Tuesday, December 29, 2015


Carl Snyder was an enthusiastic advocate of Pareto's law of income distribution, arguing that "the wealth, capital, and broad diffusion of comforts in the more highly developed civilizations like those of the United States and Europe, are the product of an extraordinarily small number of men." Any attempt to redistribute income away from the "true creators... the true saviours of our modern world" (such foolish notions being "one of the strongest drives within those vast lower levels of our neolithic population") inevitably leads to "the ruthless destruction of civilization by these barbarian hordes."

Snyder's ecstatic brand of pro-plutocratic faith and rhetoric endeared him to the folks at the Mises Institute, where one can download a copy of his Capitalism the Creator. But even a cursory glance at Snyder's book jacket-featured chart reveals that Snyder didn't solely attribute to capitalistic accumulation "the fruits of this fine flower which we call civilization." Sharing credit for the economic miracle is our old friend, "primary power."

Energy that is. From hydrocarbons (mostly). Fossil fuel.

Virtually the same chart is reproduced inside the book on page 75, titled "VIII. THE SOURCES OF OUR GREAT WEALTH AND INCOME. It shows the value of manufactures, total primary power, an index of trade and production and capital invested in manufacturing. In Chart XII, on page 113, "much the same thing is given in a different form" for the benefit of those many persons (obviously not "true creators") who find "the ordinary charts... difficult to follow." Chart XII once again "compares the amount of capital invested, the 'value added' in manufacture (over the cost of raw materials), and the number of horsepower used in primary power":
A glance suffices to reveal how close is the association, very strongly suggesting, perhaps even proving that increased product in manufacturing can only be attained through the increased use of machinery, of which the amount of horsepower employed is an excellent index. In turn, this increase in use of machinery and of primary power is possible only through the increase in the capital employed. No other conceivable way.
No "decoupling" of output from "horsepower." We'll come back to that.

Meanwhile, it was fascinating to discover that Snyder was as infatuated with Svante August Arrhenius's cosmical physics as he was with capitalism's immaculately-conceived incarnation of Vilfredo Pareto's law of income distribution. Arrhenius is best known today for his 1896 theory that climate may be affected by decreases or increases in the atmospheric concentration of carbon dioxide and other, so-called greenhouse gases.

In addition to his glowing review in the New York Times of Arrhenius's  Das Werden der Welten, the headline of which is reproduced in the lead graphic of this post, Snyder wrote The World Machine -- The First Phase -- The Cosmic Mechanism, a book he described as the "first connected presentation in English" of Arrhenius's ideas:
These ideas formed, as it were, the capstone or the keystone of a view of the world-process which has been slowly growing through the centuries and that must eventually impose upon all who trouble their minds with such matters. 
Getting back to that matter of decoupling output from horsepower, at least, Snyder's "no conceivable way" may turn out to be pretty hard to dispute, after all. The graph below is from Rethinking Economic Growth Theory from a Biophysical Perspective, by Blair Fix. It plots five-year average growth rates for "useful work" and real GDP.

There doesn't appear to be any trend of decoupling here, as there is for the relationship between GDP growth and primary energy consumption. This would suggest that most of past energy savings have come from efficiency gains in the conversion of primary energy to useful work. Fix explains that "this embodied form of technological progress has inherent limits stipulated by the laws of thermodynamics." See also the following presentation by Blair Fix, "Economic Growth as a Power Process" October 27, 2015:

ABSTRACT: Is economic growth a miracle of the free market? According to mainstream theory, growth is best ensured through conditions of ‘perfect competition’. However, economic growth is tightly correlated with the concentration of power in the hands of large corporations. Why? The capital as power framework provides potential answers that turn mainstream theory on its head: growth seems to be intimately related to the formation of hierarchy. Blair Fix is a PhD student at the Faculty of Environmental Studies, York University.
In a roundabout way, Fix's argument brings us back to to the Pareto power law of income distribution, by way of George Zipf (and Zipf mostly by way of Mario Giampietro!). Only this time, the implication is less beneficent than Snyder's notion of the "true creators... the true saviours of our modern world" (Chapter VII of Capitalism the Creator is titled "Capitalism the Beneficent").

