Because,
Whether you work by the piece
Or work by the day
Decreasing the hours
Increases the pay.
-- Mary Steward
Thursday, April 30, 2015
"They wonder why they are working longer hours for lower wages..."
Should we tell them?
Because,
-- Mary Steward
Because,
-- Mary Steward
Wednesday, April 29, 2015
Puzzling in America
Technology and Jobs: Should Workers Worry?
Responding to a question from Maryland at 46:20:
Barro: "...you could have a gradual decline in hours worked per week by a full-time employee and a gradual decline in the number of years that people participate in the labor force and that would do a lot on the labor supply side to deal with declines in labor demand..."
Delong: "And in America it's puzzling we haven't... right? That we've been stuck at forty hours a week as full time or so since world war II even though there's been 75 years since then..."
Writing in Fortune magazine 61 years ago, Daniel Seligman predicted achievement of the four-day week by 1980. He based that prediction on projection of historical trends. It didn't happen.
The future of work has a chequered past.
"And in America it's puzzling we haven't... right?"
Wrong. It's only puzzling if you don't know anything about the role of American economists in opposing, castigating and ridiculing proposals for work time reduction ("economists call it the lump of labor fallacy -- the idea that there is only a fixed amount of work to be done").
Larry Summers remembers: "when I was an undergraduate at MIT in the 1960s there was a whole round of concern about this -- will automation displace all the employment? And what I was taught as an undergraduate was that basically the people who thought it would were a bunch of idiot Luddites and that obviously there would eventually be enough demand and it would all sort of work itself out, and if people got more productive they'd be richer and they'd spend and maybe we needed some transition assistance, but that it was all basically going to be okay. That was what I was taught."
Puzzle solved!
Truthiness, media framing and the political economy of economics
Concealed deep in the bowels of the ivory tower is this little-known academic endeavor sometimes referred to as "political economy of communications." These guys study "media bias" or "media framing." They've even done content analysis that goes beyond harping at the very serious personhood of this or that individual columnist or newspaper.
For example, in Framed! Labor and the Corporate Media, Christopher Martin identified Five Dominant Frames in the media coverage of labor disputes:
Has it ever occurred to anyone that the dominance in elite economics of a particular economic ideology may owe more to the dominance of a congenial corporate media frame than to any inherent theoretical elegance or empirical support? Of course not.
There is this peculiar rhetorical mise en abyme in which editorial punditry takes its Delphic authority from what "economists say" while what they say simply regurgitates something they read (over and over again) in the press.
"I'm an economist and I'm O.K. I say what I've been told that 'economists say'."
Wouldn't it be worthwhile to ask whether the economics practiced today is, in effect, a subsidiary of the corporate mass media rather than an independent academic discipline?
For example, in Framed! Labor and the Corporate Media, Christopher Martin identified Five Dominant Frames in the media coverage of labor disputes:
(1) The consumer is king;Stated somewhat more evasively, these also happen to be the tenets of the dominant frame in contemporary economics -- the "equilibrium price-auction view of the world" (aka subjective preference theory or conservative ideal). Surprise, surprise!
(2) The process of production is none of the public’s business;
(3) The economy is driven by great business leaders and entrepreneurs;
(4) The workplace is a meritocracy; and
(5) Collective economic action is bad.
Has it ever occurred to anyone that the dominance in elite economics of a particular economic ideology may owe more to the dominance of a congenial corporate media frame than to any inherent theoretical elegance or empirical support? Of course not.
There is this peculiar rhetorical mise en abyme in which editorial punditry takes its Delphic authority from what "economists say" while what they say simply regurgitates something they read (over and over again) in the press.
"I'm an economist and I'm O.K. I say what I've been told that 'economists say'."
Wouldn't it be worthwhile to ask whether the economics practiced today is, in effect, a subsidiary of the corporate mass media rather than an independent academic discipline?
Tuesday, April 28, 2015
"Let’s stop making a fetish of national income statistics and percentage rates of growth”
Who said it? No Googled spoilers, please!
Rates of Growth
August 25, 1958
Is it true, as we are now so frequently told, that Communist Russia’s economic “rate of growth” is faster than ours, or that we cannot survive unless we increase our own “rate of growth”? There are at least five main reasons why rate-of-growth comparisons are untrustworthy.
1—In the midst of daily glib comparisons of national income and particularly “gross national product,” or GNP, it may come as a shock to many to learn that these figures are in large part arbitrary. It is impossible to compare the national income of Russia with that of the U.S. We do not know whether the Communists are telling the truth about specific output figures. Even if they were, their figures would have little comparative meaning. They have no true market prices, but only arbitrary government prices and wages. The production of specific goods is not determined by consumer demand. The comparative purchasing power of the inconvertible paper ruble and the U.S. dollar can only be guessed at.
2—It would take a book to describe all the arbitrary judgments and guesses that enter into even our own national income figures. They measure only the values that pass through the market. When a man marries his cook, for example, the money value of her services disappears from the national-income accounts. Inflation constantly changes the value of the dollar in terms of which everything else is measured.
