FT monkeys' false fallacy eruption

The Sandwichman has been out of town since last Wednesday and the Financial Times (those FT monkeys) has seized the opportunity to publish not one but two articles foisting the farcical lump of labour fallacy fable on an unsuspecting public. This is evidence of a complete lack of journalistic ethics. A simple fact check would reveal that the fallacy claim is bogus.

Some time later this week I expounded on why this even matters.

Trade, Bribes and Yardsticks

In the conclusion to their 1941 article "Protection and Real Wages," Wolfgang Stolper and Paul Samuelson wrote:

...it has been shown that the harm which free trade inflicts upon- one factor of production is necessarily less than the gain to the other. Hence, it is always possible to bribe the suffering factor by subsidy or other redistributive devices so as to leave all factors better off as a result of trade.

This is an instance of the infamous Kaldor-Hicks compensation criterion, which David Ellerman has shown to be a "same yardstick" fallacy. Ironically, Ellerman took the same yardstick analogy from another paper by Samuelson and elsewhere Samuelson is dismissive of the Kaldor-Hicks criterion.

Ian Little described the K-H criterion as unacceptable nonsense. But, hey, let's fast-track the TPP and maybe one of those winners will toss us a bribe!

 

The Fundamentals are Sound!

Uh oh.

My bottom line on the economy is: The fundamentals are sound. The underlying momentum in job growth remains solid. I expect wage growth to continue to rise and consumer confidence to continue to pick up steam. Monetary policy will remain highly accommodative—regardless of what may or may not happen with rates this year—which will spur spending. -- John C. Williams

As Sandwichman always says, when they're telling you "the fundamentals are sound," they are unloading.

WSJ on Scott Walker's Lumpy Labor Economiics

"Economists call this the lump of labor fallacy, which holds that the amount of available work is fixed. If one person gets a job, another loses it. But the addition of new workers into a market, especially skilled workers, can increase the productivity of companies in a way that expands the supply of work for everybody." -- Wall Street Journal

Except, of course, when economists "call this the lump of labor fallacy," they do not do so as economists. They are performing as hack propagandists. When "more doctors smoke Camels than any other cigarette," they are not offering a medical opinion.

Muzzling Dissent

"People everywhere confuse what they read in newspapers with news." -- A. J. "Joe" Liebling

Two somber thoughts. First, economics is not only not a science; it is not even a scholarly discipline. It is a subsection of journalism. There is the style section, the sports section, the front pages and economics. The academic jargon mills with their fancy maths are there solely to lend a cachet of prestige to the front line hacks. Case in point: Henry Hazlitt.

Second, the function of a "free press" in an oligarchy is the muzzling of dissent. As Liebling also wrote, "freedom of the press is guaranteed only to those who own one." The most effective way to muzzle dissent is to simply drown it out. That way you get to suppress speech in the name of free speech. Who could object to free speech? Those totalitarians! It's no coincidence that American fascists in the 1930s called themselves "Liberty Lobby."

Connecting the dots (and with one eye on the unexpurgated history of economic thought) the real purpose of economics today is not to foster understanding of how the economy works but to confound and marginalize those who understand even a bit of how it works.

All the flap about the "crisis of economics" and its inability to predict the great recession is so much bunk. Economics is performing exactly as it is supposed to, thank you very much.


Postscript: Having mentioned both Henry Hazlitt and Joe Liebling in one post, I started wondering if they ever crossed paths. Google Scholar produces one item that mentions both of them, a 2006 article in the Canadian Journal of Communications, "'Labor's Monkey Wrench': Newsweekly Coverage of the 1962-63 New York Newspaper Strike."

Viral Gyro Spiral

"We need campaign finance reform. We do not need 'heroes' who take meaningless flights of fancy." -- Marsha Mercer, Richmond Times-Dispatch

Have you ever wondered what politicians do with all that campaign finance money? They don't keep it (or at least not most of it). They spend it. On campaigning. A lot of it on advertising. Which means buying time and space in the media. Including the Richmond Times-Dispatch.

That media is not going to bite the hand that feeds it, is it? So, it's a bit rich when a columnist scolds a citizen for taking a "meaningless flight of fancy." What would Marsha Mercer do?

Labelling Doug Hughes's gyrocopter flight "meaningless" is what Mercer did. So we don't really need to ask what she "would" do. The job of the media is to spin and frame dissent as either trivial or terroristic. In an oligarchy, all dissent is either trivial or it is terror. Thus, by definition, no dissent can be "meaningful" in the sense of being both effectual and legitimate.

This is precisely the eye of the needle that Hughes threaded with his marvelous stunt. Superficially, it is about oligarchy and corruption of democracy by big money. But more profoundly -- and metaphorically -- it is about the hermetically-sealed "closed air space" over Washington. D.C. In his letter to all 535 members of Congress, Hughes quoted John Kerry on the corrosion of money in politics and it's contribution to "the justifiable anger of the American people. They know it. They know we know it. And yet nothing happens."

