Art Dahlberg or Rube Goldberg?

One of the endearing features of Arthur Dahlberg's Job, Machines and Capitalism was its incorporation of an elaborate diagram that illustrated his argument about technology, unemployment, war and shorter working time. A Rube Goldberg machine is a comically complicated contraption designed to perform a simple task. Goldberg began drawing his cartoon machines in 1914 and continued until 1964.

A Rube Goldberg Cartoon

The economic relationships Dahlberg tried to explain are indeed extraordinarily complex. It is doubtful that his diagrams helped readers to understand them -- unless the point Dahlberg was trying to make was that the relationships were extraordinarily complex. It should be noted that economists A.W. Phillips (Phillips Curve) and Irving Fisher both also constructed elaborate machines to model the economy.

Goodbye To The Spitzer Infrared Space Telescope

Sometime today, January 30, 2020 the plug will be pulled and the Spitzer Infrared Space Telescope will cease to operate.  It has been in operation since late August, 2003.  It will be succeeded next yeat hopefully be a enew infrared space telescope named for James Webb.

Serving as the Chief  Scientist for this telescope has been the main life work of my brother-in-law, Michael W. Werner, who has since 1990 worked on it out of the Jet Propulsion Lab at Caltech.  He had stepped down as its administrator a few years ago, but was still working on projects associated with it, and will continue to do so as data will still need analyzing, and the forthcoming James Webb telescope will need guidance.

The many achievements of this telescope have been described and pictured in the excellent book Michael and Peter Eisenhart published this last year with Princeton University Press, More Things in the Heavens: How Infrared Astronomy is Expanding Our View of the Universe, which I highly recommend.

Barkley Rosser

Which Lie Is The Worst?

With the conclusion of the Trump defense in his impeachment trial, the question arises as to which lie told by the defense is the worst?

Sean Hannity has been emphazing four in particular.  In the first he claims that there was no linkage between military aid and investigating Bidens in the July 25 phone transcript.  But there it is in black and white that when Zelensky mentioned wanting more military aid Trump immediately goes to "I need a favor though," with that immediately followed by his demand for inveatigating the supposedly missing laptop with mention of investigating Bidens coming a bit later.

Then we have the true claim that Zelensky has never publicly said he felt "pressure" from Trump.  Indeed, but we know no way he would say so as long as he wants aid.

Then we have the claim that Zelensky knew nothing about this before the July 25 phone call.  But in fact numerous witnesses have testified that he did and was fully aware of what was coming (more or less) when he participated in the July 25 phone call. This one is an outright lie.

We then finally get the argument that military aid was released even though Zelensky "did nothing that was asked" (ah, things were indeed asked after all).  But we know this was after Trump knew the whistleblower complaint was being made public, and while Zelensky got his aid, he still has not gotten his promised White House visit.

However, I think the most egregious claims and the ones that I think resonate the most with Trump's supporters are those that this impeachment is to overturn the 2016 election ans also to "steal" the 2020 election, with "ballots being torn up across the country."  On the first one if Trump were to be removed, he would be replaced by VP Pence, duly elected with Trump in 2016, not much of an overturn there.

As for the claims about 2020 the joke is that there is nothing in being impeached and removed that prevents the person removed from running again.  This one is just an outright misleading lie.  The further joke is that there are no ballots yet to be "torn up."  Not only is the Dem candidated known yet, Trump himself has not yet been officially made the GOP candidate.  Sure, he is a shoo-in to get the nomination, but he does actually have people running against him, most notably William Weld of MA, former governor there.  It is true that in some states local GOP will not let Weld or others onto primary or caucus ballots, but many will allow them.  In any case, there are no ballots to be "torn up" for the fall election, and if removed, Trump can still run.  All the people getting outraged over this are just wildly misinformed and being lied to.

Barkley Rosser

War, Peace and the End of Shorter Hours

In his preface to Jobs, Machines and Capitalism, Arthur Dahlberg explained that the economic views upon which his book was based were inspired by his reading of Stephen Leacock's The Unsolved Riddle of Social Justice. The latter book's inspiration can be summarized in the sentence, "The economics of war, therefore, has thrown its lurid light upon the economics of peace."

Contrary to Frank Knight's dismissive arm-waving about bibliographies and footnotes, Dahlberg did in fact cite two economics textbooks along with contemporary economists such as Leacock, Wesley Mitchell, Thorstein Veblen and John R. Commons. One may infer from the sarcastic comment at the end of his review that Knight failed to grasp Dahlberg's (and Leacock's, Mitchell's, Commons's and Veblen's) point that the economic organization of modern society is not "based on price competition" as had been empirically demonstrated by the experience of the war. The implication of these statistics and analyses was that even spending on destruction stimulated productive activity. (For a concise summary of Dahlberg's argument, see his 1933 Senate subcommittee testimony, cited in "What is the most useful idea in economics.")

Quibbles about Knight's review of Dahlberg might be of merely antiquarian interest were it not for several other related observations. In addition to Leacock's book, Dahlberg had been provoked by the "disturbing figures" given by David Friday in his book on wartime profits, wages and prices. Just a year before publication of Dahlberg's book, John Maurice Clark introduced the concept of the economic multiplier in The Costs of the World War to the American People. 

In "The Political Aspects of Full Employment," Michal Kalecki wrote, in 1943, that "most economists are now agreed that full employment may be achieved by government spending." The exceptions to this consensus, though, were significant:

Among the opposers of this doctrine there were (and still are) prominent so-called 'economic experts' closely connected with banking and industry. This suggests that there is a political background in the opposition to the full employment doctrine, even though the arguments advanced are economic.

Kalecki went on to assert that this opposition to government spending withers when the spending is on armaments. Almost as if to confirm Kalecki's argument, Leon Keyserling in 1950 advised the author of NSC-68 that the tripling of arms spending would pay for itself by "siphoning off" a portion of the resulting increase in national income.

...if a dynamic expansion of the economy were achieved, the necessary build-up could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product.

Twelve years later, Clyde Dankert counseled against "any sizable reduction" in hours "in view of the current cold war situation":

If shorter hours are to be advocated today -- and in view of the current cold war situation the present writer would not recommend any sizable reduction in them just now -- it would seem desirable to use, not the arguments of the past, but a more comprehensive and up-to-date argument. The one here suggested points to the maximization of worker satisfactions as the objective.