The President’s last annual Economic Report boasted in its opening paragraph that the nation’s output of goods and services in 1957 totaled $434 billion, “5 percent larger than in the preceding year.” Only later in the report were we explicitly told that “four-fifths of this increase was accounted for by rising prices,” and that therefore “in physical terms, the increase was only about 1 percent.” This July, however, all nationalincome estimates were revised again. It seems the government statisticians now think our GNP in 1957 was not $434 billion but $440 billion and that our 1956 GNP was not $415 billion but $419 billion. Yet in “1957 prices” our 1956 GNP was $435 billion.
3—It may be thought that we can make meaningful comparisons between the Russian economy and our such as pure metals in ingot form, this may be possible. But in most things there are enormous qualitative differences that never get into quantitative statistics. Not how much clothing but what kind of clothing; not how many square feet of housing but what kind of housing; not how much food in bulk but in nutrition, variety, flavor, and quality is what counts for economic welfare. Even in military weapons, quality may be the decisive factor.
4—Prof. 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.
5—Here we come to a more subtle point. Larger crops often have a smaller total dollar value than smaller crops. (Hence crop-restriction schemes.) But this merely illustrates a wider principle. Economists have pointed out since the time of Adam Smith that it is not “value-in-use,” but scarcity, that determines “value-in-exchange,” or money price. Water is an indispensable commodity that ordinarily commands no price at all. If more and more things became plentiful (except dollars), the national income, as measured in dollars, might begin to fall. If we could imagine a situation in which everything we could wish for was in as adequate supply as air and water, we might have no (monetary) national income at all!
Let’s stop making a fetish of national income statistics and percentage rates of growth.
Rates of Growth
August 25, 1958
Is it true, as we are now so frequently told, that Communist Russia’s economic “rate of growth” is faster than ours, or that we cannot survive unless we increase our own “rate of growth”? There are at least five main reasons why rate-of-growth comparisons are untrustworthy.
1—In the midst of daily glib comparisons of national income and particularly “gross national product,” or GNP, it may come as a shock to many to learn that these figures are in large part arbitrary. It is impossible to compare the national income of Russia with that of the U.S. We do not know whether the Communists are telling the truth about specific output figures. Even if they were, their figures would have little comparative meaning. They have no true market prices, but only arbitrary government prices and wages. The production of specific goods is not determined by consumer demand. The comparative purchasing power of the inconvertible paper ruble and the U.S. dollar can only be guessed at.
2—It would take a book to describe all the arbitrary judgments and guesses that enter into even our own national income figures. They measure only the values that pass through the market. When a man marries his cook, for example, the money value of her services disappears from the national-income accounts. Inflation constantly changes the value of the dollar in terms of which everything else is measured.
The President’s last annual Economic Report boasted in its opening paragraph that the nation’s output of goods and services in 1957 totaled $434 billion, “5 percent larger than in the preceding year.” Only later in the report were we explicitly told that “four-fifths of this increase was accounted for by rising prices,” and that therefore “in physical terms, the increase was only about 1 percent.” This July, however, all nationalincome estimates were revised again. It seems the government statisticians now think our GNP in 1957 was not $434 billion but $440 billion and that our 1956 GNP was not $415 billion but $419 billion. Yet in “1957 prices” our 1956 GNP was $435 billion.
3—It may be thought that we can make meaningful comparisons between the Russian economy and our such as pure metals in ingot form, this may be possible. But in most things there are enormous qualitative differences that never get into quantitative statistics. Not how much clothing but what kind of clothing; not how many square feet of housing but what kind of housing; not how much food in bulk but in nutrition, variety, flavor, and quality is what counts for economic welfare. Even in military weapons, quality may be the decisive factor.
4—Prof. 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.
5—Here we come to a more subtle point. Larger crops often have a smaller total dollar value than smaller crops. (Hence crop-restriction schemes.) But this merely illustrates a wider principle. Economists have pointed out since the time of Adam Smith that it is not “value-in-use,” but scarcity, that determines “value-in-exchange,” or money price. Water is an indispensable commodity that ordinarily commands no price at all. If more and more things became plentiful (except dollars), the national income, as measured in dollars, might begin to fall. If we could imagine a situation in which everything we could wish for was in as adequate supply as air and water, we might have no (monetary) national income at all!
Let’s stop making a fetish of national income statistics and percentage rates of growth.
Friday, April 24, 2015
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 JournalExcept, 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.
Tuesday, April 21, 2015
Muzzling Dissent
"People everywhere confuse what they read in newspapers with news." -- A. J. "Joe" LieblingTwo 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."
Sunday, April 12, 2015
UBI Caritas (the best things in life are free)
The miraculous Max Sawicky resumes wrestling with Universal Basic Income at MaxSpeak. This time the incitement comes from Dylan Matthews at Vox, who argues that a secondary benefit of basic income would be that "it enables a transition to a world of less work and greater leisure."
