Saturday, April 30, 2022

Major Economic Confusion

 Anybody confused by recent economic reports is not alone. The BEA has just reported a totally unexpected decline in real GDP for the first quarter of a 1.4% annual rate.  At the same time layoffs have reached a half century low and employment continues to rise.  How can we have an apparently beginning recession with the hottest job market in decades?

Probably this has to do with the sources of the reported decline, which may yet get revised upwards.  Consumption and investment have continued to grow.  There is a small decline of government with the end of the stimulus and a small decline in exports, half of that being in petroleum products that tend to have not lots of labor input.  There is s somewhat larger decline in inventories, which does not necessarily imply a job loss.  Indeed, that is likely to lead to rising inventories pushing growth up in the second quarter. The largest part of the decline, clearly responsible for the net negative figure, is imports. While these can lead to a decline in employment if they displace consumption, they have not done so yet, so not leading to unemployment. This looks like how we can have this anomalous result.

As it is, basically nobody is forecasting that second quarter will be a net negative, which would give us the old textbook definition of a recession.  Inventories are likely to turn around in particular.  Exports of petroleum products are likely to rise with the surge of LNG going abroad now.  The decline of government stimulus is over. If recession comes it will have to be a decline in consumption with consumer sentiment declining or maybe a decline in residential investment, this quite possible as mortgage rates rise.  

This data is certainly confusing, and certainly contributing to the sharp drop of the stock market yesterday after a week of mostly declines already, But there is evidence that the public was already pretty confused previously, some of this reflecting clearly politically biased reporting. So, even though GDP grew at 5.7% last year, the highest rate since "Morning in America" 1984, and job growth was the largest ever for the first year of a presidency, fully 29% of the population recently declared that we have been seeing job losses, with only 31% somehow aware that we have seen job gains, with many declaring the economy "bad," although that is explained by the public listing inflation as their biggest concern. But how people can turn stories about "worker shortages" into job losses is beyond me.

I also observe that people worried about "worker shortages" are also likely to be worked up about blocking illegal immigration, so consistent.

Barkley Rosser

Wednesday, April 27, 2022

You're Fired! No, I quit!

 So, Russia has stopped selling natural gas to Bulgaria and Poland because they refuse to pay for it in rubles, but they both say that they do not want Russian natural gas anyway!

Barkley Rosser

In Ukraine, Use the Weapon the Russians Can’t Match

It’s nowhere near as expensive as it sounds, and much more humane: offer every Russian soldier who defects $100,000 and the right to settle in any EU/North American country of their choice.  It might not work, especially if Russia uses deadly force against soldiers who lay down their arms or violent reprisals against their families back home.  But if a large enough portion of their troops accept the offer, the Russian war effort would be crippled.

Of course, Putin will claim that this is an inducement to the worst sort of betrayal, selling out your country’s fundamental values and interests in exchange for a bribe.  If this were really what’s at stake in the war, he’d be right.  But if not just a few, but thousands, including whole units, opt for the deal, it sends the message that Putin’s war aims are hollow.  Of course, defectors can send that message directly as well, for instance through social media, and it would take a much higher level of repression than today’s to block it.

Too expensive?  Way cheaper than war in every way.  As an upper bound, consider that if 100,000 troops defect—which would likely end the war on the spot—the cost would come to $10 billion, far less than what will be spent on arms and lost through death and destruction.

Note that this is a weapon only the West can wield, since Russia can neither afford such largesse, nor would settlement in Russia be as attractive.

The one big disadvantage with this approach is its intrinsic injustice: Russian soldiers get this deal, but not Ukrainian ones.  Giving the same bounty to Ukraine’s troops would be much costlier in relation to the value of outcomes achieved, and there’s the additional problem of extrinsic incentives crowding out intrinsic ones: soldiers who fight for cash are less likely to display the same courage or take the same initiative as those who fight for a cause, or simply for each other.  (The dreadful record of mercenaries hired to fight the US war in Iraq makes this clear.)  As a substitute, I recommend that any announcement of bounties to Russian soldiers be accompanied by a credible pledge of even greater funds to rebuild Ukraine after the war.

Bribery is an unsavory basis for public policy, but murder and mayhem on an industrial scale is far worse.

Tuesday, April 26, 2022

Channeling Great Grandfather Mayer May


Mayer May was born in Bavaria in 1848 and immigrated to the United States in 1869 when he was 21 years old. Bavaria had universal military conscription at age 21. I was born in 1948 and immigrated to Canada in 1967 to resist the draft.

Over the years, I have experienced intense fascination regarding certain topics. For example, in the early eighties, I was intrigued by the story of Moses at Mount Sinai and was convinced that the second set of stone tablets must not have contained the same text as the first because there were abundant clues in the book of Exodus that they weren't the same.

