Relevant and even prescient commentary on news, politics and the economy.

Senate AHCA Version – Premium Increases and Subsidy Reductions

CBPP has this pictorial analysis of the increased premiums resulting from the Senate version of the AHCA for a 60 year old at 350% FPL with an ACA Silver plan. “For a 60-year-old with income of 350 percent of the poverty level (about $42 ,000 today) facing the average premium on HealthCare.gov, out-of-pocket premiums would jump by an estimated $4,994. Premiums would rise by $ 2,022 for a 45-year-old at this income level, and fall by $75 for a 30-year-old. Premiums would rise by $2,694 for a 60-year old with income of 300 percent of the poverty line, and by $1,903 for a 60-year old with income of 150 percent of the poverty line.”

Premium Increase The Senate AHCA Bill increases Premium Costs .

A sixty year old slightly above 350% FPL would face the loss of thousands of dollars in tax credits. Presently, the ACA covers up to 400% FPL and limits how much can be charged for age to 300%. The AHCA goes to 500% and reduces the subsidy coverage to 350% FPL.

Losses in Tax Credits Senate AHCA also eliminates subsidies for those between 350% and 400% FPL resulting in $thousand of dollars in cost for those in the Individuals Market.

Senate Bill Still Cuts Tax Credits, Increases Premiums and Deductibles for Marketplace Consumers CBPP, Aviva Aron-Dine and Tara Straw, June 25, 2017

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Asking The Man in the Street: Research v. Rhetoric

Richard Layard, How to Beat Unemployment, 1986:

“If you ask the man in the street (not Wall Street) what has caused our unemployment, nine times out of ten he will say that it is machines displacing people. In fact for this reason he is often deeply pessimistic about whether we could ever have full employment again.”

Dear Professor Layard,

In your 1986 book, “How to Beat Unemployment,” you wrote: “If you ask the man in the street (not Wall Street) what has caused our unemployment, nine times out of ten he will say that it is machines displacing people. In fact for this reason he is often deeply pessimistic about whether we could ever have full employment again.”

I am curious. Did you ask “the man in the street”?

Cheers,


The Sandwichman

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Chait vs Roy on Baicker not really vs Baicker

Jon Chait has a brilliantly ruthless takedown of the absurd defences of the AHCA (house obamacare replacement) and BCRA (Senate version) . His main point is that Republicans are lying claimiing the huge cuts to Medicaid aren’t cuts to Medicaid and that the huge increase in the number of uninsured will actually be zero.

He also criticizes Avik Roy. This quarrel has become very interesting. Roy praised the BRCA. He refused to answer when Chait asked if he had also written it. Roy will not say if he is commenting on his own work without noting the conflict of interest.

Jonathan Chait‏Verified account @jonathanchait
Update: @avik tells me his policy is to not disclose his role in crafting legislation.

Chait notes that Roy praises the bill for increasing deductibles and also notes that Republicans denounced the Obamacare deductibles — for being too high. This just shows hypocrisy ( ok psychopathic dishonesty) or GOP politiicians. I’m sure Roy believes dedcutibles should be high, and Republicans in Congress have revealed a preference for high deductibles.

Chait also objects to Roy’s claim that Medicaid doesn’t cause improved health. Interestingly I had the same debate with someone on twitter yesterday. In both debates, the case against Medicaid is based on a citation of Baicker et al (2013) the report on the Oregon Medicaid experiment.

Chait (and I) responded by citing Somers Gawande and Baicker (2017) who wrote

Insurance coverage increases access to care and improves a wide range of health outcomes. Arguing that health insurance coverage doesn’t improve health is simply
inconsistent with the evidence.

and

One head-to-head quasi-experimental study of Medicaid versus private insurance, based on Arkansas’s decision to use ACA dollars
to buy private coverage for low-income adults, found minimal differences.11

So is it Chait’s experts against Roy’s experts ?

Not at all. Roy bases his argument on Baicker et al and Chait on al et Baicker. Katherine Baicker PhD (who should know) does not think that Baicker et al (2013) showed that Medicaid doesn’t work.

