When all the inputs are accounted for -- including labor and infrastructure -- "service and household sectors are not much less energy intensive than are the other sectors of the economy," (Stern, "Economic Growth and Energy" Encyclopedia of Energy, vol 2)

Myth: "growth has been associated with increased use of fossil fuels and other resources."

Reality: "that link has gotten much weaker over the last 15 years."

Truth: The last 15 years? Why stop there? Why not the last 35 years? Or 70 years? Look at David Stern's Figure 4, below. Since 1945 relatively less primary energy has been used per dollar of real GDP. That relative decoupling accelerated after, oh, 1973.

Now look at Stern's Figure 7.

What happened to that "relative decoupling" of GDP from energy use prior to 1973? It appears to have been more than entirely the result of the shift to higher quality fuels. After 1973, there does appear to be some relative decoupling but, as Stern pointed out:
If decoupling is mainly due to the shift to higher quality fuels, then there appear to be limits to that substitution. In particular, exhaustion of low cost oil supplies could mean that economies have to revert to lower quality fuels such as coal.
It's like the warning, "objects in mirror are closer than they appear." In this case, GDP growth and energy use are more closely coupled than they appear. Past results are not a reliable indicator of future outcomes.

Myth: "there are considerable political obstacles to implementing environmental policies in the United States and other countries"

Reality: "there are clearly much bigger political obstacles to putting in place a new economic system"

Truth: Who the fuck knows? Are the relative probabilities of implementing environmental policies or of putting in place a new economic system known? Are they quantifiable? Dean's contention here is where the argument gets interesting. Recall that quote from his op-ed:
...growth is not necessarily bad for the environment. And, as a practical matter the only way we will be able to advance environmental goals is by tying them to a growth strategy.
Yes, in theory, growth is not necessarily bad for the environment. But as a practical matter, it has been increasingly bad for the environment and there is no persuasive evidence of an imminent, fundamental change. So, when Dean says tying environmental goals to a growth strategy is a practical matter, does he really mean 'practical' or does he mean 'rhetorical'?

Dean appears to acknowledge that questioning growth is taboo. Proposals that confront the legitimacy of the growth imperative are systematically excluded from respectable, mainstream conversation. They are dismissed as ill-informed fringe talk by people who "don't understand" that growth isn't necessarily bad for the environment -- that it doesn't necessarily mean more "physical objects such as houses, cars, and refrigerators."

Wanna bet?

The above clip is from Caroline Baum's Henry Hazlitt Memorial Lecture at the 2010 Austrian Scholars Conference, held at the Mises Institute in Auburn, Alabama. You may wonder why Austrian scholars traveled all the way to Alabama for their conference? Never mind.

Baum's lecture, fetchingly titled "Still nonsense after all these years," dwelt on the Sandwichman's favorite fallacy, an appropriate theme for a Hazlitt memorial in that Hazlitt's Economics in One Lesson contained no fewer than four denunciations of "the false assumption that there is just a fixed amount of work to be done."

Less well-known than his ad nauseum Lesson was Hazlitt's outspoken disdain, in the 1950s, for what he termed "the fetish of national income statistics." Point four in Hazlitt's catalogue of reasons for doubting the trustworthiness of growth rate comparisons was the following:
Professor G. Warren Nutter has pointed out that there is 'a long-run tendency... for the industrial growth rates to slow down, or retard, as the level of production gets higher.' There are several basic explanations of this. One has to do with a trick of percentage figures. Another has to do with a physical satiety point in human needs. If only one family in a country has a bathtub, and the next year 50 families get one, the rate of growth is 5,000 percent. But when everybody has a bathtub net growth stops. This principle applies to houses, automobiles, radios, television sets, and so on.
Did you see what they did there?
we want bigger houses, fancier appliances, more cars. In the fifties it was a car in every driveway and that gave way to the two-car garage and now the three and the four-car garage.
But when everybody has a bathtub net growth stops. This principle applies to houses, automobiles, radios, television sets, and so on.
When people hear the term 'growth' they tend to think of physical objects such as houses, cars, and refrigerators
The rhetorical coupling between economic growth and physical objects is highly malleable. It is Sandwichman's contention that it is precisely this ambiguity that has made growth so rhetorically persuasive. Growth appears to mean just about whatever the speaker chooses it to mean with regard to physical objects.

You want bigger houses? Growth means bigger houses! You want to protect the environment? Growth doesn't necessarily mean more or bigger houses! When everybody has a bathtub, net growth of bathtubs stops. But in the fifties, it was a bathtub in every bathroom. That gave way to the two-bathtub bathroom and now the three and the four-bathtub bathroom. Bathtub? Did somebody say bathtub?

