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Fighting Zombies with Zombies

Fighting Zombies with Zombies

Larry Mishel and Josh Bivens enlist zombie government policy ponies in their battle against “the zombie robot argument“:

Technological change and automation absolutely can, and have, displaced particular workers in particular economic sectors. But technology and automation also create dynamics (for example, falling relative prices of goods and services produced with fewer workers) that help create jobs in other sectors. And even when automation’s job-generating and job-displacing forces don’t balance out, government policy can largely ensure that automation does not lead to rising overall unemployment.

The catch here is that the displacement of workers by technology and the investment that re-absorbs workers displaced by technology are largely, but not entirely, independent factors. “Government policy” in the quoted paragraph is just another name for investment. Hans Neisser observed in his 1942 article on technological unemployment that “it is impossible to predict the outcome of the race between the two [investment and displacement] on purely theoretical grounds.”

The conclusion is inevitable: there is no mechanism within the framework of rational economic analysis that, in any situation, would secure the full absorption of displaced workers and render “permanent” technological unemployment in any sense impossible.

The “robot apocalypse” is neither impossible nor inevitable. It is probably unlikely, but unlikely things do happen, especially when people become complacent about the impossibility of unlikely things happening.

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Output Optimum and the Roller Coaster of Immiseration

Following up on my post from two weeks ago, Immiseration Revisited, I built a spreadsheet replica of the marvelous Chapman diagram. In addition to lines on the page, the replica provides me with tables of numbers that I can add, subtract, multiply and divide in accordance with the conceptual logic of the diagram.

The chart below shows the results of some of these calculations. The red curve graphs cumulative gross “output” and green curve subtracts the value of foregone leisure and the pain cost of fatigue and wear and tear from output to calculate net “income” (green). The length of each vertical line measures the values of output and income, respectively for a work week of the length indicated by the scale on the x-axis.

“Big Dipper”: the Roller Coaster of Immiseration

I have set the hypothetical “output optimum” work week at 48 hours in deference to the diagram’s 1909 vintage. Assuming such an optimum and taking the conceptual diagram’s proportions literally, the ideal length of a work week for a laborer would be 36 hours. That is the point at which the value of foregone leisure and the pain cost of additional work begin to outweigh the additional earnings from the longer week. A workweek of 40 hours marks the threshold beyond which the value of foregone leisure alone exceeds the additional wage earnings.

If the optimal output workweek was 40 hours, the corresponding ideal length of workweek for the worker would be 30 hours, again assuming the reasonableness of the diagram’s proportions. There is, of course, only impressionistic evidence for the general shape of the curves and not for the accuracy of the proportions depicted. Nevertheless, the derived calculations indicate a steep acceleration of the discrepancy between output and worker welfare beginning well in advance of the output optimum.

Calculations based on the diagram suggest that by working 34 percent more hours per week, the employee can look forward to “enjoying” 29 percent LESS net benefit. If the actual cost to workers of working longer is even half or a third of those estimates, this still would represent a significant deviation not only from what Lionel Robbins dismissed as “the naïve assumption that the connection between hours and output is one of direct variation” but also from the equally indefensible premise of a consistently proportional relationship between work effort and reward.


(Most) Economists Balk

In a recent article, “Whose preferences are revealed in hours of work,” John Pencavel noted the “radical change in economist’s thinking about working hours” following the 1957 publication of H. Gregg Lewis’s article, “Hours of Work and Hours of Leisure,” Earlier textbooks attributed reductions in hours to pressure from trade unions, either directly through collective bargaining or by legislation promoted by organized labor. The earlier textbooks also addressed the effect that hours of work have on productivity, with reductions in hours usually leading to increases in hourly output and sometimes even to “no decline in total daily output.”

In later textbooks, the orthodoxy followed Lewis’s explanation that workers choose their own hours, based on their preferences for income or leisure. The connection between output and shorter hours vanished, as did the role of trade unions in achieving reductions of working time. But, Pencavel wondered, “If ’employers are completely indifferent with respect to the hours of work schedules of their employees,’ [as Lewis had posited] why did employers oppose so resolutely workers’ calls for shorter hours?”