I was led to these ruminations by the reading I assigned for last week to my Politics of Working Time class, Benjamin Hunnicutt's "The End of Shorter Hours." Hunnicutt cited standard economists' arguments for why the movement for shorter hours in the United States faded away after World War II and proposed his own explanation. Hunnicutt cited "the reduction of fatigue, availability of consumer credit, commuting time, stability of employment, easier work, pent-up consumer demand, increased cost of education and raising larger families, and stable cost of recreation" as the typical explanations for the demise of the movement given by economists.

Hunnicutt's own explanation consisted of a combination of subjective distaste for "idleness" arising out of the depression experiences of unemployment, the influence of the business philosophy of "the new economic gospel of consumption," a new commitment from government to maintain full employment through government spending and public works, and the consequent erosion of the idea that "work-sharing" was necessary to combat technological unemployment. In his subsequent book, Work Without End: Abandoning Shorter Hours for the Right to Work, Hunnicutt did address the factor of military spending in a paragraph toward the end of the last chapter.

This takes me back to Leacock's evocative observation:

The economics of war has thrown its lurid light upon the economics of peace.

During the presidential campaign of 1952, Dwight Eisenhower prepared a speech that he didn't deliver because it was pre-empted by Nixon's Checkers speech. In the prepared speech published in the newspapers, Ike warned about depending on the production of armaments for national prosperity:

There is in certain quarters the view that national prosperity depends on the production of armaments and that any reduction in arms output might bring on another recession. Does this mean, then that the continued failure of our foreign policy is the only way to pay for the failure of our fiscal policy? According to this way of thinking, the success of our foreign policy would mean a depression.

Four years later, during the 1956 presidential campaign, vice-presidential candidate Richard Nixon foresaw the likelihood of a four-day work week "in the not too distant future." "These are not dream or idle boasts," he argued, "they are simple projections of the gains we have made in the last four years." But during his subsequent 1960 campaign for president, Nixon backtracked,

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.

Nixon's rationale for why we can't have it contradicted his earlier claims about the gains made in the first four years of the Eisenhower administration:

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.

Production of what? "There is in certain quarters the view that national prosperity depends on the production of armaments..."

Local Climate Policy Run Amok, Bellingham Edition

Earlier this month the New York Times ran a story about Bellingham, Washington, a picturesque town that looks out across Puget Sound to the San Juan Islands.  Bellingham is home to Western Washington University, but rational thought is in short supply when it comes to climate activism.

What got the country’s attention is a proposal before the city council to require all homeowners to switch from natural gas to electric heating by 2040.  A number of cities already require new construction to use electric heat, but Bellingham would be the first to mandate a complete phaseout for everyone.

The opposition is spearheaded by, surprise, the privately owned gas and electric utilities, which plan a PR campaign talking up the wonders of CH4.  Real estate interests are unhappy too.  They will face off against the enviros, who all seem to see this as a big step toward municipal carbon neutrality.

I hesitate to draw conclusions about what people think or don’t think based on reading a few news articles, since I live hundreds of miles away and have no personal connections to Bham.  Nevertheless, I’ve checked out a number of sources representing a range of views, and I’ve yet to see anyone making the obvious point that electric heating mandates are just as likely to increase carbon emissions as reduce them.  The problem, of course, is that Bellingham proposes to significantly increase local electricity consumption but is making no corresponding effort to reduce the role of fossil fuels, and especially natural gas, in electrical generation.

This being the Pacific Northwest, much of the electricity humming through Bellingham’s wires is hydro, which is mostly fine.  (Not quite so fine if you’re a salmon searching for your smolthood home.)  But that’s already online and accounted for in existing consumption.  Where will the new electricity come from?  At the margin, the “green” heating Bham homeowners will turn to when the gas is turned off is likely to come from.....gas.  This is because renewables will not supply the full load at any point in the foreseeable future, and the home heating law will just increase electricity demand above what it would have been otherwise.  Since conversion to electricity absorbs about half the energy content of the gas used to spin turbines, more gas may end up being burned that way than if the city had taken no action and the fuel had been piped directly to the houses heating with it.  Amazingly, this point is expressed by exactly no one in a slew of articles that quote an array of business owners, politicians and activists.

So I’m dumbfounded twice over, first by the push for a policy that has an unclear relationship to its ostensible goals, and then by the apparent absence of any awareness of the problem on the part of the entire cast of characters.

When you ask why we’re not making much progress addressing climate change, the first thing you hear is the stubborn, greedy opposition of the fossil fuel companies.  I’m not saying it’s not out there, but close behind is the confusion of well-intentioned people who think cutting emissions means cutting my emissions, the ones I can see and are immediately traceable to me.  Great for instilling a sense of personal virtue, but in an interdependent society not so much for saving the planet.

Covering Up The Coverup

I keep thinking that Fox News cannot get worse, but there seems to be no bottom to how low they can go.  New lows are being exhibited in their coverage of the current Senate impeachment trial.  They are fully involved in covering up the Trump administration coverup of what Trump did regarding the articles of impeachment. Anybody getting their news on this trial from Fox will really have no idea what is going on or what the case is that the House managers of the prosecution are arguing.

I am not following the trial fully, and I am only occasionally popping to Fox News to see what they are doing, but I have seen enough.  The main thing they do, and I am seeing Sean Hannity do more of it after seeing Tucker Carlson also do it, is that they barely show the presentations of the House managers. They cover over the presentations with themselves and their allies talking and characterizing what is being said without showing whar is being said except for scattered cherry picked comments.  For Hannity Adam Schiff is a liar and "crazy."  He  repeats standard talking points he has presented almost every night for months, but never lets the House managers actually their stuff.  Tucker Carlson is no better.

Last night we had the extreme spectacle that I actually saw live, of while Hakeem Jeffries was speaking Tucker Carlson had a large chryon scrolling under him saying "Dems Push Hysterical Talking Points in Trial."  As  it is, most observers have noted that whatever  one thinks of the bottom line, the House managers have presented careful arguments supported by lots of evidence.  Nothing "hysterical" about any of it.