This sleight-of-hand is the rhetorical equivalent of the three-card monte trick of throwing down the top card. But it needs to be remembered that the card trick alone is not the whole hustle. Of equal (or greater) importance is the dramatic build-up that induces the mark to bet money on the game.

It makes little sense to argue that the three-card monte game could be played honestly if there were no shills and the dealer did not engage in card tricks. Playing honestly is not the object of the game.

Dean means well when he claims that the only way "to advance environmental goals is by tying them to a growth strategy." Realistically, it's the only way to get into the oldest floating permanent policy crap game in D.C. when it's taboo to not tie goals to a growth strategy.

It is perhaps an understatement to say that there are huge political obstacles "to putting in place a new economic system" but when the existing system precludes effective environmental policies, then there really is not much choice. The rhetoric of growth discounts policies that could make growth "not necessarily bad for the environment."

The Empire of Complicity -- Max Haiven
The struggle against hopelessness is in some ways very personal and in some ways very common. The idea that the global capitalist system as it is today cannot be changed is almost universal. Indeed, this fatalism — at least at the level of individual motivations — is ironically one of the driving forces behind the system’s perpetuation. The vast majority of those whose labors reproduce capitalism (from CEOs and politicians to lawyers and professors; to journalists and software engineers; to store clerks and strip miners) do not do so out of any particular love of the system or economic sadomasochism. Indeed, it is widely recognized that the present order is tremendously destructive, both to the world at large and to our own lives. 
Rather, like most of us, they participate — to a greater or lesser extent — in making capitalism ‘work’ because they believe there is no other option. How many of us take up positions in the architecture of power based on the rationale that our reluctance or refusal to do so would be meaningless? How many of us have been forced to compromise our values because of the economic pressures of the system? How many of us have justified these compromises in the name of inevitability? Of course, most of us work because of economic coercion; only a few of us are ever privileged enough to entertain the opportunity to say ‘no’. But, even so, we can credit the relatively minimal involvement of populations in social movements less to ignorance and apathy and more to a sense of utter futility. If capitalism and its co-optation of all that we value is inevitable, why bother to resist? Why not simply seek to do the best one can within the system?

Tuesday, June 9, 2015

TPP will give you six-pack abs without diet or exercise!

"After all, an export is more than just an item we are shipping overseas. It is also a product of the values of the people who created it, which it represents."

Also will grow thick new hair on your bald head and give you a younger wife. What else?

Monday, June 8, 2015

Exterminate the Brutes!

The liberty-loving wit and wisdom of Herr Ludwig von Mises:
The vain arrogance of the literati and Bohemian artists dismisses the activities of the businessmen as unintellectual moneymaking. The truth is that the entrepreneurs and promoters display more intellectual faculties and intuition than the average writer and painter. The inferiority of many self-styled intellectuals manifests itself precisely in the fact that they fail to recognize what capacity and reasoning power are required to operate successfully a business enterprise. 
The emergence of a numerous class of such frivolous intellectuals is one of the least welcome phenomena of the age of modern capitalism. Their obtrusive stir repels discriminating people. They are a nuisance. It would not directly harm anybody if something would be done to curb their bustle or, even better, to wipe out entirely their cliques and coteries.

Inequality, Growth and Leisure

In response to musings by Paul Krugman on inequality and growth, Dean Baker asks whether taking more of the benefits in leisure time might skew the appearance of the data. That is to say if the value of leisure wasn't excluded from GDP, those countries that took more leisure -- and, incidentally, are relatively more equal -- would have higher growth rates.

Ironically, Dean doesn't have the time just now to check that one out. Sandwichman has time but not Dean's virtuosity with data.

As Krugman argues, "there just isn't a striking, simple relationship between inequality and growth; all the results depend on doing fairly elaborate data massaging..." There isn't a striking result to be had from the data for a good reason. There isn't a single relationship in the underlying reality. The results are also constrained by what questions are being asked.

The presumptive question seems to be whether inequality is good or bad for growth. Is that the only question worth asking? Is it the best question? Dean framed his question about leisure as a supplement. He remarks, mock apologetically, "there is nothing wrong with taking the benefits of higher productivity in the form of leisure rather than income."

Wanna bet?

There must indeed be "something wrong" with taking the benefits of higher productivity as leisure. Otherwise, why would economists echo, decade after decade, the lump-of-labor refrain against the "fallacy" of reducing working time? If there really was nothing wrong with taking the benefits of productivity as leisure, then, hey presto, that boilerplate injunction would be superfluous -- inappropriate, even.