In a footnote, Pencavel also mentioned that in Lewis’s 1957 model, employers face no obstacle “to replacing shorter hours per worker with more workers.” This is an interesting point because many economists’ arguments against the employment potential of shorter working time rest on claims that workers and hours are not suitable substitutes. That conclusion is reached by smuggling back in the output/hours relationship concealed in a Cobb-Douglas production function with the Robbins/Hicks “simplifying assumption” that the current hours of work are optimal for output, so that any reduction of hours would result in a reduction of output. It is difficult to imagine how both of these things can be true at the same time.

Although the earlier textbooks and economists acknowledged the connection between hours of work and output, most were silent on the discrepancy — or at least the magnitude of the discrepancy — between an output optimum and worker welfare. Cecil Pigou, Philip Sargant Florence, Lionel Robbins, John Hicks and Edward Denison treated the output optimum as the economic ideal. Richard Lester and Lloyd Reynolds, authors of “institutionalist” labor economics textbooks, showed more sympathy to trade union arguments but did not emphasize the discrepancy between the output optimum and worker welfare.

Sydney Chapman clearly distinguished analytically between worker welfare and the output optimum but his presentation was obscured by digressions that dwelt on shift-work as a palliative and on the philosophical necessity of paying more attention to the non-tangible aspects of culture. Clyde Dankert clearly distinguished between the output optimum and worker welfare but had the rather eccentric view that although “maximization of worker satisfactions” rather than output should be the social objective, shorter hours would have to be postponed “in view of the current cold war situation.” Only Maurice Dobb clearly and concisely stated what was at stake (although he left out the increasing value of leisure):

…trade unionists in the nineteenth century were severely castigated by economists for adhering, it was alleged, to a vicious ‘Work Fund’ fallacy, which held that there was a limited amount of work to go round and that workers could benefit themselves by restricting the amount of work they did. But the argument as it stands is incorrect. It is not aggregate earnings which are the measure of the benefit obtained by the worker, but his earnings in relation to the work he does — to his output of physical energy or his bodily wear and tear. Just as an employer is interested in his receipts compared with his outgoings, so the worker is presumably interested in what he gets compared with what he gives. A man who works longer hours or is put on piece-rates, and increases the intensity of his work as a result, may earn more money in the course of the week; but he is also suffering more fatigue, and probably requires to spend more on food and recreation and perhaps on doctor’s bills.

To compare “what s/he gets” with “what s/he gives” requires above all some way of estimating the value of what is given relative to what is being received. One may even suggest that constructing those estimates was the job economists should have been doing instead of castigating trade unionists and other advocates of shorter hours for adhering to a vicious “lump-of-labor” fallacy. Heck of a job, economists!

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The “Tapes” Threat

by Sandwichman

The “Tapes” Threat

This may be so obvious it needs no explanation — but allow me to explain. This tweet puts on notice anyone who has a conversation with the POTUS that whatever they say MAY be recorded and selectively “leaked” for the purpose of blackmail, extortion and/or intimidation.

That should be an effective strategy for ensuring candid, confidential communication and advice. Mitch McConnell and Paul Ryan may be too stupid to realize the implications or too corrupt to care but there is no putting this genie back in the bottle.

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Immiseration Revisited: The four phases of working time

Is there a neo-classical theory of immiseration?
Below is the marvelous Chapman hours of labor diagram (follow the link for a more detailed explanation). It looks complicated but it really only contains four curves representing, roughly, long-term and short-term productivity, income [correction: actually income minus the value of leisure foregone] and fatigue. But there is more to it than Chapman realized or that I have previously noticed.

The context for this diagram is William Stanley Jevons’s discussion of work effort in his Theory of Political Economy:

A few hours’ work per day may be considered agreeable rather than otherwise; but so soon as the overflowing energy of the body is drained off, it becomes irksome to remain at work. As exhaustion approaches, continued effort becomes more and more intolerable.

The “L” curve in Chapman’s diagram echoes the lower curve in Jevons’s figure VIII, presented to illustrate the “painfulness of labour in proportion to produce”:

In this diagram the height of points above the line ox denotes pleasure, and depth below it pain. At the moment of commencing labour it is usually more irksome than when the mind and body are well bent to the work. Thus, at first, the pain is measured by oa. At b there is neither pain nor pleasure. Between b and c an excess of pleasure is represented as due to the exertion itself. But after c the energy begins to be rapidly exhausted, and the resulting pain is shown by the downward tendency of the line cd.

Chapman was primarily concerned with the length of the day optimal for output, which would be measured on the X axis of his diagram by the distance Ob. The optimal working day from the workers’ perspective, however, would be On and would terminate at the point where the marginal income from another time unit of work would just equal the marginal pain of working.

