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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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The Nastiest Motives of Nasty People

“Economists are active militants against the concept of the lump of labor, that is, the popular idea that the total number of jobs or of working hours is fixed (Walker, 2007).”

The quote is the first line from a 2017 paper by Tito Boeri, et al. It gives me confidence that at least some of the time my message is getting through.

The image below is from a 2018 report published by the Roosevelt Institute. It tells me there is still a huge amount of work to be done teaching people about the ideological deceptions of the so-called lump-of-labor fallacy.

 

 

At times, over the last 20 years or so – never mind how long precisely — I have felt like Captain Ahab in pursuit of the whale as I have wrestled with the so-called “lump-of-labor fallacy.” Having finally sized the beast up, I am convinced that the fallacy claim is little more than a “pasteboard mask” behind which, “some unknown but still reasoning thing puts forth the mouldings of its features.” That hitherto unknown thing is a theodicy, or, perhaps it would be more accurate to call it theo-dicey in recognition of its treachery.

 

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Three-day Workweeks and Four-day Weekends

David Gelles interviewed Richard and Holly Branson for The New York Times Saturday

David Gelles (NYT): What do you think those in positions of power should do to address social problems like income inequality?

Richard Branson: A basic income should be introduced in Europe and in America. It’s great to see countries like Finland experimenting with it in certain cities. It’s a disgrace to see people sleeping on the streets with this material wealth all around them. And I think with artificial intelligence coming along, there needs to be a basic income.

David: Because of job displacement?

Richard: I think A.I. will result in there being less hours in the day that people are going to need to work. You know, three-day workweeks and four-day weekends. Then we’re going to need companies trying to entertain people during those four days, and help people make sure that they’re paid a decent amount of money for much shorter work time.

David: That’s a pretty rosy vision of what business can do. Is it really so simple?

Holly Branson: If all businesses start doing the right thing for their communities and the world as a whole, all of the world’s problems could be solved.

Meanwhile, In The ‘Not Too Distant Future’…

In the early days of the 1956 presidential campaign, U.S. Vice President Richard Nixon envisioned the achievement of a four-day, 32-hour workweek in the “not too distant future.” Sixty years later, the average workweek in the U.S. for full-time workers was 42.5 hours. Seventy percent of all employed persons worked 40 hours a week or more.

Nixon was not the only seer to misjudge the future of working time. In the 1930s, John Maynard Keynes had famously speculated about a 15-hour workweek as an economic possibility for “our grandchildren.” Towards the end of World War II, he offered a more modest, but more imminent opinion that a 35-hour workweek would be appropriate for the post-war U.S. economy.

In 1954, Fortune editor Daniel Seligman predicted a 32-hour workweek by 1980 – or sooner if workers chose to take a greater portion of their share of productivity gains in leisure rather than income. The First National City Bank of New York calculated in 1957 that it would take 31 years to achieve a 32-hour workweek, assuming the same mix of income and leisure as had prevailed from 1909 to 1941. Alternatively, a four-day workweek could be attained in eight years if productivity gains were applied exclusively to work time reduction. Four years later, economist Clyde Dankert suggested 1980 as the date by which “the thirty-hour workweek should be widely established and some progress made toward the twenty-five-hour week.”

As it turned out, from 1954 to 1989, annual productivity gains averaged 2.1 percent a year. 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 – leaving aside the likelihood that progressive reductions of the hours of work could have accelerated productivity gains. Edward Denison estimated in the early 1960s that approximately ten percent of the productivity gains in the first half of the twentieth century could be attributed directly to the reduction of hours. So, adding in a ten percent productivity boost from work time reduction itself, a 32-hour workweek could have been achieved by 1984.

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“The theory that wages depend entirely on the efficiency of labor, or on the product of industry, is a new form of the old doctrine of the wages-fund.”

Excerpts from “The Effect of an Eight Hours’ Day on Wages and the Unemployed” by  Charles Beardsley, Jr. (The Quarterly Journal of Economics, Vol. 9, No. 4 (Jul., 1895), pp. 450-459):

The argument of workingmen that the general adoption of an eight hours’ day would raise wages and absorb the unemployed is well known. A reduction in hours of work would be equivalent to the withdrawal from the ranks of men now employed of a certain number of laborers. The gap thus made would be filled by the unemployed. It is the competition of the fringe of unemployed or intermittently employed (comprising 10 per cent. of the working classes in England in normal years, according to Mr. Tom Mann) that keeps down the wages of the employed. If the number of the unemployed were lessened, wages might rise.