However, it appears that Chief Justice Roberts is tilting to the GOP.  Late last night Jerrold Nadler accurately declared that the Trump lawyers were "lie, lie, lie."  This triggered Roberts to criticize both sides for using bad language, although it was clear he was directing this at Nadler.  However, indeed, the Trump lawyers had used personal invective and words like "hypocrisy" repeatedly all day long with nary a whisper of complaint from Roberts.  As it is, Republicans have since been all over everywhere complaining about Nadler's language, even though he was completely correct in his charge.

Anyway, again, anybody getting their information on this trial from Fox News will simply have no idea what is being said by the House managers.  This performance is a new low for them.

Barkley Rosser

Guns and Commas

I am glad that the large pro-gun rights rally in Richmond on Martin Luther King, Jr. Day end without any violence as had been threatened by some people around the US.  That is nice, but it does not end the unpleasant situation legal situation that has arisen here in Virginia.  As of now 93 jurisdictions, mostly counties, have declared themselves "gun sanctuaries" where any gun control legislation passed by the Virginia government will not be enforced.  The bills currently having received majority support in the Assembly and Senate with support from Governor Northam include requiring uinversal background checks for all gun sales (while allowing intra-family gun transfeers without that), a one-gun per month limit on gun purchases, and an especially controversial "red flag" bill allowing for a person deemed to be a danger to themselves or others to have their guns temporarily taken.

I am located in the Shenandoah Valley where this "gun sanctuary" movement got going, with neighboring county to the south of me, Augusta, getting highlighted in an article about this in The Economist recently.  VA is the only state where cities and counties are distinct and separate from each other.  So I live in the City of Harrisonburg, which is surrounded by Rockingham County, which supported Trump with over 70 percent of the vote.  Rockingham County has joined Augusta in becoming one of these on a unanimous vote of its Board of Supervisors, although I know at least one of those not happy about this. But an angry gun-toting crowd showed up at the meeting.  In Harrisonburg such a crowd showed up at the city council, but left angrily after the council refused to go along with this garbage.

I shall note here that this absolute defense of gun rights follows the 2005 Supreme Court ruling written by the late Justice Scalia on Heller versus District of Columbia  when the SCOTUS ruled against DC's banning of handguns on grounds of a nearly absolute individual right to own a gun.  This ruling overturned over a century of legal rulings that put limits on the right to own a gun given the apparent tie in the Second Amendment between this right and the need for a "regulated militia."

This is where commas come in.  What separates the two clauses of the Second Amendment is a comma, which in standard grammar inexorably links them.  That individual right is clearly tied to the need for a regulated militia, and the history of this is known.  At a minimum for Scalia to make his case, there should have been at least a semi-colon, if not a period.

Of course, even the need for a regulated militia itself is stained.  The historical origin of this demand in the amendment as written by James Madison dates back to a debate in Richmond in which Patrick Henry insisted on the need for armed militias at the state level so that slave revolts could be put down.  This is the ultimate origin of the Second Amendment.

Barkley Rosser

"What is the Most Useful Idea in Economics?"

NPR's Planet Money went to the 2020 American Economic Association conference in San Diego where they asked economists, "what is the most useful idea in economics?" David Autor appears near the end of the episode (minute 16:00) to talk about the lump-of-labor fallacy. Almost exactly 87 years earlier, on January 18, 1933, Arthur Dahlberg appeared before a Senate subcommittee to give testimony on the thirty-hour work week bill. The lump-of-labor fallacy would be a useful idea indeed if it would show economists how little they have learned and how much they have forgotten in the intervening 87 years.

In his Planet Money interview, Autor rehearses the standard refrain about there not being a "finite" amount of work to be done so we are not in danger of running out of jobs. Then he introduces the caveat that although we will not run out of jobs, that doesn't mean that there is nothing to worry about -- some people will end up in worse jobs than they previously had or would have had. Autor's remedy for this is to develop policy that will improve people's skills so they qualify for better jobs or raise the productivity in personal service jobs so they pay more.

Eighty-seven years earlier, Dahlberg also disagreed with the idea that machines create technological unemployment. He also saw that the new jobs created by technological change would be different than the old ones. But Dahlberg carried his analysis several steps further than Autor. In Dahlberg's view many of the new jobs would differ from those they replaced in that the demand for their products or services would not be spontaneous but would need to be artificially induced by, for example, advertising.

Autor acknowledges something similar when he mentions that a hundred years ago 70 percent of consumer spending was on necessities compared to only around 40 percent now. But Dahlberg raised the issue that wages are determined by bargaining and the shift away from spontaneously-demanded goods and services undermines labor's relative bargaining power, resulting in a smaller labor share of income. Recipients of capital income may spend their larger share either on personal consumption or investment but eventually they will want to "cash in" on that investment. Spending on new investment will decline faster than spending on consumption rises. Dahlberg thus invoked the business cycle as the "slow-moving effect" of the introduction of labor-saving technology.

Here is a link to the transcript of the Planet Money interview with David Autor. Below is the transcript of Arthur Dahlberg's testimony to the Senate subcommittee on the thirty-hour work week:

STATEMENT OF ARTHUR DAHLBERG, ECONOMIST AND ENGINEER [January 18, 1933]

The CHAIRMAN. State your name and occupation.

Mr. DAHLBERG. My name is Arthur Dahlberg. I am an economist and engineer. I am at present the research fellow of Social Science Research Council, and for many years I have been making a study of the rôle which the number of hours plays in the economic scheme.

Senator BLACK. You have written a book on it?

Mr. DAHLBERG. Called Jobs, Machines, and Capitalism, which was published by McMillan a few months ago.

The CHAIRMAN. So many books are coming out on the subject I can not keep track of them. I have tried to read them.

Mr. DAHLBERG. I had an advantage that I did the work and wrote most of it before the depression hit us, and it was not done in desperation.

I think I discovered a new outgrowth coming from the interaction, the injection of machinery and retention of long working hours that has not been commented upon, and they are yet very vital things in the economic scheme. I disagree with those who believe that technological unemployment is created by employment of high-class machines. I have concerned myself with the nature of the new type of work and service to which the man hours are diverted, when the length of the working day is maintained relatively constant and machinery is injected. A pretty good case can be made to disprove that technological unemployment comes by the labor-saving machine, if we refer to the unemployment statistics. They have remained relatively constant during 1920, when the machine was being injected at a very rapid rate, but if we look at the figures more closely we see this, for instance, that the type of work and service changes, while in the manufacturing industries in 1919 to 1927 the number of workers actually decreased by a little over 2 per cent, and in the major industrial groups or more basic industries, manufacturing, construction, and so forth, the employment in those fields did absorb about one million of the five million and some hundred, which I think is significant, and I think it is also significant that about two and a half million of those five million workers were forced to join the miscellaneous group.