Are economists ignoring the obvious?

Sixty years ago, Simon Kuznets -- who won the Sveriges Bank ("Nobel") Prize for his pioneering work in national income accounting -- was puzzled by his finding that for a limited sample of industrially-advanced countries, inequality didn't increase with growth. He was puzzled, in part, because ceteris paribus, "the cumulative effect of such inequality in savings would be the concentration of an increasing proportion of income-yielding assets in the hands of the upper groups." This was the famous inverted "U"-shaped Kuznets curve. Subsequent research by Thomas Piketty has shown the curve to be an anomalous statistical artifact of the periodization and country selection.

There are a multitude of factors that could explain the Kuznets curve anomaly and it is doubtful that knot could ever be untangled. But let me suggest a factor candidate. The period in which the Kuznets curve prevailed was the period in which the eight-hour day became standardized in the industrially-advanced countries. Instead of looking exclusively at the relationship between growth and inequality, might there not be greater insight gained from investigating the triad of growth, inequality and leisure?

Thursday, June 4, 2015

Those FT monkeys

Because... Marat/Sade.
Those FT monkeys covered in banknote
Have champagne and brandy on tap
They're up to their eyeballs in franc notes
We're up to our noses in crap
Those gorilla-mouthed fakers
Are longing to see us all rot
The gentry may lose a few acres
But we lose the little we've got
Revolution, it's more like a ruin
They're all stuffed with glorious food
They think about nothing but screwing
And we are the ones who get screwed

Hey Presto, A Lump of Boilerplate!

Gosh, I guess there are only so many words to go round!

Those FT monkeys, covered in banknotes, "The short working week that holds France back," Financial Times, May 28, 2015:
Introduced in the late 1990s by the Jospin government with that cool disregard for the “lump of labour” fallacy that only those educated at top French universities can contrive, this sought to cut unemployment by reducing the number of hours each individual worked. Do that and, hey presto, the idea was that there would be more jobs to go round. 
Ruth Lea, "Personal view: It's time to break the Government's web of tax fallacies," The Telegraph, Feb. 20, 2006,
My second fallacy is the "lump of public services fallacy". This is based on the idea that there is an immutable relationship between public spending and public services output. Spend the money, which the Chancellor will insist on calling "investment", and, hey presto, there will be a "lump" of "high quality" services.
The Economist: Economics: An A-Z Guide, 2003:
One of the best-known fallacies in ECONOMICS is the notion that there is a fixed amount of work to be done - a lump of LABOUR — which can be shared out in different ways to create fewer or more jobs. For instance, suppose that everybody worked 10% fewer hours. FIRMS would need to hire more workers. Hey presto, UNEMPLOYMENT would shrink.
What explains this remarkable coincidence of terminology?
The key is to exploit journalists’ incredible laziness. If you lay out the information just right, you can shape the story that emerges in the media almost like you were writing those stories yourself. In fact, that’s literally what you’re doing, since many reporters just copied and pasted our text.
Meanwhile, over at Jacobin there is a nice little non-boilerplate, non-plagiarized, non-bullshit essay by Michel Husson and Stephanie Treillet, Liberation Through Vacation: "Reducing working hours is more than a path to full employment. It could help millions live more fulfilling lives.":
Reducing forced labor time opens up various prospects for human and social emancipation. The possibility of emancipating ourselves from forced labor cannot be dissociated from the possibility of reducing exploitation in forced labor. This is the meaning of Simone Weil’s sentence: “No one would accept to be a slave for two hours; to be accepted, daily slavery must last long enough to break something in a human.”

Wednesday, June 3, 2015

Unpuzzling the Politics of Growth and Redistribution: What hath growth wrought?

"If there is a future for cosmopolitanism in Europe, it needs a credible politics of growth and redistribution." -- Peter Dorman, "Europe, Where Two Rights Make a Wrong"
Sandwichman wonders how such a politics would differ from the "ostensible socialist" wing of the neoliberal coalition. First, it would help to have a credible definition of what it is that is supposed to be growing. "Growth" sounds good... as long as you don't have to pin it down. But what supposedly grows -- national income and product accounts -- is an incomplete, monetized aggregate of disparate things, some of which are double counted, and "more" of which could mean just about anything or nothing. 

It is wishful thinking to assume that more of "whatever" will inevitably be better than a well-specified less.