But let us not part on a sour note! Here is Carl Snyder's idyllic vision of the future Technology has in store for us all:
We shall not need old age pensions or security laws, because the advance in Technology will not be confined to machinery and to processes; we shall have an equal advance in the technique (very simple and, as we now know, easily attained) of economic and monetary stability, so that we shall have no more business depressions, nor crazy speculation, nor wide unemployment and decline in the production of wealth. And these will be eradicated, not by childish and futile attempts at government fiat, but by the unbelievably simple methods of credit control. That is, we shall learn to understand and run the economic mechanism as smoothly as we do now that of a powerful electro-generating plant, or a Leviathan of the sea; and economics and economists, perhaps, will rise to larger knowledge and a new dignity and sphere of usefulness.
Unbelievably simple? Simply unbelievable.

Thursday, December 24, 2015

"Did the Great Recession Lead to the Great Vacation?" -- Yes.

Hey, don't laugh.

George Zipf (1941) "National Unity and Disunity; the nation as a bio-social organism":
Let us view the American depression of 1929 with the concept of leisure time in mind. 
b) October, 1929; the discovery of the 'raw material' of leisure time. 
With the end of 1929, the American total economy reached a point of great achievement, namely, a point when the national economy could produce its accustomed needs without using anywhere near all its available energies. Expressed differently, in 1929 the United States discovered a new 'raw material': leisure time, which in a way is just as much a 'raw material' as coal, oil, steel or anything else, because for many types of human activity, leisure time is an essential prerequisite. Of course one may be inclined to say that 1929 introduced a period of surplus production; that is true. Nevertheless in the solution of any problem much depends upon the angle of approach, and in this study we prefer to speak of the introduction of a surplus of leisure time. 
However, as we have remarked in the course of our study, any change in kind or amount of goods or of processes within a social-economy will necessitate a restriation within that social-economy itself. This was true of the discovery of steam, oil, and the like, and it will also be true of the 'discovery' of leisure time. 
Yet what are some of the implications of an increase of leisure time as far as production is concerned? Obviously, as long as a social-economy produces goods in sufficient amount to meet the minimal needs necessary for the survival of its members, then a social-economy could conceivably continue indefinitely. The only draw-back to this happy state of affairs is the phrase 'the minimal needs necessary for the survival of its members.' We do not know what those hypothetical minimal needs are, nor do we know a happy way of indefinitely forcing great masses of the population to be contented with a supply equal merely to the barest needs of survival, as long as more goods are possible. However, let us return to the consideration of leisure time as a raw material, or if one prefers, as a consumable good. 
As soon as we turn to the implications of an increase of leisure time from the viewpoint of distribution, then matters become clearer. Leisure time, like any other consumable good, is something worth organizing for; and the distribution of amounts of leisure time to the members of a population is as much subject to the laws of income-distribution as anything else. People like to eat, to sleep, to play,—and people like to 'loaf.' In short, everyone wants leisure time. To live by doing nothing is the height of economy. But how about the distribution of leisure time? Naturally, a large-scale unemployment is in and for itself a certain distribution of leisure time. But is it the most economical distribution of the nation's entire stock of leisure time within the total reservoir of a nation's complete production of consumable goods?"
Say what? Leisure time as raw material?

(Can't Stop) Endlessly Spouting Chapman

Here's a shorter summary of the Chapman model, originally published in "The 'lump-of-labor' case against work-sharing: populist fallacy or marginalist throwback." from Working Time: International trends, theory and policy perspectives and reposted on MaxSpeak in 2006.

Chapman revisited the issue of the hours of labor in his presidential address -- delivered in Winnipeg, Manitoba -- to the British Association for the Advancement of Science, Section on Economic Science and Statistics (1909). That analysis came to be considered the "classical statement of the theory of 'hours' in a free market" (Hicks 1932: 102n.; Nyland 1989). Arthur Pigou restated Chapman's argument in Economics of Welfare (Pigou 1952; 462-469). Alfred Marshall referred to Chapman's analysis as authoritative, as did Lionel Robbins (Marshall 1961: 695; Robbins 1929: 25). Concluding his footnote reference to Chapman and Pigou, Hicks declared, "There is very little that needs to be added to the conclusions of these authorities." Very little, perhaps, other than the strange occurrence that although Chapman's argument has never been challenged, economists today are oblivious to its major conclusions. Most are unaware not only of the theory's authoritative status but even of its existence.

