When Is Labor Exploited?

Earlier discussions of Joan Robinson on how it is better to be exploited than not to be exploited at all (unemployed) reminded me of the deeper issues involved. Was Marx right that it was working for private capitalists that led to exploitation? Is it a matter of what one is paid, either relative to some marginal product or some broader level? Is it a matter of self-management or being bossed? Were workers exploited in Soviet socialism, as the post-modern, Wolff and Resnick group argues, that the USSR was "state capitalism?" Is a society in which workers are not exploited possible?

In his _Socialism After Hayek_, Ted Burczak argues that such a society would be a decentralized market "socialism" of worker-owned cooperatives, funded through a wealth tax, with a generous social safety net oriented to "personal capacities" a la Nussbaum and Sen, with freedom and democracy. This supposedly avoids exploitation, as well as the sorts of flaws of information and incentives that Hayek found in command planned state socialism of the Soviet type. (I have commented on all this further in a paper on my website at http://cob.jmu.edu/rosserjb, entitled, "Has Burczak Shown How Socialism Can Survive Hayek?")

Iraqi oil production may be down again

There was much hullabalooing over a month ago when it was reported that November oil production in Iraq, about 2.4 million barrels per day (mbpd), had surpassed that of the end of the Saddam era of about 2.3 mbpd. Some Iraqi sources were claiming nearly 2.5 mbpd for December. Now, Ben Lando at Iraq Oil Report reports that Platt's estimates production fell back to 2.3 mbpd in December, even though apparently OPEC production overall rose in December. Most of the increase in recent months in Iraq has been out of Kirkuk, whose long run status remains disputed between the Kurds and the rest of Iraq. There also remains no oil law in Iraq, although majors like Shell are now negotiating with the central government on developing the Akkas field, and a slew of minors from places like Canada and Norway are cutting deals with the Kurds, who have their own oil law.

BTW, the recent reports of a new reconciliation law with the ex-Baathists, much trumpeted by Bill Kristol and other war hawks, is baloney according to Juan Cole. Baath allies voted against the law, and apparently it will make it easier to fire ex-Baathists from government jobs and keep them out for good. While there may be fewer US deaths in recent months, there remains no success at all on any of the items that the Surge was supposed to achieve by the end of this past year.

I shall scream, Bumble-Wumble! --

...If I see one more study that purports to tell us the causes of "x" on the basis of some prima facie silly instrument. So autism is caused by TV-watching, eg, since it is correlated with rainy weather.

I'm not an econometrician (nor do I play one on TV) but the naivete with which these guys trumpet their ability to sort causation from correlation on the basis of a statistical technique is mind-boggling. David Hume, call your office!

Nonsense on Imported Stilts

Econ bloggers have really missed the point about Landsburg’s free trade screed. The estimable Dani notwithstanding, the issue isn’t ultimately ethics or even procedural fairness. The problem is that doctrinaire economists understand less about trade than the average person with no academic training in the subject.

Ordinary people in many parts of the world, and not just in the US, worry about trade because they are afraid that jobs lost to imports will not be counterbalanced by jobs gained through exports. They worry that there will be fewer economic opportunities for them and their children. They worry that their wages or working conditions will be pushed downward through competition with even more vulnerable, desperate workers in other countries. They are right to worry about these things. Such miseries are not destined to happen, but they cannot be ruled out either.

Except in standard economic models which begin with the assumption that increases in imports automatically call forth equally valued increases in exports. If trade balances on the margin we live in the happy world of comparative advantage, and it is indeed true, as Landsburg says, that “when American jobs are outsourced, Americans as a group are net winners.” But the assumption that trade balances at the margin is simply a modeling convenience, something that enables Landsburg to regale his students with blackboards full of elegant diagrams and equations. It is not grounded in real experience, and especially not the experience of the US economy since the 1970s.

You have to be very well trained in economics and have high-level skills to make such a brain-dead assumption and not even know you’ve made it. Then you don’t have to give serious consideration to counterarguments because, hey, why pay any attention to the fallacies of economic illiterates and mathphobes?