I was very attracted to the writings of Walter Benjamin, whose "Program for a Proletarian Children's Theater" was the focus of the last chapter of my Master's thesis. The last numbered paragraph of the selection "Imperial Panorama" in Benjamin's One-Way Street has become my philosophical credo. It begins:
The earliest customs of peoples seem to send us a warning that in accepting what we receive so abundantly from nature we should guard against a gesture of avarice. For we are able to make Mother Earth no gift of our own.
In the mid-1990s I embarked on a life-long investigation of working time and free time, which remains the central focus of my scholarly research. One investigation I did in the late 1990s I called "Sabbath of the Land or Utopia of Work?" referring to the sabbatical and Jubilee provisions in Leviticus 25.

While researching my great grandfather's life, I have found one essay that he wrote, "The Gamble Discovery," published in The Esoteric: A Magazine of Advanced and Practical Esoteric Thought, in which he refutes the argument of Reverend S. W. Gamble of Kansas that the Jewish Sabbath, established in the Bible was not fixed on a Saturday. Following May's essay the editor adds further remarks that touch on the Sabbatical year and the Jubilee.

As I rummage through these relics from more than a century ago, I get a sense of many of my intellectual affinities were transmitted to me as a family inheritance but only recognized by me as the "resonance" of a particular idea or theme. 

I have had the title "Channeling Great Grandfather Mayer May" at hand since before I posted my previous installment on the "Legend of Rabbi Moses May" but I have been procrastinating until tonight when I stumbled across the above article, "An Insulting Lawyer."

Friday, April 22, 2022

Happy Earth Day!

 Happy Earth Day!

Yes, today is the 53rd Earth Day.  I participated in the first one, when it was held in Madison, Wisconsin on April 22, 1970, just as the environmental movement was really getting going.  There were observances elsewhere around the US, but Madison had pride of place as the person most responsible for getting Earth Day going was then Wisconsin Senator Gaylord Nelson, who was also one of the first senators to oppose the Vietnam War.  Those were the days. While we face an increasing problem of mounting global warming and cutbacks of environmental regulations and enforcement in various areas, much has been achieved, with substantial reductions of various kinds of pollution around the world in the slightly more than half a century since Earth Day began to be celebrated.  There is much still to do, but there is also much to celebrate. Air and water quality are much improved in places ranging from Gary to Cleveland and on.

As I was in very leftist Madison back then, I remember what may now seem ironic.  There was considerable unhappiness on the part of many on the Left there at the time of that first Earth Day celebration.  April 22 also happens to be the birthday of Lenin, and that one was his centennial birthday. Proper communists or strong socialists were supposed to be remembering him and honoring him on that particular day by focusing on opposing the Vietnam War and battling for workers' rights rather than calling for limiting automobile emissions, with some even claiming that this celebration was a plot by Richard Nixon to distract us all from the Vietnam War.  As it was, the Kent State killings would happen only a about two weeks after that first Earth Day, so indeed the anti-Vietnam War movement was near its peak.

It is rather curious that now many on the Right have come to be overtly anti-environmental. Climate change is supposedly a hoax.  Greens are "watermelons," green on the outside but red on the inside, in this case the old meaning of red as meaning leftist socialist rather than US Republican. The environment is increasingly becoming yet another issue where partisan divides and false narratives spouted on Fox News and various social media make it hard to even have reasonable discussions of these issues.

OTOH, there has also appeared a dark side of the environmental movement, still small, but unpleasant. This is the environmental fascism movement that uses concern about environmental quality to oppose immigration to the US.  This movement tends to align itself with openly racist elements that also drive the anti-immigrant movement on the Right. While this may seem to be an unpleasant new phenomenon, among the criticisms by leftists back in 1970 of environmentalism was the reliance on Malthus by many environmentalists, who was indeed a reactionary, with many arguing that the move to limit population growth was a racist effort, which it probably was for some involved in that.  It remains an unpleasant fact that Hitler was an advocate of conservation, which he associated with his emphasis on "blood and soil," and that among his followers were students of students of Ernst Haeckel, the man who coined the word "ecology." Needless to say, the environmental movement needs to resist this potential tendency.

Anyway, for today, have a Happy Earth Day!

Barkley Rosser

Wednesday, April 20, 2022

The Legend of Rabbi "Moses" May

Rabbi Mayer May

Sandwichman's maternal great-grandfather, Rabbi Mayer May, was rabbi at Congregation Beth Israel in Portland, Oregon from 1872 to 1880. According to newspaper reports, on October 1, 1880, Rabbi M. May was involved in an altercation with A. Waldman, during which he fired two shots from a pistol, neither of which struck his assailant.

The incident occurred on Front Street, near the Esmond Hotel where U.S. President Rutherford B. Hayes was staying during his historic 71-day tour of the West. 

For some years, Rabbi May had been embroiled in doctrinal disputes with some members of his congregation as he tried to introduce the Reform Jewish prayer book, which several Orthodox members resisted. Waldman was one of the dissidents and had leveled charges of impropriety and immorality at May, who in turn called him a liar.