Indeed she concedes much less than Chait does. He wrote “The study was unable to detect better physical health outcomes.” This is false. The study found better physical health outcomes in the treatment group than in the control group. What Chait should have written was “the study was unable to detect statistically signficicantly better physical health outcomes”.

Treating a statistically insignificant evidence improvement as evidence that there was no improvement is a gross error. It is also almost universal (I have doubts only about the “almost”). In fact Baicker et al found statistically significant effects on access to health care, diagnosis of diabetes, and treatment of diabetes. They did not find new proof that standard treatment of diabetes is better than no treatement. In every other context, this is not treated as an open question. The study did not find statistically signficant evidence that the benefit was smaller than predicted based on other studies either.

But the motto of the New England Journal (and all serious scientific journals) is first make no claims which go beyond the data.

Statistically insignificant is not an assertion. It doesn’t mean zero. It doesn’t mean small. So it is always favored. Then it is read as meaning small or zero.

Chait understands this. He argues that the Baicker et al (2013) study had low power so the fact that “The study was unable to detect better physical health outcomes.” [failed to reject the null of zero effect on physical health] doesn’t tell us much. But even in the context of a discussion of power, he refuses to distinguish zero from statistically insignificantly different from zero. I think there is some rule that people writing for general audiences must not use technical terms like “statistically insignificant”. The result is that they write falsehoods.

Tens of thousands of people a year may die partly because people just will not accept that the Neyman Pierson framework is what it is.

In any case, Roy is reduced to arguing that he understand Baicker et al (2013) and Baicker doesn’t. He is not in great shape totally aside from the question about unreported conflicts of interest.

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BCRA CBO Score

WASHINGTON (AP) — Congressional Budget Office sees 22 million more uninsured by 2026 under Senate health bill.

Toher Spiro appears to be snipping and tweeting the key bits of the CBO report

Premiums for a 64-year old with middle income go from $6,800 under ACA to $20,500 under BCRA

Deductibles for plans eligible for tax credits go from $3,600 under ACA to $6,000 under BCRA

death spiral

open thread.

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Gay Pride Around the World

We begin in the US:

…the Dyke March Collective also ejected three people carrying Jewish Pride flags (a rainbow flag with a Star of David in the center).
According to one of those individuals—A Wider Bridge Midwest Manager Laurel Grauer—she and her friends were approached a number of times in the park because they were holding the flag.

“It was a flag from my congregation which celebrates my queer, Jewish identity which I have done for over a decade marching in the Dyke March with the same flag,” she told Windy City Times.

She added that she lost count of the number of people who harassed her.

One Dyke March collective member asked by Windy City Times for a response, said the women were told to leave because the flags “made people feel unsafe,” that the march was “anti-Zionist” and “pro-Palestinian.”

“They were telling me to leave because my flag was a trigger to people that they found offensive,” Grauer said. “Prior to this [march] I had never been harassed or asked to leave and I had always carried the flag with me.”

Another of those individuals asked to leave was an Iranian Jew named Eleanor Shoshany-Anderson.

“I was here as a proud Jew in all of my identities,” Shoshany-Anderson asserted. “The Dyke March is supposed to be intersectional. I don’t know why my identity is excluded from that. I fell that, as a Jew, I am not welcome here.”

A statement posted June 25 on the Dyke March Twitter account read, in part, “Sadly, our celebration of dyke, queer and trans solidarity was partly overshadowed by our decision to ask three individuals carrying Israeli flags superimposed on rainbow flags to leave the rally. This decision was made after they repeatedly expressed support for Zionism during conversations with Dyke March Collective members.”

“Sadly, our celebration of dyke, queer and trans solidarity was partly overshadowed by our decision to ask three individuals carrying Israeli flags superimposed on rainbow flags to leave the rally. This decision was made after they repeatedly expressed support for Zionism during conversations with Dyke March Collective members.”

“People asked me if I was a Zionist and I said ‘Yes, I do care about the state of Israel but I also believe in a two-state solution and an independent Palestine,’” Grauer said. “It’s hard to swallow the idea of inclusion when you are excluding people from that. People are saying ‘You can be gay but not in this way.’ We do not feel welcomed. We do not feel included.”