That would indeed be a good thing. But as the Sandwichman pointed out two weeks ago, advocates for basic income seemingly make exactly the opposite argument. Guy Standing, co-president of the Basic Income Earth Network, cited a recent experiment in India -- and earlier experiments in North America and Europe -- as evidence for the claim that a basic income guarantee "would not reduce labor supply... The simple fact is that people with basic security work harder and more productively, not less."
The contradiction between the two arguments is less extreme than it may at first appear. A U.B.I. might reduce the dire incentive to "work or starve" at the same time as it increases opportunities and incentives to pursue the bright elusive butterfly of "meaningful work." That would be good if it was the only consideration. But it is not. There is also an inconvenient truth about the relationship between productivity and fossil fuel consumption. In the industrial economy, larger amounts of better work mean more greenhouse gas emissions. Productivity is a double-edged sword.
Max is right to point out that a Universal Basic Income scheme would involve lots of money sloshing around, creating lots of opportunity for misappropriation. His alternatives -- a family allowance and a retirement floor -- also involve money, albeit targeted to where the need is likely to be.
In my view, that only addresses one side of "the need". The other side is the need to reduce superfluous production and consumption. We have long since passed the point where capital "diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition – question of life or death – for the necessary."
Currently, world-wide carbon emissions per year are roughly double what can be re-absorbed by oceans and plants. This is not to say that the re-absorption by oceans is harmless --it leads to acidification. But clearly more than half of the emissions are superfluous to sustainability. Lo and behold, carbon emission increase in virtual lockstep with hours of work. In the U.S., the correlation between the two has been about 95% over the last quarter century.
Don't even think of using the "correlation doesn't prove causation" gambit. We are talking about a "water is wet" relationship. Fossil fuel is burned to do work. Period. If you can't fit those two pieces together, go home.
So the bottom line is we either need to cut hours of work at least in half or the remaining hours need to be less productive not more. Does the Sandwichman have a policy proposal for accomplishing such a Herculean task? Of course. The Moon Belongs to Everyone. Just to save you the trouble of clicking on that link from two years ago, I've copied the scheme below.
Dorning Rasbotham, Esq., was a friend of the poor. Nay, from the bottom of his heart, he was a friend of the poor! He felt tenderly for the poor man and his family. After all, what would become of the rich if there were no poor people to till their fields, pay their rents and manufacture their goods?
Squire Rasbotham laid down the following principle in a pamphlet he published in 1780: "A cheap market will always be full of customers." Let's not waver from that principle as we consider the facts in the following table:
"Hours" in the above table refers to billions of hours of paid employment in the U.S. in each of the specified years. "GHGs" refers to billions of tons of greenhouse gas emissions. Both totals increased from 1990 to 2011 and those increases were 88% synchronized between the two variables. If one went up, the other went up. If one went down, the other went down -- 88% of the time!
Correlation does not imply causation. In this case, though, the correlation is exactly what theory would predict. The correlation here is not "implying" anything. It is evidence in support of a theory that existed long before people even thought of measuring greenhouse gas emissions.
That theory is an extended version of Squire Rasbotham's principle that a cheap market is always full of customers. In 1865, William Stanley Jevons applied that same principle to the economy of fuel:
Fast forward to today. We want more jobs -- that is to say more hours of work --but we want less greenhouse gas emissions. We face not only a paradox but a dilemma. The horns of this dilemma are yoked together, not just "in principle" but in the physical, mechanical agent of both the economy of fuel and the economy of labor: the machine.
"When we try to pick out anything by itself, we find it hitched to everything else in the Universe." John Muir, My First Summer in the Sierra.
It gets rather tedious watching one group of experts "solve" one side of the dilemma while completely ignoring the other side while yet another group of experts "solves" the other side while ignoring the first. "Crackpot realism" was C. Wright Mills's name for it but there's nothing realistic about it. It's just plain old crackpot.
So what's the solution, then? I'll tell you after the break. Listen to this song first.
And that's not just the lyrics to an old song any more. That's the ruling of Judge Gisela Triana, of the Travis County, Texas, District Court in July 2012. From the Boston Globe, July 12, 2012:
Cap-and-dividend is a variation on the cap-and-trade concept of a market-based emissions regulatory mechanism. Some of the main criticisms of such market-based schemes have to do with enforcement mechanisms, non-compliance, transparency and regulatory capture.
The idea of trading pollution allowances originated in Ronald Coase's "The Problem of Social Cost" and was further developed by J. H. Dales in Pollution, Property and Prices. Coase's article centered on a critique of the "Pigouvian tradition" that advocated a prominent role for the state in taxation to offset the effects of environmental externalities.
In his critique, Coase didn't consider that there was both an environmental and a labor component to Pigou's analysis. Pigou's analysis of the labor question was not reducible to the environmental one and relied at a key point on Sydney J. Chapman's theory of the hours of labor. I have discussed this in detail in "The Hours of Labour and the Problem of Social Cost."
I mention this to emphasize that the hours of work is not just some random, unconnected variable that I've pulled out of a hat. It is fundamental to the analysis of social cost. It stands to reason that it should also be fundamental to the resolution of problems arising from social cost shifting.