The reply which has been made to this argument by Mr. John Rae in his valuable and entertaining book, Eight hours for Work (1894), and by other writers, does not appear to be conclusive. It is said that the demand for work comes from the product of work, and that commodities constitute the demand for commodities. If the output of commodities falls off, the demand for them, and therefore for labor, must fall off also. So that (it is said), if a general reduction of hours resulted in a diminished national dividend, wages, instead of rising, would fall. In Mr. Rae’s words,

The only way to increase the demand for labor all round is to increase the production of labor all round, and a general or serious diminution of production always causes a general or serious decrease in the demand for labor.… 

But, if all trades together were to restrict their output in the hope of distributing the work better, they would find they had merely less work to distribute; and, instead of making work for the unemployed, they would have unmade the work of a considerable portion of those now employed.… 

The effect of shorter hours on the general wages of labor depends entirely on their effect on production. If they lessen production generally, they will lower wages generally.

Mr. Rae’s position seems perfectly clear, but it depends on a half-truth. Ceteris paribus, wages vary with the productiveness of industry, but only ceteris paribus. The theory that wages depend entirely on the efficiency of labor, or on the product of industry, is a new form of the old doctrine of the wages-fund. The characteristic feature of the classical doctrine was the assumption that the wages-fund was an inelastic quantum of the total circulating capital. The error of the theory that wages are measured by amount of product is in the implication that the proportion of wages to the total product of industry is at any given time rigidly fixed. According to the theory that wages are limited by capital, wages might rise if capital increased. According to the doctrine that wages depend on product, wages may rise if the product increases. Both theories ignore the fact that a change in the volume of the national dividend may be accompanied by a readjustment of the relative proportions of the shares in distribution which will neutralize, or more than neutralize, the effect of the change in the national dividend so far as any particular one of those shares is concerned. If the national dividend is diminished, the wages-fund will be diminished, profits will fall, interest and rent will be diminished, provided only that the relative magnitudes of wages, profits, interest, and rent remain unaltered. It does not follow that if shorter hours lessen, or tend to lessen, the national dividend, they will necessarily lessen the wages-fund. For the wages-fund is the product of two factors: it is the national dividend multiplied by a ratio.

Now, shorter hours of work would give to large numbers of laborers, at present unorganized or imperfectly organized, an opportunity which they are far from possessing. These workers are now under the tyranny of competition. They keep down their own wages by bidding against each other, or rather the casually employed keep down their own wages by bidding against each other, and the wages of the regularly employed by bidding against them, and standing ready to take their places at wages-current. To whatever degree, by a redistribution of work, this cutthroat competition could be mitigated, it would become possible to control the supply of labor, and to exact a monopoly price for it. In order to reduce the severity of this competition, or practically destroy it altogether, it would probably be good policy for the employed to divide even the present wages-fund with the unemployed. With the unemployed out of the way, effective united action on the part of laborers would be possible, and considerable advances in wages obtained, especially by the lower grades of unskilled workers.

But it has been said that, while a single trade may increase wages by regulating the supply of labor, all trades together cannot. This amounts to saying that a general rise in wages (relatively to the other shares in distribution) is impossible. It amounts, as I have already pointed out, to a doctrine of a rigid wages-fund. For, unless wages can be raised by checking competition among workingmen, they can hardly (relatively speaking) be raised at all in the present social order. There is no assurance that the constant growth of the national dividend, under a regime of unchecked competition, is accompanied by a corresponding increase in wages.

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Goebbels or Gompers Addendum

In my original post, I didn’t say much about the overt racist expression in Gomper and the A. F. of L.’s  advocacy for Chinese exclusion. I guess that is because I read the stuff voluminously a couple of decades ago and it by now it just seemed to me it was common knowledge. Of course it isn’t. I was astonished and appalled when I first read it. Not so much at the vileness as at the obsessive repetition of that vileness. The pamphlet, Some Reasons for Chinese Exclusion gives a representative sampling. In the introduction, the authors assure the reader that they “are not inspired by a scintilla of prejudice of any kind…”

Not a scintilla.