In their statement, Dyke March Collective organizers singled out Grauer’s organization A Wider Bridge for what they called “provocative actions at other LGBTQ events [and] for using Israel’s supposed ‘LGBTQ tolerance’ to pinkwash the violent occupation of Palestine.”

Social-media posts in support of the Dyke March Collective also claimed that a rainbow flag with a Star of David is a form of pink washing (a theory postulated by a City University of New York professor which claims that Israeli support of LGBTQ communities is designed to detract attention from civil and human rights abuses of Palestinian people.)

At about the same time, in Turkey:

Turkish police on Sunday prevented an attempt by Gay Pride activists to hold a parade in Istanbul, the country’s largest city, in defiance of an official ban by the local authorities.
Police fired rubber bullets at a group of around 40 activists, an AFP journalist reported, a day after the city governor’s office banned the march citing safety and public order concerns.

Small groups gathered at Taksim Square but witnesses said there was a heavy police presence which outnumbered the activists, and at least four people were detained.

It is the third year in a row that the march has been banned, and organisers denounced the move.

“We are not scared, we are here, we will not change,” the Pride Committee said in a statement.

Of course they were not scared – there were no stars of David around.

In other gay pride news, last month in Tel Aviv:

Some 200,000 people took part in Tel Aviv’s Gay Pride Parade on Friday, of which approximately 30,000 had joined the celebrations from abroad, organizers said. With many roads closed to traffic for the occasion, the parade made its way through the heart of the city to the waterfront in a display of floats, music, dancers and rainbow flags.

It was the city’s 19th pride parade and according to Tel Aviv’s municipality, the largest in the Middle East and Asia, with a high number of international revelers arriving over the course of the week to take part in the parade and its related events. This year, the theme of the parade was “bisexual visibility.”

Not everyone at the parade was there to celebrate, however. Dozens of Israeli LGBTQ activists at one point blocked the Tel Aviv parade in protest against Israel’s occupation of the West Bank and East Jerusalem. The protesters erected a mock separation barrier upon which was written, “There’s no pride in occupation,” the website +972 Magazine reported. The protesters prevented the parade from proceeding through the city center for a few minutes, but were swiftly moved by police.

Pride parades are expected to be held in Be’er Sheva and Haifa and August in Jerusalem later on this month.

Also last month

A gay Palestinian man appealed to the High Court of Justice on Thursday to overturn the Interior Ministry’s decision to refuse him residency status, saying he risks death if he returns to the West Bank.

His petition testified that Palestinian police had arrested, tortured and severely beaten him because he is openly gay. Most members of his family have disowned him, and those who haven’t have warned him by phone to never come home, he stated.

The man has lived in Tel Aviv — widely hailed as one of the most gay-friendly cities in the world — with his partner for the last decade. The couple say that the Interior Ministry has repeatedly rejected their petition to legalize the Palestinian’s residence in Israel.

People who don’t understand how the world works do stupid things, make stupid assumptions, and ask stupid questions:

Why won't

Usually that sort of stupid brings on horrible consequences. Fortunately, the universe occasionally displays a sense of humor.
cbs sitcom

Click on images to embiggen.

 

More on the above photo here.

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Welfare Reform Kills ?

This is an update of this post in which I expressed immense confidence that welfare reform killed people in Florida .

The post is based on

https://www.ncbi.nlm.nih.gov/pubmed/23733981

Muennig P1, Rosen Z, Wilde ET. (2013) “Welfare programs that target workforce participation may negatively affect mortality.”

Abstract

During the 1990s reforms to the US welfare system introduced new time limits on people’s eligibility to receive public assistance. These limits were developed to encourage welfare recipients to seek employment. Little is known about how such social policy programs may have affected participants’ health. We explored whether the Florida Family Transition Program randomized trial, a welfare reform experiment, led to long-term changes in mortality among participants. The Florida program included a 24-36-month time limit for welfare participation, intensive job training, and placement assistance. We linked 3,224 participants from the experiment to 17-18 years of prospective mortality follow-up data and found that participants in the program experienced a 16 percent higher mortality rate than recipients of traditional welfare. If our results are generalizable to national welfare reform efforts, they raise questions about whether the cost savings associated with welfare reform justify the additional loss of life.

