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

“The Opportunity Cost of Socialism”

“The Opportunity Cost of Socialism”

Why is the Council of Economic Advisers producing party political propaganda for the GOP? As many folks have pointed out, the “report” is rather bizarre. My favorite part is Figure 1, which summarizes Milton Friedman’s argument that people spending “their own money” are “more careful how much to spend and on what the money is spent.” This, of course begs the question of how that money came to be defined as “their own.”

Let’s complicate that story, though, with a couple more matrices: First, Prisoner’s Dilemma:

 

Figure 2: Prisoner’s Dilemma

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Absolute Decoupling and Relative Surplus Value: Rectification of Names

Jargon is a heck of a drug:

If names be not correct, language is not in accordance with the truth of things. If language be not in accordance with the truth of things, affairs cannot be carried on to success.

The discourse of global warming/climate change is lousy with jargon. This rampant obfuscation gives science deniers rhetorical leverage and induces hallucinations about “Green New Deals” and “Environmental Kuznets Curves.” “Decoupling,” “rebound effects” and “externalities” are three terms that invite systematic incomprehension. The first two are dead metaphors and the third is an outright fraud — there is nothing “external” about an externality.

A little reflection on what these terms actually refer to can help clarify what can and cannot be done about carbon dioxide emissions. From the perspective of shameless self-promotion, it can also help show why my policy proposal makes sense and others don’t.

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The Political Economy of the Working Class

The Political Economy of the Working Class

The political economy of the working class is pluralist.

The political economy of the working class is pragmatic.

The political economy of the working class is critical.

Karl Marx chronicled and contributed to the political economy of the working class. He did not invent, conclude or supersede it. In  his Inaugural Address to the International Working Men’s Association, Marx celebrated the first victory of the political economy of the working class, the passage, in 1847, of the Ten Hours’ Bill:

This struggle about the legal restriction of the hours of labor raged the more fiercely since, apart from frightened avarice, it told indeed upon the great contest between the blind rule of the supply and demand laws which form the political economy of the middle class, and social production controlled by social foresight, which forms the political economy of the working class. Hence the Ten Hours’ Bill was not only a great practical success; it was the victory of a principle; it was the first time that in broad daylight the political economy of the middle class succumbed to the political economy of the working class.

This passage tells us what we most need to know about the political economy of the working class. It is founded upon “social production controlled by social foresight” in opposition to “the blind rule of supply and demand laws.” The “most notorious organs of science” had predicted and “proved” that “any legal restriction of the hours of labor must sound the death knell of British industry” and, of course, they were subsequently proved absolutely wrong. Not ‘merely’ wrong, but the exact opposite of apposite.

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The IPCC 1.5° C Report and the Ten-Hour Week

I read the IPCC summary for policy makers so you don’t have to. You may have heard that CO2 emissions have to fall by 45% by 2030 to avoid the possibility of overshooting 1.5°C global warming. Actually emissions must decline by 45% from 2010 levels, which are already substantially lower than 2018 levels. The strategies for reducing emissions by that amount are quite complex and depend on hundreds of governments adopting scores of policies that they have no intention of adopting.

So, burn in climate catastrophe Hell, grandchildren!

But wait! Didn’t Keynes write something long ago about the economic possibilities for our (their) grandchildren? “What can we reasonably expect the level of our economic life to be a hundred years hence?” Keynes asked that in 1930 — which just happens to be a hundred years before the IPCC 2030 target date! What about the ecological survival possibilities for our grandchildren?

I have translated the IPCC report into terms compatible with Keynes’s prognostications. Remember his prediction of a 15-hour week being “quite enough to satisfy the old Adam in most of us”? How rapidly and how steeply would we have to reduce workweeks to achieve the 45% reduction in emissions by 2030, assuming no other changes in technology (or population)?

I’ve taken quite a few short-cuts to calculate these estimates. For starters, I only look at the twenty top emitters of CO2 from 2015. I assumed that emissions reductions targets for each country should be allocated on the basis of convergence toward a uniform emissions per capita standard, which would be 45% below average emissions per capita in 2010 (for the 20 countries).

Several countries among the top twenty currently emit fewer tons per capita of carbon dioxide than the hypothetical 2030 standard. These include Brazil, India and Indonesia. Mexico is currently emitting close to what its 2030 quota would be. So my estimates are concerned only with the remaining 16 countries.

To achieve emissions reduction through hours and population limitations alone would require annual reductions in working time of between one percent for Turkey and twelve percent for Saudi Arabia. Also near the top end are the U.S., Canada and Australia at around an eleven percent per annum reduction. With considerable rounding and a generous allowance for holidays and vacations, these reductions in annual hours would indicate a workweek in 2030 of around ten hours.