Unlike [John] Rae, Chapman saw no particular danger in workers' views -- "fallacious or otherwise" -- about the mechanics of distribution (Chapman: 365). On the contrary, Chapman suggested that such attitudes probably had protected workers "against the injurious consequences of short-sightedness."

Chapman began his discussion of the hours of labor by reviewing the mass of evidence that reductions in the hours of work had not led to proportionate declines in output. Chapman attributed the phenomenon to the fact that as production methods become more intensive, workers require more leisure time to fully recover from the fatigue of work. He emphasized that in modern industry fatigue was increasingly psychological, resulting from the demands of modern industry for specialization and mental concentration as well as from the workers' attitude toward leisure rather than from the strictly physiological demands of the work. When the hours of labour were reduced, the better-rested workers were often able to produce as much or more in the shorter hours than they had previously in longer hours.

The total value of the output from standard working days of different lengths would thus initially increase as the day became longer but eventually the total output -- not only the output per hour -- would decline as the standard day became too long to allow the worker to recover sufficiently from fatigue. Beyond a certain point, each additional hour of work would continue to add a quantum of output to the current day's total output but only at the expense of reducing the next day's hourly pace. What that point was, Chapman maintained, depended on the intensity of the specific production methods and thus would vary in response to changes in those methods.

Having established the idea of an optimal length of standard working day that would maximize output, Chapman next turned to the questions of whether such an optimal length would likely be established by the workings of a free market and whether the optimal length of day for output coincided with the optimal length from the perspective of the workers' welfare. His conclusions in both cases were negative.

From the perspective of the employer, Chapman argued, the optimal length of day for output could only be achieved if all employers acted in enlightened accord. This is because the maintenance of the long-term optimum would always require some short-term restraint. A single employer could never be entirely certain of reaping the benefit of that restraint. Another firm could always potentially offer a small wage premium and hire away the first firm's well-rested workers. For employers, the optimal output work-time would thus be a form of investment without equity:
The reforming employer would run the risk of paying the whole cost of the labour value created by shorter hours and getting little in return; other employers might secure and exhaust the new labour value and no permanent good would be effected (1909: 361).
From the perspective of the worker, the optimal length of day could, for all practical purposes, be considered to be shorter than the optimal length of the day for output. Chapman considered three elements in assessing the optimal day for the worker:
  1. the wage, which Chapman assumed for the purpose of analysis to exactly equal the worker's marginal productivity;
  2. the marginal value of leisure, which Chapman assumed to vary in response to changes in the level of wages; and
  3. the disutility of work, which Chapman assumed to also be a function of the length of the working day -- during some intermediate period of the working day, Chapman assumed that work could often be experienced as pleasurable.
Chapman maintained that in forming their ideal of a working day, workers' would disregard the effects of changes in work time on efficiency, and hence on wages. As a consequence they would tend to prefer a working day longer than would be prudent in the long run, even though it would not be as long as that preferred by employers acting competitively. Thus the exclusive concern of both employers and workers with immediate self-interest would bias the preferences of each toward longer than optimal hours (1909: 367).

In the two decades following Chapman's address, his demonstration of market failure in the determination of working time led to systematic empirical study of the relationship between fatigue and work intensity. According to Nyland (1989), however, attention to the question of work intensity faded during the 1930s and after, largely because "the fact that worktime had both a temporal and intensive character made it difficult to utilise marginal productivity theory to determine the return on various factors of production" (1989: 33). As a simplifying abstraction, economists assumed that the given working day was of optimal length. Eventually, the hypothetical -- and antithetical -- status of that assumption came to be overlooked. Economists negligently reverted to a pre-Chapman faith that unencumbered market forces would spontaneously lead to the establishment of an optimal length of work time.

and Can't Stop Endlessly Spouting Chapman II:

In 2001, the Government of Queensland further summarized Sandwichman's summary of Chapman's theory in its submission to the Australian Industrial Relations Commission's Reasonable Hours Test Case. At 400 words, it's the shortest comprehensive summary of Chapman's theory I know of.
5.2.1 Theoretical review
The study of the relationship between work intensity and fatigue owes much to S.J Chapman's theory of the hours of labour, where in 1909 Chapman demonstrated market failure in the determination of working time. This argument initially involves the establishment of a concept of 'optimal hours'. The main points of this argument can be summarised as follows:

  • a mass of evidence indicating that reductions in hours of work had not led to proportionate declines in output;
  • in modern industry fatigue was increasingly less physical in nature and more a combination of psychological and physiological as a result of specialization and increased need for mental concentration;
  • the reduction of hours allowed better-rested workers to produce as much or more in the shorter hours;
  • the total value of the output would initially rise as the working day increased but eventually the total output as well as the output per hour would decline as the working day became so long that it prevented adequate recovery from fatigue for workers;
  • this is the case because, beyond a certain point, each additional hour of work would be contributing to the output of the current day's total output but at the expense of the following day's output capacity; and
  • the intensity of the work involved would dictate the point at which total output begins to fall and thus the length of the 'optimal' working day.
The second half of this argument explores whether the free market can arrive at the 'optimal' length of day, and can be summarised as follows:
  • the maintenance of a long-term optimum by employers would require short-term restraint;
  • each individual employer could never be certain of reaping the benefit of their restraint as another firm could potentially entice the employer's well-rested workers away with a wage premium;
  • therefore the optimal output work time is a form of investment without equity;
  • simultaneously, Chapman assumed that workers would choose a longer working day than was prudent (although not as long as the working day preferred by employers), primarily because of a general short-sightedness that would mean workers would consider their immediate earning capacity more than their long term earning capacity; and
  • the outcome in a free market situation would therefore be one where employers and employees acting in self-interest would each tend to select a working day that was longer than the 'optimal' hours.

Wednesday, December 23, 2015

Growth, Slavery and the Curse of Fossil Fuels

A little over a week ago, J. W. Mason posted a wonderful critique of Thomas Piketty's Capital in the 21st Century at Crooked Timber. In a digression from the theme of Josh's title and conclusion -- that the distribution of wealth is "bargaining power, it’s politics, all the way down" -- Sandwichman raised the issue that when the bargaining power of capital has been severely compromised, state-sanctioned coercion has been called upon to impose terms more favorable to capital. The extreme example of such coercion would be chattel slavery under the conditions specified by Evsey Domar in his 1970 article "The Causes of Slavery or Serfdom: a Hypothesis.”

Josh's friend and colleague, Suresh Naidu had also made the Domar connection in an earlier piece on Piketty at Jacobin:
The increasing elasticity of substitution between 'capital' and 'labor' may be as much determined by institutions and property rights as by technology. Think of the parallel with slavery. The robot economy and the slave economy may both have higher elasticities of substitution than industrial capitalism. Slaves could do virtually all the tasks of free labor, and were movable assets. 
In 'The Causes of Slavery and Serfdom,' Evsey Domar famously argued that it was a historical impossibility to have free labor, abundant land, and an aristocracy simultaneously. Free labor and abundant land would make aristocratic claims on labor impossible, abundant land and an aristocracy would require coerced labor, and only scarce land could depress wages enough to allow an aristocracy to coexist with free labor. 
Perhaps a similar trilemma exists with abundant robots, dignified employment, and unequal capital ownership.
Whenever Sandwichman hears the word "robot," he reaches for his revolver -- von Kempelen's automaton chess player, which Walter Benjamin famously dissected as follows:
The story is told of an automaton constructed in such a way that it could play a winning game of chess, answering each move of an opponent with a countermove. A puppet in Turkish attire and with a hookah in its mouth sat before a chessboard placed on a large table. A system of mirrors created the illusion that this table was transparent from all sides. Actually, a little hunchback who was an expert chess player sat inside and guided the puppet’s hand by means of strings. 
The robot is a puppet, as was the automaton chess player. Far from being a substitute for labor, it is a device for channelling labor in a particular way.

Someone is always inside pulling the strings -- designing the robots, building them, programming them, deploying them, repairing them, fueling them... extracting and refining the fuel, teaching the designers, programmers and repair personnel how to design, program and repair, etc.

Above all, robots run on electricity. To the extent that robots reduce employment, they must increase the combustion of fuel and consequently the emission of carbon dioxide (of course if Ted Cruz is elected President, none of this will matter because he will simply outlaw the hoax of climate change).