I have therefore proposed a friendly amendment to the cap and dividend proposition that I will provisionally call The Lump-of-Labor Rebound GHG Cap and Trade Remedy.
I will just sketch a rough outline of how such a policy might operate followed by some remarks on how it can be integrated with a community-based valuation of the "temporal commons":
According to our table above, there were 6.7 billion tons of GHGs emitted in the U.S. in 2011 and 225.6 billion hours worked. That same year the adult population in the U.S. was about 240 million. Suppose that the government adopted a target of cutting emissions by two-thirds by the year 2040. To do so would require a 3.7% annual reduction in greenhouse gas emissions.
The best greenhouse gas reduction on record (apart from economic fluctuations) in the period 1990 to 2011 was a little less than 2.5%. The average annual reduction was about 0.5%. Taking an average of the two gives a 1.5% reduction as something that is feasible but ambitious. To get from a 1.5% reduction to a 3.7% reduction would then require a reduction in aggregate hours of work of 2.2%.
Dividing the reduced hours number by the adult population produces an annual transferable hours credit of 936. If we assume that the labor force participation remained constant, the hours transferred from those outside of the labor force would raise the average annual hours of those in the labor force to 1460 hours, although it is conceivable that some recipients might chose to neither use nor transfer their credits. In that case, the hours reduction and the associated greenhouse gas reduction would be steeper than planned.
This is not to assume that the benchmark GHG reduction of 1.5% will occur automatically or that the further reduction in GHGs as a result the reduction of work hours will be proportional to the reduction of hours. These are targets only and there need to be programs put in place to try to meet them and monitoring to evaluate how successful those efforts were.
So far the discussion has focused on a policy that could only be implemented by a government with radically different priorities than those that any actually existing government of a wealthy industrial country has. It is a political Utopia. But the gist of this policy proposal is not restricted to a global emissions reduction strategy. My own research project began some 15 years ago by looking at collective bargaining practices and how they might be modified to promote job creation through the redistribution of working time.
One of the fruits of that project, "Time on the Ledger" examined how employment can be considered as a common-pool resource. A different valuation of benefits of leisure time and of unpaid work and of the costs of unemployment and of environmental damage could lead to a very different set of priorities in collective bargaining and those different goals could reignite a labor movement in place of a marginalized, ineffectual and increasingly irrelevant organized labor.
That would indeed be a good thing. But as the Sandwichman pointed out two weeks ago, advocates for basic income seemingly make exactly the opposite argument. Guy Standing, co-president of the Basic Income Earth Network, cited a recent experiment in India -- and earlier experiments in North America and Europe -- as evidence for the claim that a basic income guarantee "would not reduce labor supply... The simple fact is that people with basic security work harder and more productively, not less."
 |
Guy Standing on top of an airplane |
Max is right to point out that a Universal Basic Income scheme would involve lots of money sloshing around, creating lots of opportunity for misappropriation. His alternatives -- a family allowance and a retirement floor -- also involve money, albeit targeted to where the need is likely to be.
In my view, that only addresses one side of "the need". The other side is the need to reduce superfluous production and consumption. We have long since passed the point where capital "diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition – question of life or death – for the necessary."
Currently, world-wide carbon emissions per year are roughly double what can be re-absorbed by oceans and plants. This is not to say that the re-absorption by oceans is harmless --it leads to acidification. But clearly more than half of the emissions are superfluous to sustainability. Lo and behold, carbon emission increase in virtual lockstep with hours of work. In the U.S., the correlation between the two has been about 95% over the last quarter century.
Don't even think of using the "correlation doesn't prove causation" gambit. We are talking about a "water is wet" relationship. Fossil fuel is burned to do work. Period. If you can't fit those two pieces together, go home.
So the bottom line is we either need to cut hours of work at least in half or the remaining hours need to be less productive not more. Does the Sandwichman have a policy proposal for accomplishing such a Herculean task? Of course. The Moon Belongs to Everyone. Just to save you the trouble of clicking on that link from two years ago, I've copied the scheme below.
The Moon Belongs to Everyone
Dorning Rasbotham, Esq., was a friend of the poor. Nay, from the bottom of his heart, he was a friend of the poor! He felt tenderly for the poor man and his family. After all, what would become of the rich if there were no poor people to till their fields, pay their rents and manufacture their goods?
Squire Rasbotham laid down the following principle in a pamphlet he published in 1780: "A cheap market will always be full of customers." Let's not waver from that principle as we consider the facts in the following table:
"Hours" in the above table refers to billions of hours of paid employment in the U.S. in each of the specified years. "GHGs" refers to billions of tons of greenhouse gas emissions. Both totals increased from 1990 to 2011 and those increases were 88% synchronized between the two variables. If one went up, the other went up. If one went down, the other went down -- 88% of the time!
Correlation does not imply causation. In this case, though, the correlation is exactly what theory would predict. The correlation here is not "implying" anything. It is evidence in support of a theory that existed long before people even thought of measuring greenhouse gas emissions.