But the intervals from n to i and from i to b add another dimension to the diagram that has been overlooked. From n to i the worker gives up proportionally more in work effort than he or she receives in extra income. Finally, during the interval from i to b, workers endure additional pain in exchange for a decrease in total income. Beyond b, the incomes of both workers and employers are reduced.

The four phases of working time can be labeled cooperation, exploitation, immiseration and ruin. The incentive for employers is to progress inexorably toward the last phase unless regulated by legislation or collective bargaining. The following animation illustrates the contrast between the workers’ gains (green) and losses from lengthening of the working day and the employers’ gains (blue) and loses.

The conflict between labor and capital over the length of the working day can also be illustrated less kinetically by the following close-up of the X axis from Chapman’s diagram. The green arrows indicate income gains, the red arrows income losses or pain cost:

The bottom line, showing the social aggregate, indicates that the income gain for capital at the optimal point b for output is essentially a transfer of income from labor, which also has to invest additional work effort to accomplish that transfer. Up to the output optimum point there is a small net surplus of income that is, however, dwarfed by the quantity of work effort pain cost required to generate it. This does not even qualify for the Kaldor-Hicks compensation criteria. From capital’s perspective, however, the small net return and larger transfer appears to be all simply gain from expanded output — growth is good! (Just don’t look under the hood).

Chapman gave no indication of being aware of the immiseration implications of his analysis. John Hicks gave even clearer indication that he was not aware of the immiseration implications of Chapman’s analysis. Hicks observed that “it had never entered the heads of most employers that it was at all conceivable that hours could be shortened and output maintained” but asserted that trade unions “will not usually need to exert any considerable pressure in order to bring about a reduction” in circumstances where the working day exceeded the output optimum. As if workers should be content to be ground down into wretched poverty provided they didn’t drag their employer down with them! The output optimum is not a good place on the X axis for workers to be.

Only the Marxist economist, Maurice Dobb, appears to have noticed the importance of the relationship between wages and “the worker’s expenditure of energy and his ‘wear and tear.'”

What was implied in the economists’ retort to the advocates of the so-called Work-Fund leads to the apparent paradox that the more the workers allow themselves to be exploited, the more their aggregate earnings will increase (at least in the long run), even if the result is for the earnings of the propertied class to increase still faster. And on this base is erected a doctrine of social harmony between the classes. But it does not follow that the workers will prefer to be exploited to a maximum degree, or that attempts to limit this exploitation are based on fallacious reasoning.

There is no scale on the Chapman diagram and this turns out to be a useful feature. Different occupations, technologies, individuals and wage levels generate a variety of scales. One could conceive of aggregating these scales either in an overall average or clustered in quintile or decile groups. The latter procedure would be valuable in exploring whether a substantial number of workers were being pushed into conditions of immiseration even though the overall average was still safely in the exploitation range.

It is worth remarking that based on the relative length of the segments in Chapman’s diagram, the optimal length of the day for workers would be less that 72 percent of the optimal output day. For example, if the optimal length of the workweek for output was 48 hours, the optimal week for workers would be 34.4 hours. Of course Chapman’s diagram is not based on empirical measurement but Chapman had investigated in depth the extensive statistical and experimental data available at the time he was formulating his theory, so, while his proportions cannot be assumed to be precise they probably represent an informed impression — a ballpark estimate — of general relationships.

In conclusion, yes, there is a neo-classical immiseration theory. The economists who propounded it apparently were unaware that it was such a theory. By extension, that immiseration theory is a crisis theory. There is no built-in mechanism of negative feedback from prices that militates against the passage from the immiseration phase to the ruin phase. Hicks assumed that a “very moderate degree of rationality on the part of employers will thus lead them to reduce hours to the output optimum as soon as Trade Unionism has to be reckoned with at all seriously [emphasis added].” But by the time exploitation has progressed to the immiseration phase, trade unionism doesn’t have to be “reckoned with at all seriously” by employers. The trade unions would already have been defeated somewhere between point n and point b on the Chapman diagram’s X axis.

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May Day: Shorter hours — If not now, when?

The litany of shorter work week prophecy is prodigious. Keynes famously predicted a 15-hour work week for “our grandchildren” in 1930. Fifteen years later, in a letter to T.S. Eliot, Keynes parenthetically suggested a 35-hour work week for the U.S. in the immediate post-war period.