It’s not in the abstract, but they also analysed a larger data set and got a larger point estimate of 26% higher deaths due to participation in welfare reform.

The authors have since conceded that they unreasonably underesimated the standard errors of their point estimate. They used cluster robust standard errors with only 2 clusters (2 counties). This is not valid (the estimate of the variance of the point estimate of 16% more deaths is biased down). A reader noticed (as I should have) that the large difference between 16% and 26% would be extremely unlikely if the analysis had been correct.

using a reasonable fixed effects estimator (without the cluster robust consistent but biased down standard errors) they get

In the article we also presented combined results including participants in both Escambia and Alachua Counties, again controlling for year of birth, year of assignment, and site location and clustering the standard errors on location. The point estimate for that analysis is 1.26 (95 percent CI: 1.10, 1.45). Without clustering the standard errors around location, while controlling for location fixed effects as well as the other covariates, the new point estimate is 1.26 (95 percent CI: 0.96, 1.66).

So the more reasonably estimated stardard errors are roughly twice as large as the biased down ones. This means that the null of no effect (ratio of mortality rates =1) isn’t rejected at the 5% level. It is close. But the p-level of a t-statistic of a bit less than 4 is tiny (hugely significant).

The corrected standard errors imply evidence that welfare reform killed people, but not strong evidence. Hence the question mark in the updated title.

Like the authors, I apologize. I should have read the paper more carefully.

I thank Douglas Hess @douglasrhess for pointing out the published correction

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Did Conway Con Herself

This is remarkable even for the Trump administration. Kellyanne Conway claimed that the Medicaid slashing BCRA proposed by the gang of 13 doesn’t include “cuts to Medicaid”.

The Trump administration position appears to be that Trump could sign it in to law and keep his promise to protect Medicaid from cuts. Wow.

I am not President of the USA, but this doesn’t seem to be good strategy to me. It makes it clearer than ever that Trump will throw representatives and senators who vote yes under the bus if the horrible bill becomes even more unpopular as a horrible law causing horrible suffering. It also makes it clear that they will have to deal with the debate about whether $ 800 billion is zero. They could choose to repeatedly say that Trump is a liar (which will hurt them as much as voting no) repeatedly tell blatant lies about the suffering they caused, or they can avoid that debate by voting the bill down. To me the third option looks very attractive.

Already Susan Collins has had to say that she “disagrees” with Conway. She should understand that a yes vote will only be the beginning of dignity wraithdom.

It’s a small thing compared to tens of thousands of deaths a year, but Senators don’t like to be humiliated at all. I hope this makes some difference.

Update: Also Price

“HHS Secretary Tom Price making a bold delararion to @DanaBashCNN: “We would not have individuals lose coverage.” “

We know he’s shameless, but how many seantors representatives are willing to stand up for such absurd lies.

Also I don’t think insulting the CBO is optimal strategy right now. For one thing they are working very hard over the weekend to get a report which the Senate needs in order to consier the BRCRA. If someone treated me as Price treats them, I would be very very lazy (trivially true as I am, have always been and will always be very lazy). Also they can calculate effects on coverage outside the 10 year window first (they are doing this) and work backwards.

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“If There Is Any Such Thing”: Why read Hoxie on theory?

Unionists are not theorists; unionism is an eminently practical thing. — Robert F. Hoxie 

Theory and trade unionism are almost contradictory terms. — Edward M. Arnos  

In accordance with this theory it is held that there is a certain fixed amount of work to be done… David F. Schloss

Paul Samuelson once wrote that it takes a theory to kill a theory. He didn’t say it had to be a better theory. What would it take to kill a theory that never was?

The Sandwichman’s summer project has been to consolidate my research and blog posts on the lump of labor from the last ten years into something like — and yet unlike — “the archaic stillness of the book.” Sometimes, when cross checking old sources, new sources spring up out of the archives and one of the most astonishing was Robert Hoxie’s commentary on what he called “fixed group demand theory.

