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

Hoxie on “Fixed Group Demand Theory” (the “lump of labor”)

From Robert F. Hoxie, Trade Unionism in the United States, 1917:

There is much scorn of unionists by economists and employers because of this lump of labor theory with its corollaries. This scorn is based on the classical supply and demand theory and its variants. Supply is demand. Increased efficiency in production means an increase of social dividend and increased shares, which in turn increase production and saving. Therefore, the workers cut off their own noses when they limit output or limit numbers. The classical position is undoubtedly valid when applied to society as a whole, if there is any such thing, and in the long run. But the trouble is that, so far as the workers are concerned, there is no society as a whole, and no long run, but immediate need and rival social groups. 

The fixed group demand theory is as follows: The demand for the labor of the group is determined by the demand for the commodity output of the group. The community—wealth and distribution remaining the same—has a fairly fixed money demand for the commodities of a group. It will devote about a given proportion of its purchasing power to these commodities, that is, if the prices of the group commodity are higher, it will buy less units and vice versa, but expend about the same purchasing power. Therefore, the demand for the labor of the group, profits remaining the same, is practically fixed, and increasing the group commodity output means simply conferring a benefit on the members of other groups as consumers without gain to the group itself. Therefore, to increase the efficiency and the output of the group will not increase the group labor demand and group wages. Decreasing the efficiency and output of the group will not decrease the group labor demand and the group wage. 

Increasing the number of workers tends to decrease their bargaining strength relatively and to lower the total wage and the wage rate. Increasing the efficiency and the output of the workers is equivalent to increasing the group labor supply, and so tends to lower the group wage and the wage rate. Decreasing the number of workers tends to increase their bargaining strength relatively and so to increase the group wage and the wage rate. Decreasing the efficiency and output of the workers tends to increase their bargaining strength relatively and so to increase the group wage and the wage rate. The introduction of labor saving devices is equivalent to increasing the labor supply and so lowering the wage rate. Limitation of output through shorter hours, etc., i.e., decreasing the supply of labor, increases bargaining strength and tends to increase the wage. Strikes and trade union insurance funds are means of temporarily withdrawing labor supply and so of increasing bargaining strength and increasing wages. In practice the group demand theory is simply the application by the unions of the principle of monopoly, admittedly valid. But this theory only in part explains union efforts to limit both individual and group efficiency and output and to limit numbers. These policies in part rest on other theories and considerations. 

Robert F. Hoxie committed suicide on June 22, 1916. For an overview of his important but neglected contribution to economic thought see Charles R. McCann Jr. and Vibha Kapuria-Foreman, “Robert Franklin Hoxie: The Contributions of a Neglected Chicago Economist” Research in the History of Economic Thought and Methodology, Volume 34B, 2016.

Comments (0) | |

McConnell’s AHCA Bill Text and WP Interpretation

I have not had a chance to read through this; but, I thought I would put this out here for all of us to read, Senate Version AHCA McConnell

Updated this post with the changes proposed in the McConnell Senate Bill as taken from today’s Washington Post.

Washington Post Version

ACA1
ACA2
ACA3
ACA4
ACA5
ACA6
ACA7
ACA8
ACA9

How Senate Republicans Plan to Dismantle Obamacare; Washington Post; Haeyoun Park and Margot Sanger – Katz; June 22, 2017

Tags: Comments (1) | |

Here is Andrew Coulson Series on Virtues of Privatization

Diane Ravitch offers more on schools in America:


Here is Andrew Coulson Series on Virtues of Privatization

by dianeravitch

Watch libertarian Andrew Coulson’s film, now showing on some, not all, PBS stations around the nation.

It was paid for by libertarian foundations that support privatization. The lead funder–the Rose-Mary and Jack Anderson Foundation– is a conduit for the Koch brothers and DeVos family foundations.

http://www.pbs.org/show/school-inc/

Here is my response.

Carol Burris and I will soon be posting a point by point refutation.

Please let PBS know what you think.

Comments (3) | |

American carnage?

Institute for New Economic Thinking Lance Taylor describes his thinking on the great divide.  Worth a look:

President Trump, in his inaugural address and elsewhere, rightly says that over the decades since 1980 American household distributions of income and wealth became strikingly unequal. But if recent budget and legislative proposals from Trump and the House of Representatives come into effect, today’s distributional mess would become visibly worse.