The thing I stress is that workers are diverted by the injection of labor-saving machinery from these activities which are spontaneously demanded by people with purchasing power into these activities the demand for which they must themselves create; that is, economic theorists used illustrations like this: If we displace printers with machinery more pressmen are created. That was true for a long time, but we finally get a situation where the displaced men have to get into other occupations, like advertisers, life-insurance agents, hot-dog attendants, and those new jobs are different from the former jobs, in that they have relatively little bargaining power as compared with the services in the basic industries.

Now, after all, this capitalistic economy of ours is a bargaining economy. It is the same animal whether labor return is 90 per cent of the national income or 60, and the capital return 10 or 40 per cent.

The injection of machinery has diverted labor effort, has generated positions which undermine the bargaining power of workers in their dickering with employers.

During the course of the 1920s, for instance, when machinery came in very rapidly, they were unable to bargain to themselves a share of the national income commensurate with that going to the employer. The employers got most of the benefits from the injection of labor-saving machinery.

I also want to point out another effect generated, slow-moving effect, generated by this injection of labor-saving machinery. The very nature of the capitalistic process is this: that the recipients of claims to wealth must pour them back either in buying commodities or in investment in plant or stock. We got unemployment and a devitalized behavior.

If I was an employer and employed 100 men, and am spending, either for commodities, whatever they are, or for new plant, if I spend immediately the system clicks along without breakdown, but if I then inject, we will say, labor-saving machinery, which permits me to lay off 50 men, those men are unemployed until I utilize my increased profit derived from the injection of that machinery in buying other commodities for myself, or in building new plants, employing men to put up more brick.
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We have this slow-moving effect generated, that as the people in the upper income group have their incomes increased in size, the wants presented to them go out further and further, and changes in the wants change in their essential nature; they are no longer dictated by nature. They are not commodities which seek to satisfy natural organic wants. The wants become man made, and are not demanded until man makes them.

Now, we have that growth increasing at a rapid rate in the last decade or two. We displace men from our basic industries and have to have advertisers out creating wants, tempting our upper income group to spend, but they will not spend until the want is created, and we get that lag in the demand for these man-made commodities upon the supply of labor. We get that lag in the demand for labor, and with that lag comes this decreased bargaining power in the labor market.

We had in the 1920's, for instance, a bargaining situation which has permitted the upper income groups to get enough of the national income not only to supply themselves with all the commodities that advertising men could make them buy, not only enough to supply them with functionally necessary plant, but over and above that they have got enough to engage in the competitive game of sales competition, to engage in building unnecessary plants to pour $10,000,000,000 of that net into foreign investments, and of course the system runs as long as they are willing to exercise their increased in new commodities or in building more and more excess plants.

Labor is employed in the process, and purchasing power is distributed in the form of wages and salaries, but they continue to make these investments, hoping always someday to cash in, in the belief that prices for the commodities will stay put as they cut their costs of production. The time comes, however, when they may wish to cash in on that, and do not reinvest their income in more and more excess plants. The business opportunities available to them become more and more inane and the time comes when they stop their reinvesting. The moment they do that less is paid out in wages and salaries and the marginal producer has to cut wages. The others must fall in line and the market is cut down and curtailed.

The stream of sales dollars from which they extract a little profit is consequently choked off, and when the rivulet of profit is choked off their capitalization goes on the bottom.

From the early point of view I think it necessary that society establish through the control of man-hour supplied industry a bar gaining situation where the share diverted to salaries to those who use the income for consumers' goods be adequate to provide a market for that share of the national income diverted to those who use it primarily for investment goods. The only way to maintain stable capitalization is to maintain your stable market. There is no other alternative than that. The very moment your market decreases, your capitalization must fall. It seems to me that the depression was necessarily generated when we poured into the economic mechanism more man-hours than are spontaneously demanded by the people with purchasing power. I maintain that the trouble has been that we have operated our system under a chronic scarcity of jobs and business property.

During the World War the system accidentally did operate the same operating mechanism under a chronic scarcity of man-hours. We had employers bidding for men instead of workers bidding for jobs. Unemployment dried up immediately. The distribution of the national income was changed so that the share going to the upper 5 per cent of the population went down from 33 per cent in 1914 and 1915 to 26 and 24 per cent in 1918 and 1919. We had during the war period because we accidentally poured into our old industrial activity only two-thirds as many man-hours as we had been injecting before, a diversion of about one-third into war activities, and building war supplies. We generated a new bargaining situation because we operated under a scarcity of man-hours, and we threw 8 per cent more of the national income to the lower 95 per cent of the population, which together, through the lower 95 per cent of the population in 1918, we only had to get through the $3,700 group. We threw 8 per cent more of the national income to the lower income groups, who used that income and did use it for consumers’ goods, pianos, electric lights, and all these, and we provided business with a market greater than the productive capacity of the plants to handle. That was accentuated by war orders.

I want to point out an internal adjustment in industry which was generated because the market outran the productivity of the plant. Employers, [before the war] faced with the scarcity of markets, diversified their styles and shapes, in an attempt to extract some of the money of the income groups who had incomes still available, and consequently, while the individual machine is made more and more efficient, the use of that machine is made more and more uneconomic.

During the war we reversed that and gave the employers themselves an economic incentive to get together, as they did under the help of the War Industries Board, the big manufacturers themselves on these committees. They got together then because of their economic incentive in simplifying and standardizing fashions, shapes, and styles. For instance, in the tire industry they cut the varieties from 287 to 32; and that adjustment went throughout the whole of the products of industry, and because of that simplification and utilization of engineering technique at their best, the output of the industrial machine was for an average 12 per cent greater than pre-war. That is, about two-thirds as many man-hours poured into the industrial machine, generated a greater commodity output, and commodity output is real income or real wages, as had been before the war. I want to point out that as carried through, it seems to me, on a national scale, we operate this economic system of ours on a scarcity man-hour basis so that we have the employers bidding for workers, we give business a market. We throw the purchasing power to those who patronize business and induce it to run full blast and actually to generate greater output in short hours than in long hours.

