Wednesday, July 15, 2015

Why it is Wrong to Focus on Growth Alone

Matt Bruenig has a most excellent post, Why Jeb Bush is Wrong to Focus on Growth Alone at Policyshop. It isn't only Jeb Bush who focuses on growth "alone" (or above everything else). It's the standard framing, everything else is reduced to an afterthought.
In an ideal world, discussions of ideal work levels would be detached from discussions of unemployment, growth, and distribution. But in our narrow political frame, all of these things are mushed together, and tend towards the view that we must have more work hours to solve all the other stuff. This, of course, isn't true. You can reduce overall work hours (through longer vacations and more paid leave) while reducing unemployment, increasing GDP/hour, and even boosting the incomes of the poor and working classes (despite reducing work hours) by increasing transfer incomes. Yet, because of market income fetishism and simplistic discussions of GDP growth, we don't seem to have the political imagination to even consider such a program.
Two graphs summarize Bruenig's argument. See the difference?


Denis Drew said...

And what to think of American working hours (deliberately) becoming steadily less productive. I just read in Tom Geoghegan's book Only One Thing Can Cave Us (around p. 28) that American manufacturers, in particular auto manufacturing, are breaking down jobs into simpler and simpler component parts -- in contrast to German firms who, due to the influence of co-determination workers councils, steadily upgrade worker input and innovation.

The whole world (besides the US?) is straining to learn (or steal) ever more productive techniques to reach maximum possible output some day. In the US which has only a fixed amount of workers at any one time is trying to make those workers less and less individually productive in the mindless pursuit of paying them less and less -- leading to ever lowering national productivity. Talk about the fallacy of composition. We are going to be waving to them from the down escalator while they are riding the up.

Here is something Eduardo Portor had to say in the Times the other day:
Sizing Up Hillary Clinton’s Plans to Help the Middle Class
JULY 14, 2015

“Not only does the American economy suffer from one of the least skilled work forces *, according to the O.E.C.D. The American political system has not done enough to build a social insurance apparatus to help everyday workers and their families sustain prosperous lives.”

“Jobs in the economy’s largest, fastest growing occupations, in retail sales, food preparation and the like, are awful, she said, because ‘companies have created strategies that use people as interchangeable parts.’ ”


Sandwichman said...

Keeping in mind the firm's objective is to maximize profits -- not maximize output -- a longer than optimal-for-output working day may offer attractive prospects.

Ever since Thorstein Veblen wrote a whole book on it, it has been taboo for economists to acknowledge that it might be in the private interest of a firm to be recklessly inefficient in the use of resources it doesn't have to pay for. Well, not exactly K.W. Kapp wrote about it extensively and John Maurice Clark. But you don't hear much about their analysis these days either.

Instead, let's assume perfect competition, rational choice and perpetual motion powered by unicorn farts so we don't have to sully our math-o-matical analysis with heresies.