Barkley Rosser took Sandwichman to task for suggesting that the mix of empirical information, speculation and wishful thinking about the relationship between economic growth and income inequality has probably worsened since Simon Kuznets 1954 estimate of "5 per cent empirical information and 95 per cent speculation, some of it possibly tainted by wishful thinking":
But the hard fact is that there is lots more data out there on many aspects of economics, including the precise issues that Kuznets was studying when he made his complaint about "speculation."
Barkley is right about there being more data and empirical work out there, although it is unnerving that the example he cited as a sign of the empirical work -- Thomas Piketty's work -- doesn't support the complacent conventional wisdom regarding the unquestionable beneficence of economic growth. I would like to add another source that supports Barkley's claim about empirical work but contradicts the dominant complacency about growth: François Bourguignon and Christian Morrisson's widely-cited "Inequality among World Citizens: 1820-1992":
To summarize, this analysis shows that world income inequality worsened dramatically over the past two centuries. ... Changes in inequality within countries were important in some periods, most notably the drop in inequality within European countries and their offshoots in America and in the Pacific during the first half of the 20th century. In the long run, however, the increase in inequality across countries was the leading factor in the evolution of the world distribution of income. ... World inequality seems to have fallen since 1950 as a result of the pronounced drop in international disparities in life expectancy. But now that disparities in life expectancy are back to the levels before the big divergence of the 19th century, this source of convergence has lost its influence.
Bourguignon and Morrisson's empirical analysis -- along with Piketty's -- controverts that initial, tentative summary of long-term trends that puzzled Simon Kuznets:
...a long-term constancy, let alone reduction, of inequality in the secular income structure is a puzzle. For there are at least two groups of forces in the long-term operation of developed countries that make for increasing inequality in the distribution of income before taxes and excluding contributions by governments. ... What is particularly important is that the inequality in distribution of savings is greater than that in the distribution of property incomes, and hence of assets. ... Other conditions being equal, the cumulative effect of such inequality in savings would be the concentration of an increasing proportion of income-yielding assets in the hands of the upper groups -- a basis for larger income shares of these groups and their descendants.
The puzzle is solved because there isn't "a long-term constancy, let alone reduction, of inequality in the secular income structure" after all. This is not to say that the relationship between economic growth and inequality is an uncomplicated one, wholly determined by the disproportion of savings between people in different income groups. But it does fundamentally undermine the conclusions of cross-country regressions, "on the basis of which," as Bourguignon put it, "it would be tempting to conclude that 'growth (of any nature) is good for the poor'."

But what about a politics of economic growth (of any nature?) and redistribution? It might work -- just as a politics of general copulation could reduce the birth rate if combined with effective measures of contraception. Long live the revolution, indeed!

On the other hand, why make redistribution conditional on achieving growth targets in the first place? In bargaining parlance, that is what's known as a fall-back position. You don't present your fall-back position in your opening proposal. That's called "giving away the farm."

A few days ago, Sandwichman promised to expound on why the perpetual fallacy mantra even matters. Here is why. Those FT monkeys (covered in banknotes) would simply prefer to rhetorically prohibit the only opening gambit that could force real concessions from the folks who have champagne and brandy on tap. That effective initial offer would be a demand that doesn't stupidly assume, but actively pursues a "fixed amount of work" with a more equitable distribution. The only "credible politics of growth and distribution" would put distribution first and leave it to the owners of a disproportionate share of income-yielding assets to offer a growth and redistribution compromise in their counter-proposal.

But, alas, those FT monkeys' strategy seems to be working. They think about nothing but screwing growing their income-yielding assets and we are the ones who get screwed yielded.


Artist Statement (from "The Interventions of Kathryn Walter" by Bill Jeffries, Contemporary Art Gallery, Vancouver, 1990):
"The strategy behind 'Unlimited Growth...' is direct. It is directed at those who operate our free-market economy in their own interests, while excluding those interests that would be 'responsive to the needs of the community'. The subtext to 'Unlimited Growth...' relates to several aspects of public art including the need to address the use of site-specific work as a way of intervening in local issues, and in this instance, acting as a marker of resistance by the economically marginalized, as represented by a parallel gallery and a hotel providing affordable housing. Walter raises questions related to the systems underlying the transactions and power-plays that constitute normal business in the world of real estate development. In Walter's art the museum without walls is also a museum OF walls, walls new and old, as well as those walls that perpetuate economic class distinctions. Her text on the façade of the Del-Mar Hotel will stand as a witness to the various power-plays, including the threat to move B.C. Hydro's head office to the suburb of Burnaby, that led to the development surrounding 553-555 Hamilton Street."