I disagree completely with these people who think the output of industry will fall with decrease in working hours. Due to these uneconomic adjustments which took place in our economic system in the last 10 years while operating under chronic scarcity of jobs, if we shorten now we get an internal readjustment which would by better engineering utilization actually permit us to give a higher wage under short hours than under long ones. The whole economic mechanism is so involved that we get lost in following the process.

As I say, I made this analysis before the depression hit us, but that was the new era of prosperity and was not listened to, and I tried to devise a technique by which I could more vividly present these economic interrelationships. I concluded the technique of the use of words for describing social process is inadequate. It is almost impossible to get agreement on what is happening, much misinterpretation over words. The memory forgets, and the best ones can not consider more than one aspect of the problem at a time. It is tariff, unemployment insurance, wage policies and such things. I finally devised a diagrammatic means for showing the machinery skeleton of the economic system simultaneously in one diagrammatic outline. I tried to show diagrammatically the concurrent flow of man-hours in industry, the raw materials going into industry, the commodity output from it, the flow of purchasing power in the system, the flow of social controls modifying and directing these flows.

I have that here on a large chart. Not more than two or three of you can see it, and I do not know whether the committee would care to hº me explain, but I think it is a much better device than words can do.

The CHAIRMAN. The difficulty is I would not know how to put it in the record.

Senator BLACK. I have seen it myself in the book.

Mr. DAHLBERG. It looks like a hopeless thing when unexplained, but it is very easy to follow.

The CHAIRMAN. I do not see how you can explain it so that it will be understood in the record. If you could, we would like to have it in.

Mr. DAHLBERG. I thank you for your courtesy.

The US-China Nothing Burger Trade Deal

There has been much hype about the signing of Phase One (and probably only) US-China trade deal.  However based on a front page story in today's Washington Post, there is not much there.  The US did not raise tariffs as planned, but tariff still remain on two thirds of the sectors that had them, although some were halved.  But numerous US sectors see no change at all and are now viewing the  situation as not likely to improve, with them suffering losses of business likely to return.  Among those are chemicals, apparel retailers, and auto parts. In these and other sectors there is not much reduction of uncertainty regarding US-China trade, so not likely much increase in investment.

The main items in it besides no worsening of tariffs, China has made promises not to pressure US firms to turn over technology and also to increase imports from the US by $200 billion over the next two years, especially in energy and agriculture. So maybe US soybean farmers will no longer need the bailouts of billions of $ Trump has been providing to them.  However, such promises have been made in the past.

As it is, I am watching commentators on Bloomberg, and about the most any of them are willing to say is that this "puts a floor" on the "deterioration" of US-China trade relations.  That is far from some dramatic breakthrough, and most of the tariffs put on as part of the US-China trade war remain in place.

Barkley Rosser

Further Followup On The Soleimani Assassination

I wish to bring out some matters not getting a lot of attention in the US media.

An important one of those was reported two days ago by Juan Cole. It is that apparently it has not been determined for certain that the initial attack that set off this current round of deaths when a militia in Iraq attacked an Iraqi military base in Kirkuk in which an American contractor was killed, almost certainly a matter of collateral damage although not recognized as such, was actually done by Kata'b Hezbollah, the group reported to have done it.  That group was commanded by al-Mushani, who was also assassinated with Soleimani, with whom he was allied.  But it is not certain that they did it.  As it is, the Kirkuk base is dominated by Kurdish Pesh Merga, with whom it is not at all obvious the pro-Iranian militias like the Kat'b Hezbollah have hostile differences.  This may have been cooked up to create an excuse for assassinating Soleimani.

Indeed, it has now been reported that seven months ago Trump had approved killing Soleimani essentially at the first instance there would be a good excuse for doing so.  In fact it is now reported that although Trump had not heard of Soleimani during th 2016 election, within five minutes of his inauguration he suggested killing Soleimani.  SecState Pompeo been encouraging and pushing this action, but it has been something Trump has been hot to do for some time.  Going up for an impeachment trial looks like a really good time.

We have now seen quite a dance around reasons to justify this.  We must keep clear that it is a matter of both US and international law that this sort of killing of a foreign national official such as General Soleimani is that there be an "imminent threat."  I shall not drag through the various versions of what was supposedly the imminent threat here, but it has finally become clear that there was none. And as of today both Pompeo and AG Barr have now pivoted to saying that it was done for "deterrence," but that leaves this assassination as illegal, with US troops in Iraq now declared to be"terrorists."

Now indeed the further followup has become quite a mess, although hopefully the escalation has stopped and war will not happen, despite getting very close to the brink.  So Iran made its strike on two bases with US troops in Iraq.  While it initially looked that the Iranians were going out of their way to avoid killing any Americans, local US commanders now say that it looks that the strikes were in fact aimed at killing some Americans, and some were in fact injured.  I do not know if this is true or not, but it is disturbing and shows how close we have gotten to heightened war.

Then we had this disaster of the Iranians themselves shooting down a commercial Ukrainian airplane (oh, the irony), killing 176 civilians, mostly Iranians, Canadians, and Ukrainians, plus some others. With the admission by the regime anti-government demonstrations have broken out from universities especially in Tehran where many of the Iranians on the plane were from, many of them university students heading to Canada.  Those demos have gone on for three days bringing forth a harsh put down from the government, but with news people quitting their jobs out of disgust.  The government has now arrested some supposedly responsible for the erroneous shootdown under heightened laert status, which would not have come to pass without the illegal assassination. It is unclear if these arrests will bring an end to the demonstrations, but it should  be kept in mind that these involve much smaller numbers of people than turned out in the aftermath of Soleimani's assassination.

Underlying this most recent uprising is the fact that Iran is suffering serious econoimic problems.  Much of this is due to the Trump sanctions, but they also reflect entrenched corruption and spending on foreign adventures, such as support for foreign militias. These are difficult times, and let us hope that all sides step back and reduce the heightened tensions.