In 1961, Clyde Dankert cited a New York Times article from 1949 in which a “well known labor economist” predicted a 20-hour work week by 1990 and a ten hour week by 2050. Eight years later, a vocational educator forecast the 20-hour week by 2000. Also in 1961, Dankert himself suggested 1980 as the year by which, “the thirty-hour workweek should be widely established and some progress made toward the twenty-five-hour week.” Three years later, he was somewhat more circumspect, “In time we should reach the 30-hour week and even the 25-hour week, but despite all the talk about the leisure society, that time is not now and will not be for quite some years.

In a 1957 newsletter, First National City Bank of New York calculated that it would take 31 years to achieve a 32-hour work week if productivity increased at an average of between two and three percent a year and if workers chose to take the benefits in the same proportions of wages and hours as they had from 1909 to 1941. Alternatively, a four-day work week could be attained in eight years if productivity gains were applied exclusively to work time reduction. A similar calculation had been made by Fortune editor, Daniel Seligman in 1954:

A calculation made by Fortune for the years since 1929 suggests that in the past quarter-century U.S. workers have been taking about 60 per cent of the productivity pie in the form of income, about 40 per cent as leisure. Assuming that the four-day week for non-agricultural employees will be attained when the total work week is in the vicinity of 32 hours, that productivity continues to increase at an average of 2 or 3 per cent a year, and that something on the order of the recent 60-40 ratio for income and leisure continues in effect, the 32-hour week should be spread throughout the whole non-farm economy in about 25 years.

As did the City Bank forecast, Seligman noted that the shorter work week could be achieved even sooner if workers were willing to forego wage increases.

In fact, productivity gains from 1954 to 1979 averaged 2.4 percent per year. From 1957 to 1988, annual productivity gains averaged 2.2 percent. Assuming 40 percent of actual historical productivity gains, ten paid holidays, and four weeks annual vacation, a 32-hour workweek should have been realized by around 1990 — aside from the likelihood that progressive reduction of the hours of work would have accelerated productivity gains.

Using the same assumptions, the work week in 2016 should be around 26 hours. Or perhaps people would prefer to continue with the 32-hour week and take three months annual vacation. These calculations overlook the fact that reduction of the hours of work had already stagnated in the early post-war period. If we backdate the 40 percent of productivity reduction to 1950, the 32-hour mark could have been reached seven years earlier.

Edward Denison estimated that 10% of historical productivity gains could be attributed directly to hours reduction. The chart below factors in that additional 10% productivity gain and compares actual average annual hours, 1950 – 2015 with potential hours if reduced according to Seligman’s and Denison’s assumptions:

But you can’t have it now. You just can’t. How about a tax cut for the richest, instead?

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It was actually quite amusing to see an article in my provincial newspaper a while back where two sides were arguing about a reduction in the work week, and you could play bingo with the excuses the anti-side used. There wasn’t an original idea in the whole article, as the pro-side was almost apologizing and got one paragraph of the six on offer. — “Salty,” comment at AngryBear.

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The Boundless Thirst for Surplus-Labor

September 22, 1956

November 7, 1960

QUESTION. This is from Mr. White, Warren, Mich.

What is your stand on the 32-hour workweek?

Vice President NIXON: Well, the 32-hour workweek just isn’t a possibility at the present time. I made a speech back in the 1956 campaign when I indicated that as we went into the period of automation, that it was inevitable that the workweek was going to be reduced, that we could look forward to the time in America when we might have a 4-day week, but we can’t have it now. We can’t have it now for the reason that we find, that as far as automation is concerned, both because of the practices of business and labor, we do not have the efficiency yet developed to the point that reducing the workweek would not result in a reduction of production. The workweek can only be reduced at a time when reduction of the workweek will not reduce efficiency and will not reduce production.

It’s inevitable… but we can’t have it.

Dick Nixon’s turnaround on the issue of the four-day workweek was epic. His original prediction of  a four-day week “in the not too distant future” came in a prepared speech, not in some unguarded moment of overheated campaign hyperbole. He even disclaimed that his “projections” were not “dreams or idle boasts” but were based on the continuation of President Eisenhower’s economic policies.

Following up on Nixon’s 1956 prediction, United Auto Workers president Walter Reuther responded with a telegram calling on the administration to outline a legislative program to achieve the shorter workweek. Nixon sent a telegram in reply and President Eisenhower endorsed Nixon’s reply in a press conference on September 28.