First, I will sketch how the mess happened, then I will propose some ideas about how it might be cleaned up. I will show that even with lucky institutional changes and good policy, it would take several more decades to undo the “American carnage” that the president described.

Comments (2) | |

George Borjas on the New Immigration Meme

George Borjas, perhaps the US’ pre-eminent immigration economist notes:

Maybe it’s just me because I instinctively read in between the lines whenever I read anything about immigration, but I’m beginning to detect such a seismic shift in the immigration debate. We all know the party line by now: Immigrants do jobs that natives don’t want to do. As a result, natives do not lose jobs, and natives do not see their wages reduced. And anyone who claims otherwise is obviously a racist xenophobic moron. They obviously don’t like immigrants, and they obviously are not educated/credentialed enough to understand and appreciate expert opinion.

The flurry of immigration restrictions proposed by the Trump administration demands a switch in tactics–with a corresponding switch in the argument linking immigration and wages. The party line must now be that less immigration is bad. But how can one show that in simple-to-grasp economic terms that can be mass-marketed to the masses? By far the simplest way is to come up with examples that less immigration raises labor costs and makes us miserable because everything becomes more expensive.

Borjas goes on:

There is no upper bound to the hypocrisy of experts. It might be a lot of fun to keep track of this over the next few years, watching the dominos fall and all those “immigration-does-not-affect-wages” experts fall all over themselves as they switch to proving the economic awfulness of Trump’s actions because fewer immigrants mean higher labor costs, higher prices, more inflation.

But don’t hold your breath for any admission that they were wrong in the past. They will instantly switch to the former party line the minute the Trump immigration restrictions fade into history.

I have nothing to add.

Tags: , , , Comments (24) | |

New book on investment incentives will help shape policies debates for years to come

Lifted from Middle Class Political Economist is the announcement related to  Angry Bear Dr. Kenneth Thomas video series

Wednesday, June 29, 2016

New book on investment incentives will help shape policies debates for years to come

This past week I received my chapter author’s copy of a new book from Columbia University Press, Rethinking Investment Incentives: Trends and Policy Options. Based initially on the November 2013 conference on investment incentives at Columbia Law School, the contributors were put through their paces to upgrade their conference presentations into proper papers. The result is what Theodore Moran of Georgetown University calls in the Foreword “a who’s-who of experts across this broad span of topics.” He predicts, and I concur, that the work presented in this book will help drive policy discussions around the globe.
The book is divided into four parts. The first discusses theoretical debates on definitions and the effect of these incentives on (especially) foreign direct investment. The second section provides a global overview of the use of incentive incentives, both in major economies and in developing countries. Part III includes practical tools for ensuring program effectiveness as well as value for money. This includes a chapter on cost-benefit analysis, a methodology of which I am highly skeptical. As I have written before, if you end this analysis at the state (or city!) border, you miss many of the indirect job losses inflicted at competing companies by the addition of new subsidized competition. Indeed, according to economist Tim Bartik, very few subsidy programs have positive *national* effects, even if they have positive local effects that will be the only thing considered in the cost-benefit analysis.
Finally, the fourth part of the book considers ways to reduce the competitive use of investment incentives to attract investment. My chapter falls in this section, considering the control of subnational incentives in Australia, Canada, and the United States. (Spoiler: Most of the record is not pretty; Australia was an exception but the policy expired in 2011.) A variety of supranational regulatory efforts, including most notably that of the European Union, are considered in a chapter by Lise Johnson.
Have I teased you enough yet? This book is a must-have if you are interested in investment incentives and economic development; co-editors Ana Teresa Tavares-Lehmann (University of Porto, Portugal), Perrine Toledano, Lise Johnson, and Lisa Sachs (all of the Columbia Center for Sustainable Investment) are to be congratulated for the fine product.

Comments (1) | |

Many places in America are essentially devoid of doctors

Via Kevin MD Dr. Kenneth Lin writes another article on disappearing rural medical care.  this is part of the article…

I recently attended a conference in Savannah, Georgia sponsored by the Association for Prevention Teaching and Research.

Since I haven’t spent much time in Georgia outside of Savannah and Atlanta, the welcoming plenary on improving health outcomes for the state’s rural and underserved populations was eye-opening. According to Dr. Keisha Callins, Chair of the Department of Community Medicine at Mercer University, Georgia ranked 39th out of 50 states in primary care physician supply in 2013 and is projected to be last by 2020. 90 percent of Georgia’s counties are medically underserved. Mercer supports several pipeline programs that actively recruit students from rural areas, expose all students early to rural practice and community health, and provide financial incentives for graduates who choose to work in underserved areas of the state. But it’s an uphill battle. Even replicated in many medical schools across the country, these kinds of programs likely won’t attract enough doctors to rural areas where they are most needed.