But let’s get specific. Here’s how Landsburg illustrates his claim that international trade makes us better off: “I doubt there’s a human being on earth who hasn’t benefited from the opportunity to trade freely with his neighbors. Imagine what your life would be like if you had to grow your own food, make your own clothes and rely on your grandmother’s home remedies for health care.”

Notice a problem here? Landsburg assumes that there is no difference between trade within an economy and international trade. (To be more precise, the only difference is that governments interfere more often with trade across national borders.) Worse, he accuses anyone who recognizes the difference of woolly thinking, based of course on his assumption that there is no difference.

This is why the French students complained about autistic economics.

For what it’s worth, my view is that we as a society ought to provide opportunities for as many of us as possible to have a satisfying livelihood. If a community is down and out we should step in and do what we can whether or not trade played a role in creating the problem. We should create rules for international trade that minimize downward pressure on wage, environmental and social standards and that limit dangerous imbalances. These ideas are fairly widespread among the general population, and if economists think really creatively they might just be able to rise to the same level.

Bloomberg Interviews Michael Perelman

Tom Keene of Bloomberg Radio interviewed me for an hour on Monday. You can download it here:

http://media.bloomberg.com/bb/avfile/BBRECON/vMYIzswjgxsg.mp3

Tom is an excellent interviewer, who regularly interviews economists and financial experts.

Their interviews are available at
http://www.bloomberg.com/tvradio/podcast/ontheeconomy.html

Economists Who Deny Stopler-Samuelson

Greg Mankiw directs us to Steven Landsburg. I’m not sure why Greg endorses this stuff, however:

All economists know that when American jobs are outsourced, Americans as a group are net winners. What we lose through lower wages is more than offset by what we gain through lower prices. In other words, the winners can more than afford to compensate the losers. Does that mean they ought to? Does it create a moral mandate for the taxpayer-subsidized retraining programs proposed by Mr. McCain and Mr. Romney? Um, no. Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?

Dani Rodrik likely wants to remind us again of the Stopler-Samuelson theorem. And Paul Krugman might add:

What all this comes down to is that it’s no longer safe to assert, as we could a dozen years ago, that the effects of trade on income distribution in wealthy countries are fairly minor. There’s now a good case that they are quite big, and getting bigger.This doesn’t mean that I’m endorsing protectionism. It does mean that free-traders need better answers to the anxieties of those who are likely to end up on the losing side from globalisation

.

Update: Dani also weighs in.

The Law Is an Ass

Two recent decisions confirm that Charles Dickens' Mr. Bumble was correct in declaring, "The law is a (sic) Ass." In the first case, California's Supreme Court dismissed a suit by workers who were damaged by solvents, only because the majority held stocks in the oil companies. In the second, case a federal appeals court dismissed a suit by four British citizens who claimed torture, abuse, and violations of their religious rights at Guantánamo because "Because the plaintiffs are aliens and were located outside sovereign United States territory at the time their alleged RFRA claim arose, they do not fall with the definition of 'person,'" the court ruled."


This decision is surprising, given the importance of religion in determining personhood. After all, a fertilized egg with only a few cells is considered a person in the United States. Surely these unfortunate creatures are more fully developed persons in a newly formed embryo.

The first case suggests that corporations could immunize themselves from legal actions merely by ensuring that judges had some stock in the companies. On second thought, perhaps many of these corporations are not really persons after all, despite the claim that corporations have all the rights of human persons. However, some of these fictitious persons have relocated their fictitious homes to other lands. If people tortured by the government are not really persons because they are located outside the United States, surely the fictitious persons, who currently rule this country, should not be counted as persons.

Douglas Elmendorf and Jason Furman on Targeted Fiscal Stimulus (Something Stephen Moore Failed to Read)

With a hat tip to Greg Mankiw, let’s turn to If, When, How: A Primer on Fiscal Stimulus - specifically principles 2 and 3 that any fiscal stimulus be well targeted and temporary.

This paper was published on January 10, 2008. On the very next day, the WSJ oped page featured The Right Stimulus. Just about everything claimed by the WSJ was refuted by Elmendorf and Furman. I wish I had cited their paper when I wrote this.