That theory is an extended version of Squire Rasbotham's principle that a cheap market is always full of customers. In 1865, William Stanley Jevons applied that same principle to the economy of fuel:
As a rule, new modes of economy will lead to an increase of consumption, according to a principle recognised in many parallel instances. The economy of labour effected by the introduction of new machinery, for the moment, throws labourers out of employment. But such is the increased demand for the cheapened products, that eventually the sphere of employment is greatly widened....
Now the same principles apply, with even greater force and distinctness, to the use of such a general agent as coal. It is the very economy of its use which leads to its extensive consumption....This theory is known as the Jevons Paradox or the rebound effect. Substitute "fossil fuel" for coal and the theory predicts pretty accurately the results presented in the above table.
And if such is not always the result within a single branch, it must be remembered that the progress of any branch of manufacture excites a new activity in most other branches, and leads indirectly, if not directly, to increased inroads upon our seams of coal.
Fast forward to today. We want more jobs -- that is to say more hours of work --but we want less greenhouse gas emissions. We face not only a paradox but a dilemma. The horns of this dilemma are yoked together, not just "in principle" but in the physical, mechanical agent of both the economy of fuel and the economy of labor: the machine.
"When we try to pick out anything by itself, we find it hitched to everything else in the Universe." John Muir, My First Summer in the Sierra.
It gets rather tedious watching one group of experts "solve" one side of the dilemma while completely ignoring the other side while yet another group of experts "solves" the other side while ignoring the first. "Crackpot realism" was C. Wright Mills's name for it but there's nothing realistic about it. It's just plain old crackpot.
So what's the solution, then? I'll tell you after the break. Listen to this song first.
The moon belongs to everyone,
The best things in life are free;
The stars all shine for everyone,
They're shining for you and me.
The flowers in Spring,
The birdies that sing,
The sunbeams that shine,
They're yours--they're mine.
The sky belongs to everyone...
And that's not just the lyrics to an old song any more. That's the ruling of Judge Gisela Triana, of the Travis County, Texas, District Court in July 2012. From the Boston Globe, July 12, 2012:
The lawsuit was brought by the Texas Environmental Law Center, and is part of a court campaign in a dozen states by an Oregon-based nonprofit, Our Children’s Trust. The group is using children and young adults as plaintiffs in the lawsuits — some state and some federal — filed in Alaska, Arizona, California, Colorado, Iowa, Minnesota, Montana, New Jersey, New Mexico, Oregon, Texas, and Washington.As David Morris reported in On the Commons, Peter Barnes proposed treating the sky as a public trust in his 2001 book, Who Owns the Sky. Barnes's idea was the basis for a "cap-and-dividend" bill proposed in the U.S. House of Representatives in 2009.
By relying on ‘‘common law’’ theories, the group hopes to have the atmosphere declared a public trust for the first time, granting it special protection. The doctrine has been used to clean up rivers and coastlines, but many legal experts have been unsure if it could be used successfully to combat climate change.
Cap-and-dividend is a variation on the cap-and-trade concept of a market-based emissions regulatory mechanism. Some of the main criticisms of such market-based schemes have to do with enforcement mechanisms, non-compliance, transparency and regulatory capture.
The idea of trading pollution allowances originated in Ronald Coase's "The Problem of Social Cost" and was further developed by J. H. Dales in Pollution, Property and Prices. Coase's article centered on a critique of the "Pigouvian tradition" that advocated a prominent role for the state in taxation to offset the effects of environmental externalities.
In his critique, Coase didn't consider that there was both an environmental and a labor component to Pigou's analysis. Pigou's analysis of the labor question was not reducible to the environmental one and relied at a key point on Sydney J. Chapman's theory of the hours of labor. I have discussed this in detail in "The Hours of Labour and the Problem of Social Cost."
I mention this to emphasize that the hours of work is not just some random, unconnected variable that I've pulled out of a hat. It is fundamental to the analysis of social cost. It stands to reason that it should also be fundamental to the resolution of problems arising from social cost shifting.
I have therefore proposed a friendly amendment to the cap and dividend proposition that I will provisionally call The Lump-of-Labor Rebound GHG Cap and Trade Remedy.
I will just sketch a rough outline of how such a policy might operate followed by some remarks on how it can be integrated with a community-based valuation of the "temporal commons":
According to our table above, there were 6.7 billion tons of GHGs emitted in the U.S. in 2011 and 225.6 billion hours worked. That same year the adult population in the U.S. was about 240 million. Suppose that the government adopted a target of cutting emissions by two-thirds by the year 2040. To do so would require a 3.7% annual reduction in greenhouse gas emissions.
The best greenhouse gas reduction on record (apart from economic fluctuations) in the period 1990 to 2011 was a little less than 2.5%. The average annual reduction was about 0.5%. Taking an average of the two gives a 1.5% reduction as something that is feasible but ambitious. To get from a 1.5% reduction to a 3.7% reduction would then require a reduction in aggregate hours of work of 2.2%.