The term appears elsewhere only in a few sources: a dictionary entry on the lump-of-labor theory in What’s What in the Labor Movement: A Dictionary of Labor Affairs and Labor Terminology (1921) by Waldo Ralph Browne, in The Settlement of Wage Disputes (1921) by Herbert Feis, whose discussion mainly centered on Hoxie’s analysis, and Warren Gartman made a brief, parenthetical reference to the theory in a 1950 report on Longshore Labor Relations on the Pacific Coast, 1934-50. By  far the most substantive treatment of fixed group demand theory was in Edward M. Arnos’s 1915 article, “An Interpretation of the Working Rules of the Carpenters’ Unions of Chicago.” Arnos was a doctoral student at the University of Chicago at the time when Hoxie was conducting his research on organized labor’s views on the Taylor method (“scientific management”) and Hoxie engaged his students in the research project. Hoxie also wrote on the concept of fixed group demand previously without using the terminology. I reproduce both Arnos’s and Hoxie’s discussion below.

Hoxie’s novel method was to ask people why they did something. Appendix II of his Trade Unionism in the United States contains an 18 page outline and summary of  the “students’ report on trade union program.” Appendix VIII of Hoxie’s Scientific Management and Labor presents over 100 pages of questions used by Hoxie in that study. In the latter study, Hoxie prepared preliminary statements based on extensive reviews of the literature, summarizing the labor claims made by scientific management and the objections to scientific management by unions. He then circulated the summaries to proponents of scientific management and labor leaders, respectively, for their revision and approval. By his own account, Arnos’s investigation followed similarly thorough methods.

The point of such rigorous investigation was not to vindicate or invalidate the theories in question but to examine their claims in the light of experience. The outcome was not a triumph for one theory and a defeat for another — a sorting into economic laws and economic fallacies — but an assessment of the extent to which each of the competing theories had merit and their respective limitations. Hoxie operated in the spirit of ethical debate as latter proposed by Anatol Rapoport.

There are two aspects of Hoxie’s discussion of fixed group demand theory I would like to emphasize. The first is his explanation of unions’ restrictive rules as pragmatic, opportunistic measures adopted locally and retained through trial and error rather than in accordance with some overarching “theory” of how the economy works.

The second is a subtle but devastating critique of the pretension of economic theory to apply simultaneously to both the universal long run and to local immediacy. In Trade Unionism in the United States, Hoxie rhetorically affirmed the validity of the classical economic analysis “when applied to society as a whole, if there is any such thing, and in the long run” while objecting that for workers, “there is no society as a whole, and no long run, but immediate need and rival social groups.” A few years later, Maynard Keynes echoed the assessment that “this long run is a misleading guide to current affairs.”


In a brief essay on “The Theory of Unionism: Principles of Uniformity,” Hoxie thinly muzzled a searing critique of economic orthodoxy by presenting it as the employer’s naïve conclusion: 

Apparently it rarely occurs to the employer that this analysis is not complete. Having assumed that definite laws determine the manner in which income is shared among the productive factors, he apparently concludes, somewhat naively, that just as the laborers in society will in the aggregate profit by increase in the social income, so also will the laborers in any individual establishment profit by increase in its income.

Hoxie’s “employer” is simply parroting the old “Say’s Law” truism that, as Alfred Marshall put it, “the demand for work comes from the National Dividend; that is, it comes from work: the less work there is of one kind, the less demand there is for work of other kinds; and if labour were scarce, fewer enterprises would be undertaken.” Marshall’s “national dividend” was an updated and sanitized label for what a decade earlier in The Economics of Industry, he still referred to as the “wages-and-profits fund,” which was too close to the discredited wages-fund to escape scrutiny. The bottom line, though, remained that “there is no such thing as general overproduction.” There is only ever “commercial disorganization; and that the remedy for it is a revival of confidence.”

The chief cause of the evil is a want of confidence. The greater part of it could be removed almost in an instant if confidence could return, touch all industries with her magic wand, and make them continue their production and their demand for the wares of others. If all trades which make goods for direct consumption agreed to work on and to buy each other’s goods as in ordinary times, they would supply one another with the means of earning a moderate rate of profits and of wages. 