Nixon’s reply was that “mere artificial legislation” would not accomplish a four-day workweek. What was necessary was “dedicated joint efforts of labor, management, government and research.” For his part, Eisenhower “saw nothing wrong with” Nixon’s answer, which he thought also represented his own view that it would be “wonderful” to have more leisure time, but that “no man can say it is going to come about because I say so.” A month after his first comment, Nixon reaffirmed his expectation of a shorter workweek, based on partnership between government, business and labor.

The adamant wording of Nixon’s 1960 dismissal of the idea takes on added resonance in the context of Eisenhower’s earlier caveat that “no man can say it is going to come about because I say so.” Four years later, it “just isn’t a possibility… we can’t have it now. We can’t have it now… [because I say so].”

This wouldn’t be the first time that self-contradiction has appeared in the rhetoric of opposition to shorter work time. The Sandwichman has amassed the world’s largest collection of lame excuses offered by opponents. I assembled 21 of them and sorted them into eight categories having to do with productivity, new consumer wants, unsatisfied needs, labor costs, government policy, self-adjusting markets, history and inevitability, and the devious motives of proponents.

To be kind, the rationales are opportunistic. Mostly, they are jejune partial equilibrium statements invoked as if they were eternal verities. More bluntly, they are mendacious. Every single reason given for not shortening the hours of work is complemented by a contradictory reason for not shortening the hours of work. Damned if you do and damned if you don’t.

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Only So Much To Go ‘Round

The Sandwichman commented the other day on The Economist article, “Britain’s Green Party proposes a three-day weekend.” Regrettably, though, I didn’t pay much attention to their “rebuttal” to the alleged assumption of a fixed amount of work:

In fact, if people worked fewer hours, demand would drop, and so fewer working hours would be on offer.

I have seen stupid explanations before of why there is not a fixed amount of work. Layard, Nickell and Jackman argued that if work time reduction and redistribution succeeded in reducing unemployment, it would be inflationary and that would probably cause the central bank to intervene to re-establish the “non-accelerating inflation rate of unemployment.” That’s pretty stupid but not nearly as stupid as what The Economist article claimed as “fact.” Pardon me for repeating the whole dreadful argument:

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War is the Health of the State

Excerpts from Randolph Bourne’s The State:

War is the health of the State. It automatically sets in motion throughout society those irresistible forces for uniformity, for passionate cooperation with the Government in coercing into obedience the minority groups and individuals which lack the larger herd sense. The machinery of government sets and enforces the drastic penalties. The minorities are either intimidated into silence, or brought slowly around by subtle process of persuasion which may seem to them really to be converting them. Of course, the ideal of perfect loyalty, perfect uniformity is never really attained.  

War is the health of the State. Only when the State is at war does the modern society function with that unity of sentiment, simple uncritical patriotic devotion, cooperation of services, which have always been the ideal of the State lover. With the ravages of democratic ideas, however, the modern republic cannot go to war under the old conceptions of autocracy and death-dealing belligerency. If a successful animus for war requires a renaissance of State ideals, they can only come back under democratic forms, under this retrospective conviction of democratic control of foreign policy, democratic desire for war, and particularly of this identification of the democracy with the State. 

War is the health of the State and it is during war that one best understands the nature of that institution. If the American democracy during wartime has acted with an almost incredible trueness to form, if it has resurrected with an almost joyful fury the somnolent State, we can only conclude that the tradition from the past has been unbroken, and that the American republic is the direct descendant of the English State. 

And what was the nature of this early English State? It was first of all a medieval absolute monarchy, arising out of the feudal chaos, which had represented the first effort at order after the turbulent assimilation of the invading barbarians by the Christianizing Roman civilization. … The modern State begins when a prince secures almost undisputed sway over fairly homogeneous territory and people and strives to fortify his power and maintain the order that will conduce to the safety and influence of his heirs. The State in its inception is pure and undiluted monarchy; it is armed power, culminating in a single head, bent on one primary object, the reducing to subjection, to unconditional and unqualified loyalty of all the people of a certain territory. This is the primary striving of the State, and it is a striving that the State never loses, through all its myriad transformations. 