When people talk about places where doctors won’t go, they tend to focus on international destinations, such as war zones in Syria or sparsely populated areas of sub-Saharan Africa. It’s hard to believe that many places in America are essentially devoid of doctors, and access to medical care is as limited as in countries where average income is a tiny fraction of that in the U.S. Providing health care coverage for everyone, while important, won’t automatically ensure the availability of health professionals and resources in rural communities. In a recent JAMA Forum piece, Diana Mason discussed the financial struggles of rural hospitals that support community health alongside primary care clinicians, which may become more acute if budget cuts to rural health programs and grants occur as proposed in President Trump’s budget.

Comments (11) | |

One Ohio Town’s Immigration Clash, Down in the Actual Muck

NYT has an interesting article that might provide readers with the details of not only immigration but labor, food supply, agriculture in a mixed reaction to such issues.  I also wonder if planting went smoothly, for instance, as the details of lives get lost in the simplicities of bumper sticker, all or none politics.  This is of course only one small sector of of an economy affected by immigration but sometimes a story offers much insight if I ask the right questions as it develops and figure out what this city boy doesn’t know.  How could this community come to terms with its problems and strengths?

For decades, the farmers have relied on migrant labor from spring to fall. Depending on how quickly they work, field workers can earn up to $18 an hour, compared with Ohio’s $8.15 minimum hourly wage. Many return year after year to do the strenuous seasonal work, sometimes in temperatures that soar to 100 degrees. (Local residents largely steer clear.)

Seven in 10 field workers nationwide are undocumented, according to estimates by the American Farm Bureau Federation. In Willard, it is probably no different.

“Without the Hispanic labor force, we wouldn’t be able to grow crops,” said Ben Wiers, a great-grandson of the pioneer Henry Wiers, who bought five acres here in 1896, noting that he considers many workers at Wiers Farms, which cultivates more than 1,000 acres of produce under the Dutch Maid label, to be friends.

But beefed-up border enforcement has slowed the flow of workers who enter the country illegally. Last year, a shortage forced Mr. Wiers and the other growers to leave millions of dollars’ worth of produce in the fields.

Comments (13) | |

Rethinking rural hospitals

Via Journel of American Medical Association (JAMA) is an invitation us to keep looking at the plight of rural hospitals in light of decreasing rural population. Dr. Diana Mason writes:

But other rural communities, home to nearly 20% of the US population, are not so fortunate. Since 2010, 78 of the more than 2150 rural nonspecialty US hospitals have closed. While the closure rate has recently declined, the proportion of financially struggling rural hospitals has increased. When a rural hospital closes, the economic losses can devastate an already stressed community through loss of health care workers, emergency services, and primary care capacity, as well as higher unemployment and lower per-capita income, a drop in housing values, poorer health, and increasing health disparities.

Why are rural hospitals at higher risk of closure than urban hospitals? George Pink, PhD, Deputy Director of the North Carolina Rural Health Research Program, sees 3 main contributors:

  • Market factors. Rural areas tend to have poorer population health, higher unemployment rates, and stiffer competition from other hospitals
  • Hospital factors. These include low occupancy rates, lack of physician coverage, deteriorating facilities, and patient safety concerns
  • Financial factors. From 2012 to 2014, for example, rural hospitals averaged a 2% operating margin, compared with 5.9% for urban hospitals

Comments (12) | |

Video series for “Rethinking Investment Incentives”

Video series for “Rethinking Investment Incentives”

As regular readers will recall, I contributed to the Columbia Center for Sustainable Investment’s book, Rethinking Investment Incentives: Trends and Policy Options (Columbia University Press, 2016). Now, the editors have put together a series of video teasers for most of the individual chapters, all of which can be seen here.

As I wrote before, the book offers the perspectives of numerous experts in the field, and you can get quick overviews of the chapters from the teasers. These include the authors of chapters on theoretical analyses of location incentives; overviews of incentive use in the United States, the European Union, and the rest of the world; and control policies both subnational and supranational. I hope you find them of interest!

Comments (0) | |