Although Marshall didn’t mention this, it follows from his analysis of the impossibility of overproduction that in a crisis entrepreneurs commit the lump of confidence fallacy (or the fallacy of the fixed Confidence-fund). If only they understood how the “magic wand” of confidence works. Nor did Marshall happen to mention that the employers’ stock remedies for hard times of cutting wages and/or laying off workers simply reflects their obliviousness to the fact that “there is no such thing as general overproduction.”
Why worry about what Alfred Marshall wrote or didn’t write 136 years ago? Because it is the dogma echoed down through the ages, such as in this 1986 gem by Richard Layard, How to Beat Unemployment:

The one fatal heresy in economic analysis is to take output as given. That is the ‘lump of output’ fallacy. You must always have a theory of how output is determined and you must never say, ‘Higher output per worker reduces employment, because it reduces the employment needed to produce a given output’. Likewise you must never say ‘More people cause unemployment’, unless you can explain why output will not grow.

Along with Richard Jackman, Layard recycled the archaic and bogus analysis the next year in a pamphlet, “Innovative Supply-Side Policies to Reduce Unemployment” and yet again in 1991, adding Stephen Nickell to the team in Unemployment: Macroeconomic Performance and the Labour Market. This “analysis” became the basis of Tony Blair’s and Gerhard Schroeder’s miserable “New Supply-Side Agenda for the Left.” Jonathan Portes’s proudest accomplishment was explaining the lump-of-labour fallacy to successive cabinet ministers. And so the magic wand of confidence waves on…
But enough about the magic confidence wand (if there is any such thing). Below is some true grit from Hoxie and Arnos.
Robert F. Hoxie “The Theory of Unionism: Principles of Uniformity,” in Readings in Current Economic Problems, 1915

The third charge against the unionist which we have undertaken to examine states that while he is struggling for increase of wages he is at the same time attempting to reduce the efficiency of labor and the amount of the output. In other words, while he is calling upon the employer for more of the means of life he is doing much to block the efforts of the employer to increase those means. 

There is no doubt that this charge is to a great extent true. In reasoning upon this matter the employer, viewing competitive society as a whole, assumes that actual or prospective increase in the goods’ output means the bidding-up of wages by employers anxious to invest profitably increasing social income. It follows that in competitive society laborers as a whole stand to gain with improvements in industrial effort and process. In the case of the individual competitive establishment it is clear that the maximum income is ordinarily to be sought in the highest possible efficiency, resulting in increased industrial output. At least this is true where there are numerous establishments of fairly equal capacity producing competitively from the same market. Under such circumstances the increased output of any one establishment due to “speeding up” will ordinarily have but a slight, if any, appreciable effect on price. Each individual entrepreneur, therefore, is justified in assuming a fixed price for his product and in reckoning on increase of income from increase of efficiency and industrial product. Apparently it rarely occurs to the employer that this analysis is not complete. Having assumed that definite laws determine the manner in which income is shared among the productive factors, he apparently concludes, somewhat naively, that just as the laborers in society will in the aggregate profit by increase in the social income, so also will the laborers in any individual establishment profit by increase in its income.  

To this mode of reasoning, and to the conclusions reached through it, the unionist takes very decided exceptions. To the statement that labor as a whole stands to gain through any increase in the social dividend he returns the obvious answer that   labor as a whole is a mere academic conception; that labor as a whole may gain while the individual laborer starves. His concern is with his own wage-rate and that of his immediate fellow-workers. He has learned the lesson of co-operation within his trade, but he is not yet class-conscious. In answer to the argument based on the individual competitive establishment he asserts that the conditions which determine the income of the establishment are not the same as those which govern the wage-rate. Consequently, increase in the income of the establishment is no guarantee of increase of the wage-rate of the worker in it. Conversely, increase in the wage rate may occur without increase in the income of the establishment. Indeed, in consequence of this non-identity of the conditions governing establishment income and wage-rate, increase in the gross income of the establishment is often accompanied by decrease in the wage-rate, and the wage-rate is often increased by means which positively decrease the gross income of the establishment.  