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Goebbels or Gompers?: A Closer Look at Stephen Miller’s Immigration Manifesto

Stephen Miller, architect of the Trump administration’s immigration policy is getting a lot of bad press these days. Some wags (and even relatives?) juxtapose Miller’s photo to one of Nazi propagandist Joseph Goebbels, insinuating likeness of facial expression is a predictor of ideological leaning and propaganda technique. The comparison is as unhelpful as it is unfair. A more apt comparison would be with Samuel Gompers, founding president of the American Federation of Labor.

Miller doesn’t look at all like Gompers but his rhetoric echoes Gompers’s Chinese exclusion advocacy from the 1880s to the dawn of the twentieth century. It is only by discerning the similarities and differences between Miller’s position and Gompers’s that an effective rebuttal to Miller’s policy prescriptions can be mounted.

Miller’s 2015 anti-immigration manifesto, Immigration Handbook for the New Republican Majority, is an articulate, compelling strategy polemic. It also discretely avoided any overt expression of racism or white supremacism. The handbook stresses polling that concluded “an economically focused message [on immigration] resonates with voters of all economic backgrounds and all ethnic backgrounds.” More specifically, it cites the result that “86% of black voters and 71% of Hispanic voters said companies should raise wages and improve working conditions instead of increasing immigration.”

For those without either the time or stomach to wade through Mr. Miller’s analysis and polemic, here is a synoptic collection of excerpts:

Simply put, we have more jobseekers than jobs.

The principal economic dilemma of our time is the very large number of people who either are not working at all, or not earning a wage great enough to be financially independent. The surplus of available labor is compounded by the loss of manufacturing jobs due to global competition and reduced demand for workers due to automation.

We have an obligation to those we lawfully admit not to admit such a large number that their own wages and job prospects are diminished. A sound immigration policy must serve the needs of those already living here.

So whether comprehensive, piecemeal, step-by-step, incremental, or whatever other process one conceives, the question that must be asked is this: will the legislation make life easier or harder for American workers?

Is there a single more reasonable proposition than to say that a nation’s immigration policy should consider first what is good for its own citizens?

Republicans—who stood alone in Congress to save America from the President’s [Obama’s] immigration bill and who alone have fought against his executive amnesty—must define themselves as the party of the American worker, the party of higher wages, and the one party that defends the American people from Democrats’ extreme agenda of open borders and economic stagnation.

No issue more exposes the Democrats’ colossal hypocrisy than their support for an immigration agenda pushed by the world’s most powerful interest groups and businesses that clearly results in fewer jobs and lower wages for Americans.

Paragon polled three sentences lawmakers should use that have been too absent in the immigration conversation:

  • The American people are right to be concerned about their jobs and wages, and elected officials should put the needs of American workers first.
  • The first goal of immigration policy needs to be getting unemployed Americans back to work—not importing more low-wage workers to replace them.
  • Immigration policy needs to serve the interests of the nation as a whole, not a few billionaire CEOs and immigration activists lobbying for open borders.

I especially like the part about Republicans defining themselves “as the party of the American worker, the party of higher wages.” That is not to say they would have to be the party of workers and higher wages. But who could argue with that polling sentence about what the first goal of immigration policy needs to be?

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War is Peace, Freedom is Slavery, Ignorance is Strength

A piece of work is Professor Walter E. Williams of George Mason University. Back in February, I flagged a column by Williams in which the nimble prof performed the lump-of-labor fallacy shuck and jive. One of the venues for that rendition of Will Automation Kill Our Jobs was David (“Trump is 100% right”) Horowitz’s FrontPage Mag.

Little did I know at the time that just three weeks earlier, Williams had penned a defense of Trump’s (Sessions’s, Miller’s) immigration policy, Immigration Lies and Hypocrisy also published at FrontPage Mag. One may admire the accuracy of article’s heading as a label of its contents until one realizes it is not actually intended as a confession.

I wrote to Professor Williams about the bizarre discrepancy between his January 30th column and his February 20th claims. I don’t really expect to hear back.

Dear Professor Williams,

I appreciate that you “can’t respond to every query” but my question raises urgent questions of morality and intellectual integrity. In February of this year, you wrote an opinion piece decrying the so-called “lump-of-labor fallacy” that you claim lurks behind concerns that automation will “kill jobs.” I noticed that one outlet that carried your syndicated column was David Horowitz’s “FrontPage Mag.”