Tuesday, December 15, 2015

The Only Thing You'll Ever Need to Know About NRO

Wait... I can do better than that. Tilt!

Notice the difference? Look real close at the alignment of the chart frame and the outer frame in the second chart. With an almost imperceptible 1/2 degree rotation of the chart, the temperature record can be made to appear essentially flat. How could the editors at NRO have overlooked this opportunity? Too much intellectual integrity? I doubt it.

As a university teacher I get this all the time. There is a word for it: SOPHOMORIC -- "conceited and overconfident of knowledge but poorly informed and immature." 

The NRO chart is based on fact. It merely misrepresents that fact. This is S.O.P. for the climate change denial cult. They are big on isolated facts wrenched out of context and presented in a misleading way. Senator Ted Cruz is a master of the technique. He is so good at it that he would never have to lie. Except that he is so good at it that he cannot tell the difference!

Senator Cruz and NRO are not the problem. They are symptoms of the problem. The problem is that misrepresentation is the currency of contemporary American life. Advertising, politics, entertainment, business, education, administration, economics. Cruz and NRO simply inflate that currency to outlandish proportions. They get away with it because "everybody does it!"


Saturday, December 12, 2015

Trump, the Cruz Stalking Horse Chump

Susan and Jerry DeLemus were announced to be part of Senator Ted Cruz's New Hampshire leadership team. By July they were

Friday, December 11, 2015

Doctor Krugman and Mister Trump

Mark Thoma cites a Paul Krugman column on Empowering the Ugliness in which the latter concludes that ."..this ugliness has been empowered by the very establishments that now act so horrified..." Professor Krugman was referring to a contemporary ugliness that is -- to use a discrete circumlocution -- not unprecedented in American political culture, as the above pamphlet cover from the American Federation of Labor illustrates.

Of course, A.F. of L. President Samuel Gompers's advocacy of Chinese Exclusion -- like Donald Trump's proposal for Muslim  (and Mexican) Exclusion -- was "not inspired by a scintilla of prejudice of any kind, but with the best interests of our country uppermost in our mind..." Not a scintilla!

Sam Gompers also said, "So long as there is one man who seeks employment and cannot find it, the hours of work are too long." I mention this because both anxiety about immigration and advocacy of shorter working time as a remedy for unemployment have been ridiculed by economists -- including Krugman -- as products of a mistaken "lump-of-labor" belief in a fixed amount of work.

Thanks in part to decades of condescension by economists (including Paul Krugman), the shorter working time remedy is now conveniently "off the agenda." According to Krugman, he doesn’t "get too worked up about this kind of misunderstanding anymore; it doesn’t have political power behind it, the way right-wing fallacies do."

But what about unemployment? "Yes," Krugman conceded in his 1997 hot dogs and buns rebuttal to William Greider, "technological change has led to a shift in the industrial structure of employment. But there has been no net job loss; and there is no reason to expect such a loss in the future." Which could be paraphrased as yes, immigration has led to a shift in the ethnic composition of employment. But there has been no net job loss; and there is no reason to expect such a loss in the future." Here is why we shouldn't have to get worked up about unemployment anymore:
But wait--what entitles me to assume that consumer demand will rise enough to absorb all the additional production? One good answer is: Why not? If production were to double, and all that production were to be sold, then total income would double too; so why wouldn't consumption double? That is, why should there be a shortfall in consumption merely because the economy produces more?
Here again, however, there is a deeper answer. It is possible for economies to suffer from an overall inadequacy of demand -- recessions do happen. However, such slumps are essentially monetary -- they come about because people try in the aggregate to hold more cash than there actually is in circulation. (That insight is the essence of Keynesian economics.) And they can usually be cured by issuing more money -- full stop, end of story. An overall excess of production capacity (compared to what?) has nothing at all to do with it.
Full stop. End of story.

Except that's not the end of the story. That insight which Krugman called "the essence of Keynesian economics"? There was more than one application of the principle, according to the man himself:
The full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will not do the trick. Less work is the ultimate solution.
In other words, "So long as there is one man who seeks employment and cannot find it, the hours of work are too long." So, what'll be -- meat or rice?