The laborer’s statements in this instance are without doubt well founded. The clue to the whole situation is, of course, found in the fact that the wage-rate of any class of laborers is not determined by the conditions which exist in the particular establishment in which they work, but by the conditions which prevail in their trade or “non-competing group.” With this commonplace economic argument in mind, the reasonableness of the unionist’s opposition to speeding up, and of his persistent efforts to hamper production, at once appears.

“An Interpretation of the Working Rules of the Carpenters’ Unions of Chicago,” Edward M. Arnos, 17th Report of the Michigan Academy of Science, 1916

Theory and trade unionism are almost contradictory terms. The trial and error method of testing rules, the ever changing conditions of the trade, the large number of men concerned in the agreement, the different nationalities represented in the union personnel, and the triennial agreements have left the carpenters’ rules marked as if they are in a process. The constant changes in the agreements evince the carpenters’ struggle to get control of the trade, first by one method or rule and then by another. This trial and error method has removed at least the trace of theory as a controlling force in the construction of the joint agreement. Journeymen are seldom conscious of any underlying theory of the rules in explaining their demands, methods, policies, and aims. Although the development of the rules has been free from the control of theorists, development has been in harmony with certain theories of business and human relationship. The theory of standardization, the theory of undercutting, the fixed group demand or lump labor theory, and the standard of living theory, are vital to the carpenters’ rules. Journeymen may not realize the presence of any theories, nevertheless the officers interpret the rules in the light of these theories. To illustrate, one business agent said the rule prohibiting journeymen from taking their tools on the job before they were employed was to prevent men from gathering around the places of employment prepared to work, because the employers used their presence to intimidate the journeymen on the job; i. e., according to his theory of life, men who were out of employment would place themselves where they could underbid their fellows who were employed. To illustrate the underlying force of their fixed group demand theory, one of the officials said that they were in favor of a raise of wages to 70 cents per hour because there was a certain amount of work to be done and the carpenters could get 70 cents per hour as well as 65 cents. Thus consciously or unconsciously, the carpenters supported all of their rules by some of their theories of life. Let us consider these theories and their significance after careful analysis. 

… 

The presence of an unemployed group and their theory of undercutting necessitates standards and uniform units of measurement. Thus the first of the hypothetical theories is accounted for. This assumption of the constant over-supply of labor also presupposes that there is a fixed group demand for labor, thus their theory of a fixed group demand or “lump of labor” theory. The third theory to be considered is that of the fixed group demand. This fixed group demand is usually approached through the desire to share work among their members, which they accomplish by limiting the supply of labor. Their rules on apprenticeship so limit the number of apprentices that it is said that only the sons of the most prominent journeymen are indentured. The number of apprentices range from one to two per cent of the number of journeymen. Rushing and excessive work have the same effect upon the supply of labor, through the limitation of the amount of work to be done in a certain time. The eight hour day and holidays limit the number of working hours and thus limit the labor supply. The fixed group demand theory is supported by their experience of unemployment. The leaders contend that the unemployed are as numerous under low wages as they are under high wages. The hypothesis is that there is a certain amount of carpentering to be done in Chicago. This is fixed by the number of persons who live there. To quote an official, “a man wouldn’t live in a tent if wages were high nor in two houses if they were low.” Of course this opinion would not bear strict interpretation nor do they claim that for it. The constant increase in the scale of wages and the accompanying decrease in unemployment in the trade are often cited as proof of their hypothesis. Their wage slogans, “high wages breed high wages,” “no wage reductions,” “cheap wages make cheap men,” and “get more now,” have their origin in this group of facts. 