Reportedly, Waldman came up from behind May one day, grabbed his coat, spun him around and punched him several times in the face, breaking his glasses. May then pulled out his revolver and, being semi-blinded shot twice in Waldman's general direction. Both men were arrested but only Waldman was charged with assault. Presumably, May's response was deemed self defense.

Following the incident, Rabbi May submitted a letter of resignation to the congregation in the interest of restoring peace and dignity. A little over a month later, the rabbi's house burned down. May was away from home at the time, but according to reports "his wife and children barely escaped with their lives." 

The house was located at the corner of Twelfth and Main Street. This is significant because the 1880 census shows Mayer May, a "minister," and his family, including my grandfather, Angelo Mayer May, living on Main Street in Portland. Many stories identify "Rabbi Moses May" as the rabbi involved in the incident. However, the only Moses May documented to be living in Portland any time near the event is listed in a commercial directory from 1885 as a peddler.

There are two secondary sources that report about the incident involving Rabbi May. "The War on the Willamette," published in 1958, is mainly a compilation of three newspaper items from the time, with a very brief and general introduction. The rabbi is identified in those news reports simply as "M. May." The second, "Mayer May: Pioneer Portland Rabbi," published in 1989, contains much more contextual information about Rabbi May's family and subsequent career, including interviews with two granddaughters, one of whom was my mother.

The name "Rabbi Moses May" appears to be a misinterpretation of a phrase in one of the newspaper accounts given in the 1958 article:

Waldman annoyed him continually, interfering with him and wishing him to teach the religion of Waldman instead of that of Moses, and because he did not has been trying to ruin him by setting adrift reports about his moral standing, which the Rabbi characterized as false, shameful, and hollow.

The Moses in that sentence is clearly the man who spoke to a burning bush, led the Jews out of Egypt, and received the commandments on Mount Sinai -- not the studious immigrant from Bavaria who fired two ineffectual shots from his pistol at a tormentor on Front Street in Portland in 1880. Nevertheless most recent stories about the misidentify the principal in the latter incident.

Temple Beth Israel in the 1800s

Even the website of Congregation Beth Israel of Portland lists "Rabbi Moses May" as rabbi from 1872 to 1880. But a video celebrating their 150th anniversary includes a photograph of my grandfather, Rabbi Mayer May, with a confirmation class. Page 207 of Pioneer Jews: A New Life in the Far West also includes the same photo, with the caption, "Rabbi Mayer May and his confirmation class in Portland, Oregon, 1878; courtesy, Oregon Jewish Historical Society, Portland." The main text on the same page, however, refers to "teacher and cantor, Moses May" who "was hired to serve as acting rabbi at Beth Israel." 

For a while, as I was researching this story, I suspected that maybe Rabbi May changed his first name following the shooting incident. But the June 1880 census records contradict that theory. I have ordered my grandfather's birth certificate from 1879 and his sister's from 1872 (presumably) for further confirmation.

After resigning his ministry and losing his home, Mayer May moved his family to The Dalles, Oregon for a couple of years until taking up another ill-fated position as rabbi in Waco, Texas. After initially making a good impression, Rabbi May started preaching incoherent mysticism and was referred to a physician for mental illness. 

The malady appears to have been temporary as the family soon returned to The Dalles and then moved to San Francisco, where Mayer May established a solid reputation and career as a teacher and principal of the Free Religious School of the Jewish Educational Society of San Francisco.

Saturday, April 9, 2022

The Obsolescence of Nostalgia

As the crow flies, it is around 200 kilometers from Michilimakinac, where Kandiaronk's Wyandot people settled in 1671, when he was around twenty years old, to Tehkummah on Manitoulin Island where Isabel Paterson was born 215 years later. 

It gets even cozier because the Wyandot had been displaced from the south shore of Georgian Bay by the Iroquois Five Nations, who around the same time also displaced the Oddawa, Ojibwe, and Potawatomi people from Manitoulin Island. The latter three tribes formed the Council of Three Fires, which also relocated to Michilimakinac and formed alliances with the Wyandot and other tribes.

One of the threads that I am weaving derives from David Graeber's and David Wengrow's account of how Kandiaronk's (or Kondiaronk's) criticisms of European customs became the basis for the Enlightenment critique, which was subsequently blunted by Turgot's theory of four evolutionary stages of society and Rousseau's ambivalent recuperation of the Noble Savage. Graeber and Wengrow got their argument from Ronald Meek's 1971 account. 

Anne Robert Jacques Turgot, Baron de l'Aulne, commonly known as Turgot maintained in his 1750 lecture that there were four economic stages of society: hunter-gatherers, pastoral, agriculture and finally commercial society. Nearly 200 year later, Isabel Paterson described the "only four general ways by which human beings can exist" as the following:

(1) The savage society, or "snatch economy," of wandering hunters who live by the bounty of nature, on what they can kill or pick up.