Today, the Guardian featured an interview with Mr. Horowitz in which he asserted that Donald Trump’s immigration policy is “100% right.” Horowitz, the article notes, was a mentor to Stephen Miller, the Trump advisor who in 2015 authored Senator Sessions’s “Immigration Handbook for the New Republican Majority.” Here are a few excerpts from that document:

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The Lump That Begot Trump

I don’t want to pretend that this explains everything. But it is “another brick in the wall,” so to speak, if not the keystone. In January 2015, Senator Jeff Sessions produced an Immigration Handbook for the New Republican Majority,” written by his communications director, Stephen Miller.

Miller’s analysis in the handbook is just the sort of thing that economists would denounce as a “lump-of-labor fallacy.” Curiously enough, few did. They were much too busy snatching pensions from future old folks on the pretext that older people working longer wouldn’t “steal jobs” from youth.

Here are a few representative arguments from the handbook:

The last four decades have witnessed the following: a period of record, uncontrolled immigration to the United States; a dramatic rise in the number of persons receiving welfare; and a steep erosion in middle class wages. But the only “immigration reforms” discussed in Washington are those pushed by interest groups who want to remove what few immigration controls are left in order to expand the record labor supply even further.

 ———————

No issue more exposes the Democrats’ colossal hypocrisy than their support for an immigration agenda pushed by the world’s most powerful interest groups and businesses that clearly results in fewer jobs and lower wages for Americans.

Here are the findings from a poll of likely U.S. voters commissioned by GOP pollster Kellyanne Conway:

  • 77% of respondents said jobs should go to current U.S.-born workers or legal immigrants already in the country—instead of bringing in new workers to fill those jobs
  • 88% of conservatives, 78% of moderates, 78% of independents, 71% of Democrats and 62% of liberals says current U.S. workers should get jobs preference
  • 80% of respondents said businesses should recruit the currently unemployed instead of expanding the labor supply with new workers from other countries

  ———————

How are any members of the Democrat caucus going to explain why they are determined to provide instant work permits to every illegal immigrant and visa overstay in the country? How are they going to explain why they want to double the number of guest workers when we don’t have enough jobs for the workers here right now? How are they going to explain why they voted for legislation that will surge the labor supply at a time when wages are down and a record number of Americans can’t find work?

As I mentioned above, these are precisely the kinds of arguments that economists routinely denounce as being based on a lump-of-labor fallacy. In fact, although he didn’t use that phrase, Walter Ewing of the American Immigration Council countered the handbook’s claims with one of the fallacy claim’s stock surrogates — the “not a zero sum game” rebuttal:

Employment is not a “zero sum” game in which workers compete for some fixed number of jobs. Immigrant workers spend their wages in U.S. businesses—buying food, clothes, appliances, cars, etc. Businesses respond to the presence of these new workers and consumers by investing in new restaurants, stores, and production facilities. And immigrants themselves are 30 percent more likely than the native-born to start their own business. The end result is more jobs for more workers. The economic contributions of unauthorized immigrants in particular would be amplified were they given a way to earn legal status.

This is all very well and good… except for one problem: Miller’s and Sessions’s handbook cited an actual “zero sum” of net employment growth for U.S.-born workers:

…according to the BLS, all net employment gains since the recession have gone to foreign workers while 1.5 million fewer U.S.-born Americans hold jobs today than did then—despite the total population of U.S.-born adults increasing by 11 million over that same time.

Well, as the economist says, that may be true in practice but is it true in theory?  There is indeed a gap between what the evidence shows and what it proves. There is no guarantee that if “foreign” workers didn’t take those jobs, they would still be there for U.S.-born workers. Miller and Sessions fill that in with pure supposition. However…

However, in a contest between suppositions based on peoples’ perceptions and suppositions contrary to those perceptions, who do you suppose wins? As I have pointed out repeatedly, the “no zero-sum game” rebuttal, the lump-of-labor fallacy is a red herring. Sometimes there are empirically zero sums and there doesn’t have to be a “fixed amount of work” for the actual amount of work to be deficient. As tendentious as Miller’s and Sessions’s argument may be, Walter Ewing’s rejoinder is no less tendentious — and loaded down with hollow promises and empty platitudes to boot.

See also Sessions, Krugman, DACA and the Lump-of-Labor Fallacy

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