Dividing the reduced hours number by the adult population produces an annual transferable hours credit of 936. If we assume that the labor force participation remained constant, the hours transferred from those outside of the labor force would raise the average annual hours of those in the labor force to 1460 hours, although it is conceivable that some recipients might chose to neither use nor transfer their credits. In that case, the hours reduction and the associated greenhouse gas reduction would be steeper than planned.
This is not to assume that the benchmark GHG reduction of 1.5% will occur automatically or that the further reduction in GHGs as a result the reduction of work hours will be proportional to the reduction of hours. These are targets only and there need to be programs put in place to try to meet them and monitoring to evaluate how successful those efforts were.
So far the discussion has focused on a policy that could only be implemented by a government with radically different priorities than those that any actually existing government of a wealthy industrial country has. It is a political Utopia. But the gist of this policy proposal is not restricted to a global emissions reduction strategy. My own research project began some 15 years ago by looking at collective bargaining practices and how they might be modified to promote job creation through the redistribution of working time.
One of the fruits of that project, "Time on the Ledger" examined how employment can be considered as a common-pool resource. A different valuation of benefits of leisure time and of unpaid work and of the costs of unemployment and of environmental damage could lead to a very different set of priorities in collective bargaining and those different goals could reignite a labor movement in place of a marginalized, ineffectual and increasingly irrelevant organized labor.
Wednesday, April 8, 2015
Of Bathtubs, Bombshells and Boilerplate
The bathtub in question is the analogy Linda Booth Sweeney and John Sterman use to illustrate a dynamic stock-flow system, such as the relationship between greenhouse gas emissions (a flow) and the accumulation of greenhouse gases in the atmosphere (a stock). Gernot Wagner and Martin Weitzman stress the importance of the bathtub analogy in their new book, Climate Shock.
What's fascinating about the bathtub analogy is how consistently people get the dynamics of accumulation wrong. Or at least how often business school graduate students with backgrounds in science, technology, math and economics get it wrong. Sterman has pioneered a cottage industry publishing articles about the inability of large numbers of students to correctly identify the effects of flow variations on stock levels. A frequent source of error is something Booth Sweeney and Sterman call "correlation heuristic": students often expect that changes in stock will have the same shape as changes in flow.
This common error has implications for people's attitudes about the action and policy needed to mitigate climate change, Booth Sweeney and Sterman point out. According to the correlation heuristic logic, many people would assume that a reduction in greenhouse gas emissions would directly translate into less greenhouse gases in the atmosphere. It doesn't.
A few weeks ago, Scientific American called the International Energy Agency's announcement a week earlier that global GHG emissions for the generation of energy were unchanged in 2014 from 2013 a "bombshell" that "flew in the face of established economic wisdom." The article went on to point out that scientists had "mixed opinions" about the long term significance of this momentary and sector-limited decoupling of emissions from GDP growth. Some thought it was a hopeful sign that decoupling is already happening. Others warned that emissions were likely to resume their upward trend in 2015.
The article neglected to mention that even if total global emissions were to remain flat for years to come, the concentration of GHGs in the atmosphere would continue to increase relentlessly. Annual emissions would need to be cut to around half their current levels just to stabilize atmospheric concentrations at current levels. That's the difference between stocks and flows.
Happy talk about decoupling GDP growth from resource consumption and waste generation to achieve "green growth" ignores this crucial distinction. Even the more sober "prosperity without growth" critique that highlights the huge disparity between relative decoupling and absolute decoupling ignores this distinction. Accumulation is the bottom line. No mitigation without disaccumulation.
A bombshell dud
A few weeks ago, Scientific American called the International Energy Agency's announcement a week earlier that global GHG emissions for the generation of energy were unchanged in 2014 from 2013 a "bombshell" that "flew in the face of established economic wisdom." The article went on to point out that scientists had "mixed opinions" about the long term significance of this momentary and sector-limited decoupling of emissions from GDP growth. Some thought it was a hopeful sign that decoupling is already happening. Others warned that emissions were likely to resume their upward trend in 2015.
The article neglected to mention that even if total global emissions were to remain flat for years to come, the concentration of GHGs in the atmosphere would continue to increase relentlessly. Annual emissions would need to be cut to around half their current levels just to stabilize atmospheric concentrations at current levels. That's the difference between stocks and flows.
Happy talk about decoupling GDP growth from resource consumption and waste generation to achieve "green growth" ignores this crucial distinction. Even the more sober "prosperity without growth" critique that highlights the huge disparity between relative decoupling and absolute decoupling ignores this distinction. Accumulation is the bottom line. No mitigation without disaccumulation.
From shocks to stocks and flows... to lumps
The boilerplate is not Paul Guinan's imaginary steampunk contraption -- shown at left -- but the proverbial "fixed amount of work to be done" which has performed oh-so-much work for lazy journalists and economists assuaging those unfounded fears about unemployment that emanate from the economic illiterati. Come to think of it, though, a make-believe robot makes a good mascot for an oft-told tale about a make-believe fallacy.
Do the erring graduate students in Sterman's and Booth Sweeney's experiments assume there is a fixed amount of water in the bathtub? No, they don't. They realize that the change in flow of water into the tub affects the accumulation of stock in some way. But they systematically mis-specify the timing and magnitude of the effects.