(2) The pastoral nomad society, wandering herdsmen who live in the main off their tame animals.

(3) The agricultural society, in which men have learned to get most of their living from cultivated crops.

(4) The industrial economy, ranging all the way from handicrafts to high-speed, high-energy motor machine production; and requiring a general exchange system.

By 1948, the four-stages myth had become canon. It was also amplified by social Darwinism as practiced by Herbert Spencer and his American disciple, William Graham Sumner. Sumner's doctoral student, Thorstein Veblen, adopted Sumner's perspective of social evolution but jettisoned the laissez-faire component of his teachings. 

Paterson may or may not have read Sumner but she was friends with Stuart Chase, a follower of Veblen and a casual associate of the Technocracy movement inspired by Veblen. It would have been easy for her to reverse engineer Sumner's position by fusing laissez-faire economic doctrine to Chase's and Veblen's social evolutionary perspective. Technocracy without the altruism.

As so often happens, my something-completely-different dive down the Ayn Rand/Isobel Paterson rabbit hole has started to converge chronologically and thematically with my previous progressive/planned obsolescence thread featuring Herbert Marcuse, Thorstein Veblen, Georg Simmel, Christine and J. George Frederick, et al.

Marcuse adopted his persistent (albeit analytically shallow) obsession with planned obsolescence from Vance Packard, whose inspiration was... Stuart Chase's The Tragedy of Waste. While Paterson's and Ayn Rand's individualist vision was grounded in nostalgia for a mythical 19th century American heroic inventor/businessman type, Marcuse's hopes for liberation dwelt on a resigned anti-nostalgia for the mythical 19th century class-conscious revolutionary proletariat. 

While Paterson and Rand were idolizing mythical productivist heroes, actual businessmen and women like the Fredericks, Paul Mazur, and Edward Bernays were laying the foundation of a consumer society. They saw the barrier to economic dynamism as insufficient demand, not excessive government.

I was unable to find any commentary on Rand by Marcuse. Rand, however, had a few choice words for Marcuse:

When every girder of capitalism had been undercut, when it had been transformed into a crumbling mixed economy—i.e., a state of civil war among pressure groups fighting politely for the legalized privilege of using physical force—the road was cleared for a philosopher who scrapped the politeness and the legality, making explicit what had been implicit: Herbert Marcuse, the avowed enemy of reason and freedom, the advocate of dictatorship, of mystic "insight," of retrogression to savagery, of universal enslavement, of rule by brute force. 

Note the "retrogression to savagery" trope -- the ghost of Turgot. In a sense, Marcuse and Rand were looking glass images of each other, each trapped in their adjacent funhouse mazes of obsolescence and nostalgia, a trope handed down from Turgot to Spencer to Sumner to Veblen... and Chase... and Packard.

The function of the four-stages myth was to deny the critique of social hierarchy. The illusion of a "progressive" stage theory leads back into the maze it is trying to escape from.

Is there a way out of that maze? I think there is -- at least intellectually. The way out -- and forward -- involves revisiting the "second storey" under historical materialism that Georg Simmel constructed and re-examining Marx's scaffolding for the Grundrisse that he dismantled in the published volume one of Capital. It seems to me that there is a way to contend with the gap between objective culture and subjective culture, collectively

Friday, April 8, 2022

Asymmetric Whining

 This is not news, but yet again we see the old phenomenon of people whining a lot when something gets worse but then saying nothing when it gets better.  The latest example of that involves gasoline prices.  They were rising and got into the range of near real highs seen in times like 2008, 1981, and 1918.  But now they have slid backwards, down in the neighborhood of 20 cents per gallon where I am.  Crude prices are down as well, with WTI having gotten near $120 per barrel it is now below #100 per barrel again.  But am I hearing anybody cheer or say, "Wow! That's great!" No.  Of course it can be said that the prices are still pretty high, and still way above where they were a year or two ago. But the crickets going on with this are noticeable. Oh, there was the interview Donald Trump just made with the Washington Post that appeared in today's edition. But he was spouting outright falsehoods unsurprisingly, that crude prices have reached an all time high along with retail gasoline prices, neither of which is remotely true.

Of course, it can be noted that this may not continue. Almost certainly a major factor in this decline is the release of oil from the Strategic Petroleum Reserve, with a less publicized release from the IEA reserves as well.  Both of these are planned to continue for several months, with several states also temporarily suspending their gasoline taxes as well, just to add to this movement.  The upshot has been both declining crude prices as well as declining retail prices. The lockdowns in China associated with the pandemic outbreak there also happens to be fueling a reduced demand, and also probably something on the order of two thirds of Russian oil exports are still happening in one direction or another, despite the sanctions.  So oil and gasoline prices have gone down, but there is reason to believe that some of the reasons for this may go away in a few months, so maybe getting too positive about it all is not reasonable.