Barkley Rosser

Addendum:

I must walk back one speculation in the above.  I asserted that probably the troops at the base attacked by a militia on Dec. 27 were Kurdish Pesh Merga.  I should have checked on this before posting. They were not. While it is near Kurdish dominated Kirkuk, I have now checked on this aind it turns out that the K-1 base indeed had a lot of Americans, some other foreign coalition troops, as well as Iraqi Security Forces, the national army. These troops were all supposedly involved in fighting ISIS/ISIL/Daesh.  Four US military people were injured, with this obviously intended by whoever was attacked (the killed American contractor was a naturalized US citizen born in Iraq).

There remains a possibility that the attacker may have been ISIS/ISIL/Daesh forces, some of which are apparently in that area, and who would have a motive for doing so.  However, there are strong claims made by US officials that it was Kati'b Hezbollah, commanded by al-Mushani. I have also seen a report that  Soleimani visited Shia militia leaders in Baghdad in late October, supposedly auggesting they attack US forces and supplying them with Katyusha rockets and other arms, with the attack on K-1 involving the use of such rockets.



I 

Can The US Assassination Of Qasem Solemiani Be Justified?

We know from various Congressional folks that briefers of Congress have failed to produce any evidence of "imminent" plans to kill Americans Soleimani was involved with that would have made this a legal killing rather than an illegal assassination.  The public statements by administration figures have cited such things as the 1979 hostage crisis, the already dead contractor, and, oh, the need to "reestablish deterrence" after Trump did not follow through on previous threats he made.  None  of this looks remotely like "imminent plans," not to mention that the Iraqi PM Abdul-Mahdi has reported that Soleimani was on the way to see him with a reply to a Saudi peace proposal.  What a threatening imminent plan!

As it is, despite the apparent lack of "imminent plans" to kill Americans, much of the supporting rhetoric for this assassination coming out of Trump supporters (with bragging about it having reportedly been put up on Trump's reelection funding website) involves charges that Soleimani was "the world's Number One terrorist" and was personally responsible for killing 603 Americans in Iraq.  Even as many commentators have noted the lack of any "imminent plans," pretty much all American ones have prefaced these questions with assertions that Soleimani was unquestionable "evil" and "bad" and a generally no good guy who deserved to be offed, if not right at this time and in this way.  He was the central mastermind and boss of a massive international terror network that obeyed his orders and key to Iran's reputed position as "the Number One state supporter of terrorism," with Soleimani the key to all of that.

Of course, in Iran it turns out that Soleimani was highly respected, even as many oppose the hawkish policies he was part of.  He was viewed as crucial to the victory over ISIS/ISIL/Daesh in Iraq, much feared by Iranians. Shia take martyrdom seriously, and he is viewed as a martyr. It appears that even Trump took notice of the massive outpouring of mourning and praise for Soleimani there up to the point of people dying in a stampede in a mourning crowd in his hometown.  But, hey, obviously these people simply do not understand that he was The World's Number One Terrorist!  Heck, I saw one commenter on Marginal Revolution claiming Soleimani was responsible killing "hundreds of thousands."  Yes, this sort of claim is floating around out there.

A basic problem here is that while indeed Soleimani commanded the IGRC al Quds force that supported and supplied various Shia  militias in several Middle Eastern nations, these all were (and are) ultimately independent.  Soleimani may have advised them, but he was never in a position to order any of them to do anything.  Al Quds itself has never carried out any of the various attacks outside of Iran that Soleimani is supposedly personally responsible for.

Let us consider the specific case that gets pushed most emphatically, the 603 Americans dead in Iraq, without doubt a hot button item here in the US.  First of all, even if Soleimani really was personally responsible for their deaths, there is the technical matter that their deaths cannot be labeled "terrorism."  That is about killing non-combatant civilians, not military personnel involved in combat.  I do not support the killing of those American soldiers, most of whom were done in by IEDs, which also horribly injured many more.  But indeed this awful stuff happened.  But in fact this was all done by Iraqi -based Shia militias.  Yes, they were supported by Soleimani, but while some have charged al Quds suppplied the IEDs, this turns out not to be the case.  These were apparently made in Iraq by these local militias.  Soleimani's al Quds are not totally innocent in all this, reportedly providing some training and some inputs.  But the IEDs were made by the militias themselves and planted by them.

It is also the case that when the militias and Americans were working together against ISIS/IISIL/Daesh, none of this happened, and indeed that was still the case up until this most recent set of events, with the death setting off all this an American civilian contractor caught on a base where several Iraqis were killed by a rocket from the Kat'b Hezbollah Iraqi group.  Of course with Trump having Soleimani assassinated, this cooperation has ceased, with the US military no longer either fighting ISIS/ISIL/Daesh nor training the Iraqi military.  Indeed, the Iraqi parliament has demanded that US troops leave entirely, although Trump threatened Iraq with economic sanctions if that is followed through on.

As it is, the US datinrg back to the Obama administration has been supplying Saudi Arabia with both arms and intelligence that has been used to kill  thousands of Yemeni civilians.  Frankly, US leaders look more like terrorists than Soleimani.

I shall close by noting the major changes in opinion in both Iran and  Iraq regarding the US as a result of this assassination.  In Iran as many have noted there were major demonstrations against the regime going on, protesting bad economic conditions, even as those substantially were the result of the illegal US economic sanctions imposed after the US withdrew from the JCPOA nuclear deal, to which Iran was adhering.  Now those demonstrations have stopped and been replaced by the mass demonstrations against the US over Soleimani's assassination.  And we also have Iran further withdrawing from that deal and moving to more highly enrich uranium.

In Iraq, there had been major anti-Iran demonstrations going on, with these supported to some degree by the highest religious authority in the nation, Ayatollah Ali Sistani.  However, when Soleimani's body was being transferred to Iran, Sistani's son accompanied his body.  It really is hard to see anything that justifies this assassination.

I guess I should note for the record that I am not a fan of the Iranian regime, much less the IGRC and its former and new commander.  It is theocratic and repressive, with many political prisoners and a record of killing protestors. However, frankly, it is not clearly all that much worse than quite a few of its neighboring regimes.  While Supreme Jurisprudent Khamenei was not popularly elected, its president, Rouhani, was, who obeyed  popular opinion in negotiating the JCPOA that led to the relaxation of economic sanctions, with his power reduced when Trump withdrew from the agreement.  Its rival Saudi Arabia has no democracy at all, and is also a religiously reactionary and repressive regime that uses bone saws on opponents and is slaughtering civilians  in a neighboring nation.