Kerry went on to point out how the corruption of money in politics "muzzles more Americans than it empowers." How does it do this? Well, for one, those same media outlets that profit from the spending of that corrupting money to buy advertising space also get to pass judgment on the wisdom or folly of dissenting speech: "Sit down, sit down, sit down, sit down! Sit down, you're rocking the boat!"

We need a lot more than campaign finance reform. We do not need minders and muzzlers from the media to tell us what is "meaningful" and what is not.

Hughes on First?

Have to admit, the spectre of mailman flying a gyrocopter onto the lawn of the Capitol building appeals to the Sandwichman's weakness for eccentric idealists.

From the Tampa Bay Times, here is the letter that Doug Hughes was delivering to 535 members of both houses of Congress.

Dear ___________,

Consider the following statement by John Kerry in his farewell speech to the Senate —

"The unending chase for money I believe threatens to steal our democracy itself. They know it. They know we know it. And yet, Nothing Happens!" — John Kerry, 2-13

In a July 2012 Gallup poll, 87% tagged corruption in the federal government as extremely important or very important, placing this issue just barely behind job creation. According to Gallup, public faith in Congress is at a 41-year record low, 7%. (June 2014) Kerry is correct. The popular perception outside the DC beltway is that the federal government is corrupt and the US Congress is the major problem. As a voter, I'm a member of the only political body with authority over Congress. I'm demanding reform and declaring a voter's rebellion in a manner consistent with Jefferson's description of rights in the Declaration of Independence. As a member of Congress, you have three options.

1. You may pretend corruption does not exist.
2. You may pretend to oppose corruption while you sabotage reform.
3. You may actively participate in real reform.

If you're considering option 1, you may wonder if voters really know what the 'chase for money' is. Your dismal and declining popularity documented by Gallup suggests we know, but allow a few examples, by no means a complete list. That these practices are legal does not make them right! Obviously, it is Congress who writes the laws that make corruption legal.

1. Dozens of major and very profitable corporations pay nothing in taxes. Voters know how this is done. Corporations pay millions to lobbyists for special legislation. Many companies on the list of freeloaders are household names — GE, Boeing, Exxon Mobil, Verizon, Citigroup, Dow … 

2. Almost half of the retiring members of Congress from 1998 to 2004 got jobs as lobbyists earning on average fourteen times their Congressional salary. (50% of the Senate, 42% of the House) 

3. The new democratic freshmen to the US House in 2012 were 'advised' by the party to schedule 4 hours per day on the phones fund raising at party headquarters (because fund raising is illegal from gov't offices.) It is the donors with deep pockets who get the calls, but seldom do the priorities of the rich donor help the average citizen. 

4. The relevant (rich) donors who command the attention of Congress are only .05% of the public (5 people in a thousand) but these aristocrats of both parties are who Congress really works for. As a member of the US Congress, you should work only for The People. 

1. Not yourself.
2. Not your political party.
3. Not the richest donors to your campaign.
4. Not the lobbyist company who will hire you after your leave Congress. 

There are several credible groups working to reform Congress. Their evaluations of the problem are remarkably in agreement though the leadership (and membership) may lean conservative or liberal. They see the corrupting effect of money — how the current rules empower special interests through lobbyists and PACs — robbing the average American of any representation on any issue where the connected have a stake. This is not democracy even if the ritual of elections is maintained. 

The various mechanisms which funnel money to candidates and congress-persons are complex. It happens before they are elected, while they are in office and after they leave Congress. Fortunately, a solution to corruption is not complicated. All the proposals are built around either reform legislation or a Constitutional Amendment. Actually, we need both — a constitutional amendment and legislation. 

There will be discussion about the structure and details of reform. As I see it, campaign finance reform is the cornerstone of building an honest Congress. Erect a wall of separation between our elected officials and big money. This you must do — or your replacement will do. A corporation is not 'people' and no individual should be allowed to spend hundreds of millions to 'influence' an election. That much money is a megaphone which drowns out the voices of 'We the People.' Next, a retired member of Congress has a lifelong obligation to avoid the appearance of impropriety. That almost half the retired members of Congress work as lobbyists and make millions of dollars per year smells like bribery, however legal. It must end. Pass real campaign finance reform and prohibit even the appearance of payola after retirement and you will be part of a Congress I can respect. 

The states have the power to pass a Constitutional Amendment without Congress — and we will. You in Congress will likely embrace the change just to survive, because liberals and conservatives won't settle for less than democracy. The leadership and organization to coordinate a voters revolution exist now! New groups will add their voices because the vast majority of Americans believe in the real democracy we once had, which Congress over time has eroded to the corrupt, dysfunctional plutocracy we have.
The question is where YOU individually stand. You have three options and you must choose. 

Sincerely, 

Douglas M. Hughes

See also: WHAT IS OUR ONE DEMAND?

See also: Martin Gilens and Benjamin I. Page, "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens"

Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.