In the middle range, France and the U.K. could look forward to workweeks of around 20 hours a week. China, currently the world’s largest emitter of CO2 would see its workweek cut to somewhere in the neighborhood of 25 hours per week.

Of course some of these reductions in working time could be reversed by de-industrialization — that is the substitution of less energy intensive but more labor intensive methods of production. Hours reduction could also be moderated by transition to solar and wind energy, by energy conserving technological advances and by the introduction of carbon-capture technologies, including large-scale reforestation.

This hours reduction exercise is only meant to give a simplified view of the scale of transition required. But it also alludes to an earlier transition that consolidated the central place of fossil fuels in an expanding industrial economy.

In 1847, after decades of struggle by factory workers, the U.K. parliament passed the Ten Hours Bill. In response, manufacturers turned to the high-pressure steam engines to compensate for the loss of factory working time with faster, more powerful, more fuel efficient machinery that could do more work in less time. By the end of the 1850s, steam power had decisively eclipsed water power and high-pressure steam had surpassed the low-pressure Watt steam engine.

It was not the intention of the ten-hour legislation in the mid-19th century to deliver the “coup de grâce,” to water power, as Andreas Malm termed it, but that was its effect. Might not a working time policy designed and intended to enforce a transition away from fossil fuels be worthy of serious consideration?

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I Believe Kellyanne Conway

In an interview with Jake Tapper on CNN’s State of the Union, Kellyanne Conway said, “I’m a victim of sexual assault, I don’t expect Judge Kavanaugh or Jake Tapper or Jeff Flake or anybody to be held responsible for that. You have to be accountable for your own conduct.”

 I believe Conway because she spoke about this before, in October 2016, in an interview with Chris Matthews, right after the Access Hollywood tape of Donald Trump’s “locker room talk” came out.

KELLYANNE CONWAY: I would talk to some of the members of Congress out there when I was younger and prettier, them rubbing up against girls, sticking their tongues down women’s throats who – uninvited, who didn’t like it.

CHRIS MATTHEWS: Yes.

CONWAY: Yes, you’re saying yes because you know it’s true. They used to –

MATTHEWS: No, I’m hearing it – I’ve heard the accounts, of course, but I want to ask you –

CONWAY: They did – no, absolutely. And some of them, by the way, on the list of people who won’t support Donald Trump because they all ride around on their high horse.

Conor Friedersdorf summed up that exchange at the time: “the GOP nominee’s campaign manager declared on national television that multiple prominent Republicans –– some who oppose Trump, and others, apparently, who support him –– perpetrated sexual assaults, and she knows their names.”
The headline on that story was, “Trump Tries to Intimidate Republicans Into Sticking With Him” and the subhead was, “His campaign manager, Kellyanne Conway, warned that she knows of GOP congressmen who perpetrated sexual assaults.”

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Is the Ecological Salvation of the Human Species at Hand?

Is the Ecological Salvation of the Human Species at Hand?

In “De-growth vs a Green New Deal,” Robert Pollin relies on the same blurring of distinctions that Robert Solow employed 46 years earlier in his condemnation of The Limits to Growth as “bad science.” Nicholaus Georgescu-Roegen pointed out Solow’s obfuscation in the article that inspired the term “degrowth.” That historical context is vital for understanding why Pollin’s “blueprint for ecological salvation” is no advance over Solow’s.

In “Is theEnd of the World at Hand” Solow scolded the “bad science” of The Limits to Growth report on the grounds that its authors’ model assumed “that there are no built-in mechanisms by which approaching exhaustion [of resources] tends to turn off consumption gradually and in advance.”[1] Solow cited increases in the productivity of natural resources to illustrate the importance of the price system as the built-in mechanism of capitalism for “registering and reacting to relative scarcity.”

According to Solow, between 1950 and 1970, consumption of iron in the U.S. increased by 20 percent while the GNP roughly doubled. Consumption of manganese rose by 30 percent. Copper consumption increased by one-third, as did lead and zinc consumption. These increases represented productivity gains ranging from 2 percent per annum for copper, lead and zinc to 2.5 percent for iron. Meanwhile, productivity of bituminous coal rose by 3 percent a year during the same period.

There were, Solow conceded, some “important exceptions, and unimportant exceptions.” Among the more important ones was petroleum, “GNP per barrel of oil was about the same in 1970 as in 1951: no productivity increase there.” Nevertheless, Solow was confident that “no one can doubt that we will run out of oil… [s]ooner or later, the productivity of oil will rise out of sight, because the production and consumption of oil will eventually dwindle toward zero, but real GNP will not.”