… 

The President is an elected king, but the fact that he is elected has proved to be of far less significance in the course of political evolution than the fact that he is pragmatically a king. It was the intention of the founders of the Constitution that he be elected by a small body of notables, representing the ruling propertied classes, who could check him up every four years in a new election. This was no innovation. Kings have often been selected this way in European history, and the Roman Emperor was regularly chosen by election. That the American President’s term was limited merely shows the confidence which the founders felt in the buttressing force of their instrument. His election would never pass out of the hands of the notables, and so the office would be guaranteed to be held by a faithful representative of upper-class demands.

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Say’s Other Law: “Misery is the inseparable companion of luxury”

It was a dark and stormy global night economy and a spectre task was haunting facing Europe…

A new supply-side agenda for the left

The task facing Europe is to meet the challenge of the global economy while maintaining social cohesion in the face of real and perceived uncertainty. Rising employment and expanding job opportunities are the best guarantee of a cohesive society.

The past two decades of neo-liberal laissez-faire are over. In its place, however, there must not be a renaissance of 1970s-style reliance on deficit spending and heavy-handed state intervention. Such an approach now points in the wrong direction.

Our national economies and global economic relationships have undergone profound change. New conditions and new realities call for a re-evaluation of old ideas and the development of new concepts.

In much of Europe unemployment is far too high – and a high proportion of it is structural. To address this challenge, Europe’s social democrats must together formulate and implement a new supply-side agenda for the left.

— Tony Blair and Gerhard Schroeder, The Third Way/Die Neue Mitte, 1998.

In a 1981 review of George Gilder’s Wealth and Poverty, Anna Weniger and Hank Robinson succinctly described “the essence of supply-side economics” as “simply a campaign to redistribute income from poor to rich, dressed in the garb of economic theory.” Gilder’s economic theory was fundamentally an affirmation of Say’s so-called Law. “The essential thesis of Say’s Law,” he insisted, “remains true: supply creates demand. There can be no such thing as a general glut of goods.”

I’m not going to bother trying to debunk supply-side economics. What would it take to change the mind of someone who “can’t see what’s wrong” with a theory about a monetary economy that is based on the assumption it is a barter economy? What would it take to change the mind of someone whose belief in the theory is intimately tied to their identity?

So let’s assume that anyone I could persuade with the following argument is already inclined to agree with Weniger and Robinson’s assessment of supply-side economics as mere pretext. Theoretical flimsiness is no problem for conservatives because the argument is, after all, consistent with their values and objectives. Supply-side rhetoric is their sales pitch.

But what about “the left”? If we take Blair’s and Schroeder’s representation of their position on the left at face value, the question arises of what in Hell did they think they were selling? A social democratic redistribution of income from the poor to the rich? It appears they were selling the supply-side rhetoric to themselves and to corporate media and campaign donors as “realism.”

The old ideas that were thinly veiled ends in themselves for conservatives were to be repackaged as new concepts that would enable electoral success in an environment that was inhospitable to the Labour Party’s own “old ideas.” Whether the “new concepts” could somehow deliver social cohesion and expanding job opportunities as well as redistribution of income from the poor to the rich was seen by Third Way acolytes as strictly a matter of cleverness. Third Way proselytizers were supremely confident of their cleverness.

You Don’t, Say?



On the assumption that those who believe Say’s Law — or those who cling to the argument as a ready-made justification for their preferred policy outcomes — will not change their minds, I would like to present what might be described as Say’s other law:

Misery is the inseparable companion of luxury.

A position Say proclaims “as false in principle, as it would be cruel in practice” is that misery and want are indispensable as incentives to work:

The apologists of luxury have sometimes gone so far as to cry up the advantages of misery and indigence; on the ground, that, without the stimulus of want, the lower classes of mankind could never be impelled to labour, so that neither the upper classes, nor society at large, could have the benefit of their exertions.

Of course the Third Way manifesto didn’t overtly “cry up the advantages of misery and indigence.” The phrasing was more subtle and nuanced:

But providing people with the skills and abilities to enter the workforce is not enough. The tax and benefits systems need to make sure it is in people’s interests to work… Part-time work and low-paid work are better than no work because they ease the transition from unemployment to jobs. … The labour market needs a low-wage sector in order to make low-skill jobs available.

In short, there needs to be more low-wage jobs to transition people away from benefits and benefits need to be restricted so that they are not an impediment to people accepting low-wage jobs. Or, in blunter words, “without the stimulus of want, the lower classes of mankind could never be impelled to labour.”
Say’s “other law” appears in the chapter “On Consumption” in his Treatise on Political Economy; or the Production, Distribution, and Consumption of Wealth. Here’s more:

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