What happens if we dial back the preposterous "fixed amount of work" assertion of the lump-of-labor fallacy claim to a more plausible "correlation heuristic"? Instead of assuming that there is only so much work to go 'round, the benighted Luddites, trade unionists and other economic populists might be suspected merely of committing the more common error of assuming that job losses in the economy as a whole are homologous to losses in a particular trade as the result of labor-saving technology. From a distance the two fallacies may appear indistinguishable. But there is a difference -- several differences, actually.
For starters, the correlation heuristic has been experimentally documented, not just asserted. Evidence trumps mere allegation. Secondly, the heuristic is not as obviously preposterous as the belief in a fixed amount of work. It seems more likely that people -- even Luddites -- would make a plausible error than an implausible one. But perhaps most importantly, the correlation heuristic error may pertain equally to those who allege the fallacy as to those who are alleged to commit it.
How so? Economists making the lump-of-labor fallacy claim insist that the price mechanism automatically adjusts the demand for labor to accommodate changes in the supply of labor. In terms of the bathtub analogy, this is the same as saying that the outflow of the drain self-adjusts to correlate with the inflow from the faucet. One can indeed imagine a device that could accomplish this feat -- a bulb, floating on the surface of the water, attached by a chain of a given length to a plug in an auxiliary drain, such that when the water rises above a certain level, the floating bulb pulls the plug out of the auxiliary drain.
It could work...
Unfortunately, as Mr. Keynes explained long ago, the propensity to consume doesn't float like a bulb on the surface of income. The economists' cherished notion of equilibrium remains a heuristic and nothing more. The pot has been calling the kettle black.
Why does the Sandwichman keep harping on this arcane specimen of journalistic and economic boilerplate? Because heuristics aside, there are statistical series that seriously, relentlessly correlate: energy consumption and hours of paid employment. Energy intensity per dollar of industrial production has declined for nearly a century. That's relative decoupling. Energy intensity per hour of paid employment does not decline. Greenhouse gas emissions per hour of paid employment does not decline. There is no relative decoupling, let alone absolute decoupling or -- sustainable pie in the sky -- disaccumulation of GHGs in the atmosphere.
To cut greenhouse gas emissions in half, we must cut hours of paid employment at least in half. What would John Sterman say to that?
What happens if we dial back the preposterous "fixed amount of work" assertion of the lump-of-labor fallacy claim to a more plausible "correlation heuristic"? Instead of assuming that there is only so much work to go 'round, the benighted Luddites, trade unionists and other economic populists might be suspected merely of committing the more common error of assuming that job losses in the economy as a whole are homologous to losses in a particular trade as the result of labor-saving technology. From a distance the two fallacies may appear indistinguishable. But there is a difference -- several differences, actually.
For starters, the correlation heuristic has been experimentally documented, not just asserted. Evidence trumps mere allegation. Secondly, the heuristic is not as obviously preposterous as the belief in a fixed amount of work. It seems more likely that people -- even Luddites -- would make a plausible error than an implausible one. But perhaps most importantly, the correlation heuristic error may pertain equally to those who allege the fallacy as to those who are alleged to commit it.
How so? Economists making the lump-of-labor fallacy claim insist that the price mechanism automatically adjusts the demand for labor to accommodate changes in the supply of labor. In terms of the bathtub analogy, this is the same as saying that the outflow of the drain self-adjusts to correlate with the inflow from the faucet. One can indeed imagine a device that could accomplish this feat -- a bulb, floating on the surface of the water, attached by a chain of a given length to a plug in an auxiliary drain, such that when the water rises above a certain level, the floating bulb pulls the plug out of the auxiliary drain.
It could work...
Unfortunately, as Mr. Keynes explained long ago, the propensity to consume doesn't float like a bulb on the surface of income. The economists' cherished notion of equilibrium remains a heuristic and nothing more. The pot has been calling the kettle black.
Out of the bathtub and into the frying pan
Why does the Sandwichman keep harping on this arcane specimen of journalistic and economic boilerplate? Because heuristics aside, there are statistical series that seriously, relentlessly correlate: energy consumption and hours of paid employment. Energy intensity per dollar of industrial production has declined for nearly a century. That's relative decoupling. Energy intensity per hour of paid employment does not decline. Greenhouse gas emissions per hour of paid employment does not decline. There is no relative decoupling, let alone absolute decoupling or -- sustainable pie in the sky -- disaccumulation of GHGs in the atmosphere.
To cut greenhouse gas emissions in half, we must cut hours of paid employment at least in half. What would John Sterman say to that?