As it is, we have already had some asymmetry of whining. This has involved people getting all worked up about the rise of inflation while somehow not being favorable about what appears to be one of the hottest job markets ever. Indeed, if anything the latter has led to people whining because it is hard to get people to do some services.  They see the dark side of even what is mostly a good thing.  But this asymmetry of being more upset about things that are getting worse rather than being pleased about things getting better is a deeply entrenched human characteristic.

Barkley Rosser

Thursday, April 7, 2022

The Passing of Alain Parguez

 I have just learned from Louis-Philippe Rochon that Alain Parguez has died.  He was a French economist long based at the University of Besancon before he retired some years ago.  He was long perhspa the main leader of the "circuitist" school of monetary economics, a distinctively French approach that never really caught on in the US, although it has had adherents in Canada.  It is a sort of kissing cousin of the MMT approach, but with more of a Marxist bent to it.  Ironically for a quasi-Marxist I was told by somebody, not Alain himself, that apparently he had pretty serious aristocratic ancestry.

He used to fairly regularly attend the Eastern Economic Association meetings, and I also encountered him in France as well on several occasions, where I used to spend more time than I do anymore. He was a fascinating personality, quite a distinctive character, with a highly distinctive way of speaking that would command one's attention, even if one did not necessarily agree with what he was saying.  I always enjoyed his company.  Our daughter, Sasha, now a successful standup comedian, found him much more interesting than almost any other of my economics colleagues that she ever observed.

As it is, I have mixed feelings about circuitism, which is an intellectually challenging view.  But I confess to having some frustration with it as well, as with some other views it sort of running in circles on itself as it were. But then I guess that is appropriate for a school of thought called circuitism. Anyway, RIP to Alain.

Barkley Rosser

Friday, April 1, 2022

The Road to SerfRanddom

I have always enjoyed chapter 10 of Friedrich Hayek's Road to Serfdom -- "Why the worst get on top." Always referring to the last quarter century or so since I first read it. Hayek's argument struck me immediately as  watertight but I was puzzled that he seemed to exempt his own preferred collective from his argument. Maybe he just wanted to slip it past the unwary?

Individuals may be individuals but individualists are a collective. Harold Rosenberg coined a fine phrase for such collectives: "the herd of independent minds." Whether we call it capitalism or free enterprise, the individualist's Utopia meets Hayek's definition of collectivism: "The 'social goal,' or 'common purpose,' for which society is to be organized is usually vaguely described as the 'common good,' the 'general welfare,' or the 'general interest.'" 

We can be less vague in describing the social goal of a capitalist society: the accumulation of capital. Does that goal not seem collectivist enough? O.K., then let's be more vague and call it economic growth. That way, the people on top can claim to be pursuing the general welfare by promoting the accumulation of capital. Capitalism is collectivist.

Why does organizing society for a common social goal favour the worst? In the first place, because success is not guaranteed. When a democratic leaders run into obstacles in achieving the plan, they face a choice of giving up or of assuming extraordinary powers. When a dictator faces that choice, the choice is between "disregard of ordinary morals or failure." That is why, "the unscrupulous and uninhibited are likely to be more successful in a society tending toward totalitarianism." Sound familiar?

How do these unscrupulous and uninhibited people manage to rise to the top? Hayek gave three reasons why a "numerous and strong group with fairly homogenous views," large enough to impose its views on society, "is not likely to be formed from the best but rather by the worst elements of any society":

  1. "the lowest common denominator [of moral and intellectual standards] unites the largest number of people."
  2. "those whose whose vague and imperfectly formed ideas are easily swayed and whose passions and emotions are readily aroused... will swell the ranks..."
  3. "it is easier for people to agree on a negative program -- on the hatred of an enemy or envy of those better off [or of those worse off!] -- than on any positive task."
Sound familiar? 

What brings me to Hayek is Immanuel Kant, "the most evil man in mankind's history." Hayek's epistemology was neo-Kantian. One might think that the extreme contradiction between Ayn Rand and Fred Hayek, the two libertarian icons, would lead to some kind of open rupture. But no. Even evangelical anti-abortionists have no problem embracing sound bites from the pro-abortion, atheist Rand when it helps them attack the critical race theory enemy. They just let icons be icons.

Do you think First Liberty Institute would mind that their anti-Kant rant echoes a 1960 Ayn Rand lecture titled "Faith and Force: The Destroyers of the Modern World?" I asked them. I'll let you know if they reply. Here's the view of a religious group from the other side of the spectrum:
There's always the danger that watching all the Ayn Rand interviews and reading the lectures and newsletter articles from the 1960s will turn me into an objectivist. But not really. I am amused and mildly charmed by her chutzpah but I cannot be seduced by her borscht-circuit philosophy. Rand inverted Leninism to construct a myth where everyman is free to be Lenin, independent of the Party or the State (but not of the cult and its omniscient creator, Ayn Rand). 