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Catch 22.4

As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital, so the number of those that can be continually employed by all the members of a great society must bear a certain proportion to the whole capital of that society, and never can exceed that proportion. — Adam Smith, The Wealth of Nations

An”invisible hand” reaches up out of the subterranean depths of that “whole capital” periodically to re-establish the “certain proportion,” which lies somewhere between 20 and 25 percent. The average from 1948 to the end of 2017 was 22.43434%. It looks rather like this:

Household and non-profit net worth and GDP track each other quite nicely from 1948 to 1973 until “something happens” in 1973. (What could that “B”?!) After 1973, net worth underperforms GDP until sometime in the late 1990s when a series of wild gyrations commences. As you can see from the chart, though, the authorities have the situation well in hand and nothing could possibly go wrong.

Henry Hoyt in 1886 and Leo Amery in 1908 chided Smith’s “fallacy” of “terminological inexactitude” and the consequence of ignoring the fact that the capital of a nation, “grows by the exercise of the qualities and energies of which it consists.” Well, yes, but to some extent those qualities and energies are bound up in the possession of assets whose market values at any particular time can be aggregated. The amount of work to be done is not fixed but it is bounded. Hoyt and Amery had a point — but so did Smith.

It seems to me that my little chart above tells a story of how those bounds might even be stretched a bit — presumably by the expedients of easy credit, fiscal deficits and financial deregulation. But there seems to be inevitable leakage from stimulation to speculation and from speculation to Ponzi finance, as Minsky warned. From 1948 to 2016, the CPI-adjusted net worth of households and non-profits never exceeded five times real GDP (or GDP never less than 20% of Net Worth). At the end of the second quarter of 2018, GDP was 18.7% of Net Worth.

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“What Keynes Ignored”

“What Keynes Ignored”

Ruth Sutherland wrote in The Daily Mail a couple of days ago:

Here is how Keynes “ignored” those “workaholic tendencies”:

Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy. It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional society. …

For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented.

To be fair to Sutherland, Keynes didn’t use the exact words “workaholic tendencies” so if she actually read the Keynes essay, she might have not comprehended the passages dealing with the training of “old Adam”… “too long to strive and not to enjoy.” On the other hand, it is entirely possible Sutherland didn’t read the essay but just assumed Keynes ignored the point she wanted to raise.

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Is the Ecological Salvation of the Human Species at Hand?

The July-August issue of New Left Review published an essay by Robert Pollin titled “De-growth vs. Green New Deal” in which he outlines his objections to what Peter Dorman affectionately refers to as “a suicide cult masquerading as a political position.” I have written a response to Pollin’s article, that I have submitted to NLR, a draft of which, “Pollin’s Green New Deal: Blueprint for Ecological Salvation?” may be downloaded as a pdf file from dropbox.

In my response I am particularly interested in how Pollin’s argument unwittingly recapitulates Robert Solow’s from 46 years earlier, right down to the percentage of gross income to be invested in clean energy (Pollin) or pollution abatement (Solow). The ubiquitous “decoupling” turns out to be a euphemism for resource input productivity and not a particularly helpful one. Proponents often referring to the decoupling of GDP growth from “CO2 emissions” when what they mean — unless they intend to deceive — is the decoupling of the derivative rates of change.

A point I have mentioned previously is that Nicholas Georgescu-Roegen was not advocating “degrowth” as an ecological panacea. What he was saying (and what he wrote) was that evolution and history involve “permanent struggle in continuously novel forms” and is not a “predictable, controllable process.” There is no “blueprint,” no “built-in mechanism,” no 20 or 30 year investment plan, (and no pure interpretation of the U.S. constitution or the Bible) that will relieve us of that permanent struggle.

Reverse ‘Decoupling’ in the 21st Century

Post Script: I almost forgot to mention, there is this conceit on the part of technocrats to insist that if you don’t have a “blueprint” for how you’re going to “solve the problem” you’re not really serious. “Get out of the way!” This is a symptomatic late 18th century, early 19th century bourgeois viewpoint and is exemplified in Andrew Ure’s Philosophy of Manufactures. The machine and the factory were viewed as the pinnacle of human achievement and the best one could do is emulate their automatism.

Pollin plays the “degrowthers don’t have a programme and I do!” card with a vengeance. Of course the more detail and moving parts such a programme has, the better because the closer it resembles a machine or even a factory containing many machines. With that kind of challenge, it is very tempting to come up with a detailed programme to illustrate how various scenarios might work out in practice. But such competition will inevitably be judged on mechanistic grounds.

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