Barkley Rosser

Small Town Support for Trump and “The Working Class”

Much has been written about voters, sometimes labeled the “white working class”, who live in small towns, have low incomes and supported Trump in 2016.  There are various hypotheses—not, despite the rhetoric, mutually exclusive—that have been proposed to explain this: never-ending latent racism galvanized by the experience of having a black president, a vote of despair in the face of economic decline, paranoia fueled by fictitious narratives of immigrant crowding and crime.  I just finished reading a post-mortem on the recent British election that, by analogy, suggests two more hypotheses about Trumpism:

1) With decades-long declines in deindustrializing areas, there has been a steady outflow of mostly younger residents.  This has a tendency to shift the politics of those who remain to the right based on age considerations alone, but the outflow is likely selective in other respects as well.  Those who light out to the cities are probably better educated and more tuned in to trends in metropolitan culture, taking their blue votes to jurisdictions that already pile up big majorities for Democrats.

2) What do people do when they lose their long-term jobs in manufacturing and the relatively well-paid services that cluster around manufacturing nodes?  If they don’t emigrate, what’s left?  Many look for bits of opportunity where they can find them, combinations of self-employment, gig work, off-the-books service work, etc.  Those who scrounge for income in these ways are the same people as the workers who were laid off during deindustrialization, but their class position has changed.  They no longer look to unions or government regulation to protect their interest against employers, quite the opposite.  Union work now competes with them, and regulation just makes it harder to cut the corners their livelihood depends on cutting.  In other words, their income has gone down but they are less “working class” than before.

Just to be clear, I’m not pushing these explanations.  They are just hypotheses, and it isn’t obvious to me what kind of evidence would adjudicate them.

Are We Living In The "Capitalocene"?

I also attended the last session listed in the program at the ASSA at 2:30 on Sunday, an URPE session on "Ecology, the Environment, and Energy," chaired by Paul Cooney.  He presented on "Marxism and Ecological Economics: An Assessment of the Past, Present, and Future." Lynne Chester presented on "Energy and Social Ontology: Can Social Ontology Provide Insight?"  Finally Ann Davis presented on ""'Home on the Range:' Integrating the Household and Ecology."  There were a lot of interesting ideas in these talks, and there was a vigorous discussion about them involving the audience.

What I want to present here is not anything in particular from the talks, but rather a remark from probably the most insightful commenter in the audience.  That was my old friend, David Barkin, who has lived in Mexico for a long time and is at Metropolitan University in Mexico City.  Long an expert on Mexican agriculture, he has in more recent years written a lot on ecological economics from a radical perspective.

Near the end of the session as the discussion was going on about all the papers, he brought up an idea I was unaware of previously, although it has been around for awhile.  It is due to the late German Marxist political scientist, Elmar Altvater, who first became known for writing on environmental problems in the Soviet Union.

So the concept he introduced is that rather than the world being in the "Anthropocene," we are in the "Capitalocen.e."  We may have been the former since humanity first emerged as a species and began heavily impacting the environment, including through bringing about species extinctions.  But in the last several hundred years we have moved into this much more damaging system of the Capitalocene.

This is a serious and challenging idea.

Barkley Rosser

Might We Be On The Verge Of An "Upswing"?

One of the more dramatic sessions at the just-completed ASSA meetings in San Diego was an AEA panel on "Deaths from Despair and the Future of Capitalism" on Saturday at 2:30.  Chaired by Angus Deaton, it focused on the book by him and his wife/coauthor Anne Case with the same title as the panel session.  Case spoke on their book.  This was followed by Robert Putnam, who spoke on his forthcoming (in about six months) new book, The Upswing, which this post will focus on. This was followed by Raghuram Rajan, who spoke about his recently published book, The Third Pillar: The Community. Finally Ken Rogoff commented on the Case/Deaton book, although he has no new book of his own.

So all of these focused on the declining life expectancy in the US, along with the associated broader breakdown of community and equality and so on.  Putnam presented a series of figures showing the long term trends on various variables from equality to memberships in organization to degrees of political polarization to the relative use of the words "we" and "I" in books published from the 1880s to the present.  He showed a trend where basically there was improvement from around 1900 to the 1960w (1970s in the case of equality)   All of these have since gone down basically steadily to the point that we are now "in about the same condition as we last were in the gilded age."

This leads to Putnam posing a possible optimism the possibility of the "Upswing" in the title of his forthcoming book. He argued at the end of his talk that we should consider what happened back then: the emergence of the Progressive movement that started that upward trajectory of social capital.  He argues that since we did this back then, it can happen again, the Upswing. Can it?  I do not know, but maybe he is right to push for such an outcome, although it may take getting rid of our current president.

Barkley Rosser

Is The Chines Economic System the "Mandarin Growth Model" or the "Chinese-Style Keiretsu System"?

The first term in this choice was the title of a paper presented this morning (1/4/20) at the ACES/ASSA session at 8 AM in San Diego by Wei Xiong of Princeton University.  It was a highly mathematical model I shall describe shortly, but which drew heavily on the paper presented before it by Chenggan Xu of Cheng Kong Graduate School of Business in Beijing, the alma mater of Jack Ma who founded Alibaba and the founder of Sinopec and the richest woman in China, etc. His paper was titled "Institutional Genes of China's Socio-Economic Development," with it discussed by the current ACES (Association of Comparative Economics) president, Scott Rozelle of Stanford.

The simplistic version of the "Mandarin model of growth" according to Wei Xiong is "political centralization with fiscal decentralization."  He then presented a math model of incentives for regional governors in a growth tournament being judged by the central government.  These governments face a choice of long term growth-enhancing infrastructure investment versus short-term consumption spending.  He argues this leads to a "rat race of shadow banking borrowing" that is putting the Chinese system into peril as the debt-GDP ratio has been sharply rising, with much of this in the shadow banking sector. This was what I heard about personally on my last trip to China a few years ago, a lot of concern about the growth of the shadow banking sector, driven by local governments.