In practice, the objectivist is no different from what Rosenberg called "the heroes of Marxist science." One can paraphrase Rosenberg's description, simply substituting the word "Objectivist" for "Communist": "The Objectivist belongs to an elite of the knowing. Thus he is an intellectual. But since all truth has been automatically bestowed upon him by his adherence to Objectivism, he is an intellectual who need not think."

The backstory on Ayn Rand is that she got the meat of her "philosophy" from New York Herald Tribune columnist, Isabel Paterson, whom she met in 1940 during the Wendell Willkie campaign. Rand was enthralled by Paterson's erudition. For the next eight years, I.M.P., as she signed her columns, became her mentor. Rand was not well read; Paterson was a bookworm. Rand sat at Pat's feet and imbibed the individualist creed.

Paterson was a remarkable woman. She set a flight altitude world record for women less than a decade after the Wright brothers flew at Kitty Hawk. With two years of formal schooling, she became a nationally-syndicated reviewer of books. She wrote several novels and a philosophical/political/economic manifesto on individualism. With a few elaborations and vulgarizations, Paterson's manifesto, The God of the Machine, was canonized as Rand's philosophy.  

In November 1943, Rand wrote a four-page letter to Paterson's publisher, G.P. Putnam, urging publicity for the book on the grounds that it was, "a document that could literally save the world--if enough people knew of it and read it." 
"The God of the Machine," Rand wrote, "is the greatest book written in the last three hundred years. It is the first complete statement of the philosophy of individualism as a political and economic system. It is the basic document of capitalism." This was high praise indeed, considering Rand's novel, The Fountainhead, had been published earlier that year.

Kidding aside, was the book really that great? Would it do for capitalism, "what the Bible did for Christianity—and, forgive the comparison, what Das Kapital did for Communism or Mein Kampf for Nazism"? Admittedly, Paterson was a forceful, compelling writer with an impressive breadth of knowledge. Less impressive is the shallowness of her comprehension of the argument of her main ideological adversary, Karl Marx.

Paterson's argument against Marx was mostly ad hominem: "Marx was a fool with a large vocabulary of long words." "A parasitical pedant, shiftless and dishonest." He had "an unacknowledged need to adopt the non-sensical 'dialectic' of Hegel."
"Marx's theory of class war is utter nonsense by its own definition..." Again, "Marx was a fool..." He had a "superficial mind..." 

Beyond the onslaught of disdain are only repeated claims about Marx's theory being deterministic and mechanistic: 
...the most grinding despotism ever known resulted at once from the "experiment" of Marxist communism, which could posit nothing but a mechanistic process for its validation.

...they assume that a productive society, which depends primarily on exact communication, can be organized after they have destroyed that means. In this they revert below savagery, and even below the animal level. They have got down to the premise of mere mechanism. Cogs in a machine need no language.

What was Paterson's rational and individualistic alternative to this deterministic, mechanistic dishonest foolish sub-human non-sense? Society is a machine!

No, seriously. Society is literally a machine:
Personal liberty is the pre-condition of the release of energy. Private property is the inductor which initiates the flow. Real money is the transmission line; and the payment of debts comprises half the circuit. An empire is merely a long circuit energy-system. The possibility of a short circuit, ensuing leakage and breakdown or explosion, occurs in the hook-up of political organization to the productive processes. This is not a figure of speech or analogy, but a specific physical description of what happens.
In spite of Paterson's insistence that her metaphor is not a figure of speech, it is the central metaphor of her book, as indicated by the book's title. Any discrepancy in the "hook-up" between the political system and the production process can result in "short circuit, ensuing leakage and breakdown or explosion." The examples Paterson gives of such mismatched hook-ups are between European society and the industrial revolution and Native Americans and the introduction of firearms to their hunting economy.

In her weekly column, "Turns With a Bookworm" of July 16, 1939, Paterson laid out the premise of her future book in the form of a report on a conversation with the Irish poet and literary critic, Mary Colum, which concluded with Colum asking Paterson, "Well, why don't you write that?" 

And so she did. Remarkably, Paterson's grasp of Marx in the resulting book didn't exceed the reach of an off-hand comment made by Colum one summer evening in 1939. 

Somehow the suggestion Paterson once had a job proofreading Capital -- "Good grief, didn't we have to proofread Capital once; and a dreary job it was" -- sounds far fetched, or at least apocryphal. Charles Kerr published a revised edition of volume 1 in 1905, volume 2 in 1907 and volume 3 in 1909. Paterson left home for Calgary in her teens and held various jobs for several years. From 1905 to 1910, starting when she was 19, Paterson was employed by a Calgary, Alberta law firm.