Their fixed group demand theory explains the union’s defense for limiting the output. The public press has frequently denounced trade unions for limiting the output. Employers have made most bitter attacks upon the union for those rules and practices which result in limiting the output. The opponents of trade unions on this point usually argue that prices to the consumer are thus raised, and charge the union with a breach of good faith with society. The business man, the entrepreneur, and the classical economist would usually undertake to solve the problem of unemployment by reducing wages with the hope that the demand for labor would be increased by reason of the decrease in wages. Not so with the trade unionist. He has a different theory of business. The former groups think that prices and demand vary inversely, the latter group thinks that “there is a certain amount of work to be done and a certain number of men to do it. Each should be given a chance to do some of it.” In a few words, their theory is that there is a fixed demand for commodities regardless of price, within a reasonable limit. According to this latter theory, a man does not buy a straw hat because it is cheap, but because it is the custom of certain classes to wear a certain kind of hat on certain occasions. The increase in wages for the makers of high hats would probably not decrease the demand for that particular kind of hat. On the other hand the author of the foregoing reasoning admitted that he would buy an automobile if the price dropped to one hundred dollars and unwillingly admitted that his demand in the automobile market would increase the demand for mechanics. Neither of the above theories are valid if applied to the extreme, and are contradictory when so applied. The carpenters observe from experience that a change in wages is not followed by a corresponding change in demand for labor. They try to take advantage of this slowness of “demanders” to adjust themselves to a changed condition of supply. The union theory operates in these cases where the demand for an article does not fall when the price is raised, or in technical language, Where the demand is inelastic, and the opponents’ theory operates in those cases Where the demand for an article falls off rapidly as the price is increased, or in technical language, where the demand is elastic. The demand for salt and carpenter work is almost fixed or “inelastic,” and the demand for automobiles is quite elastic. Therefore the carpenters’ and the employers’ theories are both valid as you limit their applications and neither theory has universal applications.

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Saudi Succession Shuffle

Saudi Succession Shuffle

A not unexpected event has just been announced: 31-year old Prince Muhammed bin Salman bin Abdulaziz al-Sa’ud has been elevated from Deputy Crown Prince of Saudi Arabia by his father, 81-year old King Salman bin Abdulaziz bin Abdul-Rahman al-Sa’ud, to replace his 57-year old cousin, Prince Muhammed bin Nayef bin Abdulaziz al-Sa’ud.  The former Crown Prince is Minister of the Interior, a position he inherited from his father, the late Prince Nayef, who was Crown Prince prior to current King Salman, but died before the most recent king, Abdullah bin Abdulaziz bin Abdul-Rahman al-Sa’ud died at age 90 in 2015, so Salman got to be king and now has moved his younger son up ahead of his somewhat older nephew.  Muhammed bin Salman (MbS) is also Defense Minister, the position his father had taken in 2011 on the death of Prince Sultan, who was then also Crown Prince, with Salman prior to that serving as Governor of Riyadh province for 40 years.  MbS has by all accounts been running things in Saudi Arabia recently, being behind the aggressive war in Yemen that has gone badly and also probably the main orchestrator of both Donald Trump’s visit to Saudi Arabia and the move to diplomatically and economically isolate Qatar.  Juan Cole describes MbS as being “sloppy” and “unwise,” but he may be in position now to rule Saudi Arabia for a long time to come if this appointment is not reversed somehow by other members of the Saudi royal family.

It is possible that the trigger for this elevation has been reports in the last few days of the US Secretary of State, Rex Tillerson, and Secretary of Defense,  Mad Dog Mattis, turning increasingly against the campaign against Qatar pushed by MbS, despite Donald Trump’s repeated support for it via Twitter.  Not only did Tillerson sell Qatar a bunch of F-15s a few days ago, but yesterday Tillerson demanded that the Saudis and Emiratis (from UAE) present their specific demands of the Qatar regime.  It has been two weeks since they initiated this campaign against Qatar, with the clear support of Trump, but indeed they have neither issued specific demands that by satisfying them Qatar could bring about an end to this diplomatic and economic embargo, nor have they presented a shred of evidence of the Qataris financing terror groups, the supposed justification for all this, although pretty much everybody knows that it is a more general annoyance by the Saudis with their not just going along with whatever the Saudis want as well as in particular the Qataris being too friendly with Iran, although even the anti-Iran Tillerson and Mattis realize that the US is allied de facto on the ground in the war against ISIS, which the Saudis have done near zero to support, not to mention Qatar hosting the US major air base that is being used in the campaign against ISIS/Daesh.

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