The historical underpinning of this Mandarin growth model was laid out in the paper by Xu who presented a tripartite system: The ruling bureaucracy, the system of deciding who was in that ruling bureaucracy, and the system and reality of land ownership.  In the imperial system the bureaucracy was the Mandarin elite who were in the  earlier and less-corrupt stages of dynasties selected according to the Confucianist Mandarin exam system originated in the Han dynasty.  This was separated from land ownership at that stage, but at later stages of a dynasty the  sign of rising corruption was the breakdown of the exam system as land-owning Mandarins got their incompetent sons appointed to the bureaucracy.

In contrast to this clearly still important system, it appears a new system is arising in China.  I should be clear that the label in the title is my neologism for this. system.  The paper that presented it was titled "The Growth of Conglomerates in China," presented by Chang-Tai Hsieh of the University of Chicago, with Chong Bai of  Tsinghua University in Beijing and two professors from the Chinese University of Hong Kong as coauthors. Chang admitted upfront that what he was describing are not really conglomerates, which are single corporations operating in many sectors. This is what the pre-WW II Japanese  zaibatsu looked like and what the current South Korean chaebol (jaibul) look like. But these structures now taking over the Chinese economy are not single corporations but rather large interconnected groups of them. While they do not exactly resemble the Japanese keiretsu groups, that looks to me to be their closest models, although they have substantial differences. Hence my neologism: "Chines-style keiretsu."

So here is the bottom line.  The paper was inspired by a 2012 New York Times story on "hidden ownership" in Chinese companies that led to the NY Times getting blocked in China, still in place. These researchers followed the sources used by the Times to investigate and fully lay out the ownership structures of leading Chinese corporations.  A crucial pattern in this is of multiple layers of holding companies owning holding companies holding companies owning holding companies to an almost unbelievable degree along with "real companies" and state-owned companies, with this structure like the Japanese keiretsu involving a vertical structure of input suppliers and output subsidiaries of several layers often.  This even gets down to a large company owning a major provincial bank that then owns many local banks that fund many local enterprises, some of whom are either suppliers or outlets of the core company, with many of these involved in joint ventures with other companies in other networks.  Oh yes, this is really complicated.

The current summary stats on all this are that that the top 100 Chinese companies now own half the capital stock of China. The average number of layers of ownership in one of these companies is 23.  A weird detail is that when they finally come to the end of these long trails of holding companies to actual people, usually well connected politically, it seems to almost always be two of them.  Why this Hsieh had no explanation.

An  important issue involves what is at the core of this. In a Japanese keietsu, it is a privately owned bank.  In these Chinese-style keiretsu it turns out to be a major state-owned enterprise.  The paper shows a link between the size and political connectedness of this core SOE and both the total size of the network and the number of layers within it, with a math proof of the latter point.

To get to the intra-Chinese systemic competition point, in the older Mandarin model the local Communist Party chief was running the show.  In this newer emerging system that person gets bypassed as local companies get absorbed into these larger national entities that depend ultimately on the political connectedness ot the owners of the various related firms and the power and connectedness of the ultimate core state-owned enterprise.  That the core is state-owned is another difference between the Japanese keiretsu and these Chinese-style keiretsu.

Which system will come to dominate in the future remains up in the air, but for now it looks like this newly emerging "Chinese-style keiretsu" system is what is what is on the risee, and maybe it can avoid and maybe even mitigate the mushrooming shadow banking debt arising from the  inter-provincial growth tournament of the old Mandarin growth model.

Oh, Hsieh mentioned that there was one major Chinese company that did not at all exhibit this structure, looking like a more or less "normal" international company.  That is Huawei.

Barkley Rosser

Killing Abu Mahdi Al-Muhandis

Most of the attention in this recent attack by a US drone at the Baghdad Airport has been on it killing Iranian Quds Force commadder, Qasim (Qassem) Solmaini (Suleimani), supposedly plotting an "imminent" attack on Americans as he flew a commercial airliner to Iraq at the invitation of its government and passed through passport control.  But much less attention has been paid to the killing in that attat of Abu Mahdi al-Muhandis, commander  of the Popular Mobilization Forces in Iraq and reportedly an officer in the Iraqi military, as well as being accoeding to Juan Cole a Yazidi Kurd, although the PMF is identified as being a Shia militia allied with Iran.

The problem here is that supposedly US leaders approved this strike because there were no Iraqi officials in this grroup; it was supposedly "clean."  But there was al-Muhandis, with his PMF also allied to a political faction, the Fath, who hold 48 seats in the Iraqi parliament.  The often anti-Iranian Shia lieader, Moqtada al-Sadr, has now joined wirh Fath and other groups to demand a vote in the parliament to order a withdrawal of American troops from Iraq.  It might be good for them to go, although Trump has just sent in 3,500 more Marines to protect the US embassy that came under attack and protests after an earlier US attack on pro-Iranian militas.

Solemaini may have been ultimately behind the killing of up to 600 Americans by pro-Iranian militias during the war in Iraq.  But he has also worked with the US both in the aftermath of 8/11/01 against the Taliban in Afghanistan and more recently against ISIS/ISIL/Daesh in Iraq, with those efforts now jeopardized by this US attack.

There is much more that can be said about this, but among less noticed responses I note that although Israeli PM Netanyahu made a strong statement supporting the attack, apparently he has ordered his aides not to talk about it further, and the Israelis are worried about possible escalation of this  In KSA, "Bone-Saw" MbS has said nothing, although supposedly the Saudi had sought to kill Solemaini themselves.

Oh, and of course Mike Pompeo announced that this move has made Americans "safe" in the region, even as Americans have been urged to leave Iraq immediately.  So, yeah, they will be more safe by getting the heck out.

Oh, and of course Solemaini has been replaced by his deputy, who I imagine will continue whatever nefarious plots Solemaini was working on.  The idea that killing Solemaini will slow any of this down, especially now with many Shia invoking Solemaini as a martyr, a major theme of Shiism, looks highly unlikely.

Barkley Rosser

Addenda:

1) The Iraqi parliament has voted to recommend that US troops be expelled from the nation even though apparently there are villages in northern Iraq under the control of remnants of ISIS/ISIL/Daesh.

2) Iran has further withdrawn from the JCPOA nuclear deal.  While IAEA inspectors will still be allowed into the country, limits on centrifuges and enriching of uranium are ending.  Trump's efforts to get Iran to the table to negotiate a tighter deal are completely shredded.