About half-way through "The dynamic economy of the future," the final chapter of her book,  Paterson calls attention to "[t]he one problem which may be said to have arisen from the dynamic economy": the labor problem -- "when industry slows down, the workingmen are most visibly affected." 

Paterson offered a partial solution:
There is absolutely no solution for this except individual land ownership by the great majority, and the use of real money. It is not necessary that everyone should own a farm; but enough people must own their homes and have a reserve for "hard times."

In two sentences, "the great majority" dwindles down to a vague "enough people." Paterson doesn't elaborate on how this condition of home ownship and a financial reserve is to be met. Presumably, it can only be achieved by hard work and thrift. Since those "most visibly affected" are most also likely to not have such a reserve, it is hard to see in what way this is meant as a "solution" to the labor problem any more than "stop eating avocado toast" is a solution to the high price of housing.

"It is not necessary that everyone should own a farm..." is a remarkably insensitive statement to make in the aftermath of the great depression when farmers were on the front lines of dispossession. In the wake of the World War I wartime boom, small farms limped through the 1920s faced with low prices, over-supplied markets and rising debt. When "hard times" suddenly went viral after the stock market crash of 1929, many farmers had no reserve because they had already suffered through a decade of "hard times."

Admittedly, Marx didn't offer a practical solution for the labor problem, either. What he did, though, is present an analysis of how the accumulation of capital necessarily generates hard times both through cyclical depressions and chronic unemployment. 

Although Paterson had a great deal to say about how stupid and dishonest Marx was, she didn't offer a single sentence about why he was wrong about, for example, "the disposable industrial reserve army of the unemployed" or "the law of the tendency of the rate of profit to decline." She did, however, offer this chestnut: "The collectivist, with the theory of "technological unemployment," assumes a fixed number of jobs, another arbitrary quantity." The lump of labor fallacy!

Backing up to her previous paragraph, this is how Paterson presented the alleged fallacy:

Anyhow, the collectivists were forced to admit that production had refuted Malthus, increasing prodigiously, year by year. Then they had to say that the trouble was "overproduction"; the workingman would work himself out of a job pretty soon! This theory has evoked the phrase "technological unemployment," which is said to be caused by mechanical improvements in the means of production. That is, if a machine is invented by which one man can do the work previously done by ten men, it must put nine men permanently out of employment. It sounds plausible, but is it true?

Not only is it not true, it is not Marx's argument, which presumably is what is meant by "the collectivists' theory." Marx's argument is that capital must constantly employ more labor power because labor power is what produces surplus labor. If capital gets rid of nine workers in one factory, it has to hire ten or eleven somewhere else in the economy to up the accumulation process.

Marx's theory has nothing to do with a "fixed amount of work." It has to do with disequilibria between supply and demand for commodities -- including labor power -- that is not adjusted automatically by investment, interest rates or some market deity's "invisible hand." Far from assuming a fixed amount of work, Marx argues that the accumulation of capital requires a perpetual increase in the amount of labor employed alongside an increase in unemployment.

Maybe Marx was wrong. If so, a hoary straw man argument demonstrates no such thing. How hoary? The bogus fallacy claim was 163 years old in 1943.

It seems possible to me that Isabel Paterson was working out some complex personal issues when she wrote The God of the Machine. According to her biographer, Stephen Cox, she hated her father, whom she saw as a ne'er-do-well and loved her mother who seemed able to get things done even when there was little to work with. She had a poor opinion of many men she knew, who she viewed as weak and feckless. 

She was able to "make it" in a patriarchal society pretty much on her own terms. Or perhaps not. 

On a visit to Manitoulin Island in Ontario, where she was born, she mentioned that she had "ten thousand cousins" there that she didn't want to have anything to do with. Ten thousand is an obvious exaggeration. Manitoulin Island has seven Indian Reserves. Paterson was born in the township of Tehkummah about 10 kilometers from what is now called the Unceded Territory of  the Wiikwemkoong. 

When Paterson was a year old, her family's house burned down and her family moved to Michigan, then to Utah, and finally to Alberta, next door to Blackfoot territory. Indigenous characters feature peripherally in several of her novels and are central to her mismatched "hook-up" theory of political organization and production. I didn't know any of the foregoing when I first saw her photograph and wondered if she was part Indigenous. From the 1920s to the 1940s, assimilationist themes were rife among (acknowledged) Native American authors. What better way to assimilate that to simply become that to which one is assimilating?

The Elixir of Commerce

McCulloch, J. R. (John Ramsay). Outlines of political economy : being a republication of the article upon that subject contained in the Edinburgh Supplement to the Encyclopedia Britannica : together with notes explanatory and critical, and a summary of the science / by John M'Vickar. New-York, 1825. The Making Of The Modern World. Web. 15 Nov. 2011.