With a few important exceptions (the work of Herman Daly and colleagues, e.g., Daly and Townsend 1993 ; see also Princen et al. 2002 ; Meadows et al. 2004 ; DeGraaf et al. 2005 ; Whybrow 2005 ; Victor 2008 ; Schor 2010 ), most of the research, teaching, and popular discourse on sustainability continues to focus on technological solutions—more energy, more resources, more efficient eco-friendly growth—while the actual leverage point—voluntarily limiting our consumption—remains largely undiscussable, particularly among our business and political leaders.DeGraaf 2005, Victor 2008 and Schor 2010, by the way, all prescribe reductions of working time as key to reducing emissions. Wagner and Weitzman on Sterman's bathtub analogy: "climate scientists -- and the rest of us -- would be well advised to remind ourselves daily of its significance." Paul Krugman on Martin Weitzman's fat tail analysis: "So what I end up with is basically Martin Weitzman’s argument: it’s the non-negligible probability of utter disaster that should dominate our policy analysis. And that argues for aggressive moves to curb emissions, soon "
- the possibility of disaster...
- the significance of the bathtub analogy...
- the actual leverage point...
- measured rather than heuristic correlations
Monday, April 6, 2015
Revised Job Data Survey
Here is a revised version of the data interpretation survey. I have edited the graph and the survey to (hopefully) get rid of ambiguities. I would be grateful to anyone who anyone who completes the survey, which should take no more than ten minutes.
Thursday, April 2, 2015
Economists Discover the World!
Jared Bernstein exclaims : "The macro blogosphere is on fire, as Bernanke, Summers, and Krugman are having a fascinating discussion... we've made important diagnostic progress here by bringing the international dimension... into the discussion."
You mean to tell me that up to now economists have left out the international dimension? If only these New Keynesians had read Keynes, they would have known that Keynes was on to this dilemma in the early 1930s. "National Self-sufficiency," 1933:
You mean to tell me that up to now economists have left out the international dimension? If only these New Keynesians had read Keynes, they would have known that Keynes was on to this dilemma in the early 1930s. "National Self-sufficiency," 1933:
"...I have become convinced that the retention of the structure of private enterprise is incompatible with that degree of material well-being to which our technical advancement entitles us, unless the rate of interest falls to a much lower figure than is likely to come about by natural forces operating on the old lines. Indeed the transformation of society, which I preferably envisage, may require a reduction in the rate of interest towards vanishing point within the next thirty years. But under a system by which the rate of interest finds, under the operation of normal financial forces, a uniform level throughout the world, after allowing for risk and the like, this is most unlikely to occur. Thus for a complexity of reasons, which I cannot elaborate in this place, economic internationalism embracing the free movement of capital and of loanable funds as well as of traded goods may condemn this country for a generation to come to a much lower degree of material prosperity than could be attained under a different system."
Wednesday, April 1, 2015
Guy Standing Out In His Field
Guy Standing on basic income:
A basic income would help people be more rational, more long-term in their outlook, and more prepared to take entrepreneurial risk.
It would not reduce labor supply. This was shown by our pilots in India, in which we were able to provide over 6,000 men, women and children with a basic income for 18 months and monitor what happened by comparison with a larger number not provided with one, through a randomized control trial. It has also been shown in experiments in the US, Canada and several European countries.
The simple fact is that people with basic security work harder and more productively, not lessA commenter:
NO. I don’t know how you set up that experiment in India, but common sense says the conclusion is wrong.Proof (if any was needed) that "el mayor necio es el que no se lo piensa y a todos los otros define."
Guy Standing on a lump of labor:
There is an adage in economics known as ‘the lump of labor fallacy’. It is that technological change is destroying jobs and generating rising unemployment. It rests on an image of a finite number of jobs.
This is nonsense. What is happening is more subtle and potentially liberating, but also potentially generating a dystopia of socially unsustainable inequality, in which a growing share of the population will be mired in chronic insecurity, through no fault of their own.Who is the greater fool: smart Guy with his condescending "subtlety" or stupid guy with his anti-evidence "common sense"? My middle-sized facts post the other day started out a couple of weeks ago with a somewhat different meditation on Dr. Pepper's inquiry into the limits of unknowing.
What I was thinking about was the practice of attributing "assumptions" to people based on hypothetical models that they are unlikely to have ever entertained. The proverbial "image of a finite number of job" -- whether fallacious or not -- would only be meaningful in the context of some kind of a simple theoretical model of the job market with interactions between supply and demand. As rudimentary as one might imagine such a model, it is likely to be as alien to "the common man" as Fred Flintstone's car would to prehistoric Homo sapiens.
The image of a finite number of jobs contains an amusing substitution. Someone must have thought a fixed amount of work to be done sounded too unbelievable to attribute to people and figured that finite would add credibility. What then is the meaning of an infinite number of jobs? If that is subtle, the Sandwichman is a brontosaurus-burger.
Guy standing on top of an airplane:
CCI. Son tontos todos los que lo parecen y la mitad de los que no lo parecen.
Alzóse con el mundo la necedad, y si hay algo de sabiduría, es estulticia con la del cielo; pero el mayor necio es el que no se lo piensa y a todos los otros define. Para ser sabio no basta parecerlo, menos parecérselo: aquel sabe que piensa que no sabe, y aquel no ve que no ve que los otros ven. Con estar todo el mundo lleno de necios, ninguno hay que se lo piense, ni aun lo recele.
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