Rasbotham, Dorning. Thoughts on the Use of Machines in the Cotton Manufacture. Addressed to the working people in that manufacture, and to the poor in general. Manchester. 1780. The Making Of The Modern World. Web. 15 Nov. 2011.

Wennerlind, Carl. "Credit-Money as the Philosopher's Stone: Alchemy and the Coinage Problem in Seventeenth-Century England." History of Political Economy, Volume 35, Annual Supplement, 2003, pp. 234-261.

Dorning Rasbotham's pamphlet evoked the image of alchemical transmutation. That was the inspiration for the working title for this serial posting, The Moral Philosophers' Stone. That notion of alchemy has led me to two additional sources ; a footnote by the American editor of M'Culloch's Outlines of Political Economy, John M'Vickar and the article by Wennerlind. M'Vickar's footnote shares Rasbotham's unrestrained enthusiasm for commerce but makes explicit the allusion to alchemy:

The Moral Philosophers' Stone: A Compleat History of 'A Certain Quantity of Labour to be Performed'

Two weeks ago Back in 2011 a hunch about Charles Dickens and Edward Carleton Tufnell led me to the discovery of what I surmised might be the prototype of the idea that has come to be known to economists as "the lump of labor." To my surprise, it was a subtle and articulate defense by a fairly prominent early 19th century political economist of the proposition that "...there is a certain quantity of work to be done; and this quantity, generally speaking, does not admit of being much extended, merely on the temptation of labour being offered at a cheaper rate..."

The author was the Scottish church leader, Thomas Chalmers, whose neglected 1808 treatise on "the Extent and Stability of Natural Resources" has been described by A. M. C. Waterman as a "missing link" between T. R. Malthus and David Ricardo. Chalmers's later article appeared in the May 1820 issue of the Edinburgh Review, the flagship journal of Whig political economy.

Alas, my Eureka moment was destined to be short-lived, however, because one week later, while searching the Goldsmiths'-Kress archives for a quote from James Phillips Kay's The Moral and Physical Condition of the Working Classes Employed in the Cotton Manufacture in Manchester, I discovered an even more venerable specimen in a pamphlet signed "A Friend of the Poor" but attributed to a gentleman with the picturesque handle of Dorning Rasbotham, Esq. The 1780 pamphlet, "Thoughts on the Use of Machines in the Cotton Manufacture," was written in response to disturbances occasioned by the introduction of Richard Arkwright's spinning jenny. The following passage contains the tell-tale phrase, "a certain quantity of labour to be performed" and pronounces the alleged principle false:
There is, say they, a certain quantity of labour to be performed. This used to be performed by hands, without machines, or with very little help from them. But if now machines perform a larger share than before, suppose one fourth part, so many hands as are necessary to work that fourth part, will be thrown out of work, or suffer in their wages. The principle itself is false. There is not a precise limited quantity of labour, beyond which there is no demand. Trade is not hemmed in by great walls, beyond which it cannot go. By bringing our goods cheaper and better to market, we open new markets, we get new customers, we encrease the quantity of labour necessary to supply these, and thus we are encouraged to push on, in hope of still new advantages. A cheap market will always be full of customers.
Now, "a certain quantity of work to be done" was part of the the dictionary definition of the verb, to task, that is, to assign a person to perform a certain amount (and kind) of work within a particular time and place. It is useful to keep this definition in mind because the difference between Rasbotham's "certain quantity of labour" and Chalmers's "certain quantity of work" commences in a not-so-subtle shift from an indefinite abstract possibility to a finite empirical fact. But the latter fact is not some crude, static "assumption" -- it is a theoretically-refined empirical prediction, which takes into account both the abstract indefiniteness and the practical constraints upon realizing that theoretical potential.

In terms of both chronology and demonstrated familiarity with the "founding fathers" of classical political economy, Chalmers must be presumed to have an edge over Rasbotham. This is not to say that he is necessarily right, only that it would be presumptuous to dismiss his claim peremptorily -- to "view [it] with contempt," as Paul Krugman put it.

In modern terms, the second part of Chambers's sentence -- "...this quantity, generally speaking, does not admit of being much extended, merely on the temptation of labour being offered at a cheaper rate..." -- expresses the concept of the price elasticity of demand. In fact, Chambers uses the term, "elasticity," to describe the phenomenon. By contrast, Rasbotham's pamphlet deals optimistically in stark dichotomies of good versus bad effects, with the preponderance of expected benefits rendering "some little difficulty, in particular cases... a sacrifice we ought to make chearfully for the common good."

In an 1827 essay on the progress and prospects of the British cotton industry, John Ramsay M'Culloch judged Rasbotham's opinion as having been proven sound by the results, employment rising from less than 30,000 in 1767 to nearly a million fifty years later, concluding "There is, in fact, no idea so groundless and absurd, as that which supposes that an increased facility of production can under any circumstances be injurious to the labourers" [emphasis added]. Not under any circumstances?

continued: see The Elixir of Commerce