Beware What You Wish For: Kossaks Want Obama Versus Huckabee

This has already scrolled off of daily kos, but yesterday they had a poll of people guessing which were the easiest and the toughest matchups from a Dem perspective in the prez race. While McCain was generally viewed as the toughest opponent, the most popular combo, viewed as easiest, was Obama versus Huckabee. I want to warn that this might be one of those desires one curses having fulfilled.

Key here is my post here earlier on "Who is a 'Populist'?" Among current candidates, they were Edwards, now looking near dead, and Huckabee. Obama is the New Centrist Dem, who does not appeal to poorer people so much, a sucker for a "Reagan Democrat" approach from the guitar playing, Colbert-appearing, Huck. He is ahead of both Romney and McCain in Michigan in the latest polls, and could get the nomination. Nice guy that he is, at least on the surface, he could go all the way. And, lest anybody forgets, his fundamentalism is right in there with the old-timey populists: think William Jennings Bryan. (And, don't forget that lots of Dems in 1980 were hoping for Reagan to get the GOP nomination.)

James Pethokoukis and Rudy Giuliani Must Think Lower Savings is the Key to Long-term Growth

With a hat tip to Cactus, let’s wonder the latest insanity from James Pethokoukis :

To a supply-sider, there is no worse tax than the capital gains tax. One big problem is that budgeteers surely would crunch the numbers and claim the plan would result in $2 trillion to $3 trillion in lost government revenue. Such "static scoring" that does not take into account the economic growth impact of lower taxes may well be bunk.

Ahem! The Reagan and Bush43 versions of “giving people their money back so they can consume” more sine any spending cuts lowers national savings. Abstracting from any Keynesian or short-term stimulus effect (after all, the supply-side school wants us to believe they are interested in long-term growth), lower savings translates into less investment and less long-term growth. But James Pethokoukis does not seem capable of writing something this basic and simple even if it is a key element of the debate. I have to wonder why U.S. News allows him to publish anything on economics at all.

Bush Says the Economy is Strong But Giuliani Say It is in Peril – But They Agree on Tax Policy

A new ad endorsed by Rudy Giuliani states:

With pundits and politicos handicapping the campaign like the Super Bowl, it's easy to lose sight of what's at stake. An economy in peril. A country at war. A future uncertain.

In the meantime, President Bush discussed the economy in Chicago:

We have a strong foundation in our economy, but we cannot take economic growth for granted. That's what I want to share with you. I understand that while there is a foundation that would be the envy of a lot of other nations, we cannot take growth for granted. We confront economic challenges, from the downturn of the housing sector to high energy prices to painful adjustments in some of the financial markets. Recent economic indicators have become increasingly mixed. Last Friday we learned that our economy has now had 52 months of uninterrupted job growth. That's a record. That's the longest period of job creation on record.Our entrepreneurs are taking risks. Our small businesses are expanding.

To be fair, the President did say there is some mixed news. But whether the economy is strong or the economy is in peril, Bush and Giuliani agree we need to keep taxes low even if they have no real intent on reducing government spending low. More on this theme from Paul Krugman.

New Hampshire

Have people seen Andrew Kohut's Times op-ed today? He argues that the polls were wrong on Obama/Clinton because a) lower income whites are less likely to answer surveys and b), in adjusting for this long-standing fact, pollsters failed to take into account the greater racism of those low-imcome whites who refused to answer compared to those who did.

If he's right, then it would seem there was no late break for Hillary, and all the business about Hilary's showing emotion had nothing to do with the result. What do you think?

A Robot Reads from Michael Perelman

Hear a robot reading from my book, The Invention of Capitalism

http://technorati.com/videos/youtube.com%2Fwatch%3Fv%3DNlwxZHWsiB0

Arnold Schwarzenegger Has a Brilliant Idea

Our governor is proposing again to automatically reduce spending every time a state has a deficit and in good times to put money away for a rainy day. This last part reminds me of the strategy of Jerry Brown, who put money away for a rainy day. The Republicans, seeing money piling up in state coffers, argued that the savings was proof that the government to need the money. Voilà, the infamous proposition 13.

As a result of the Brown precedent, I assume that the Schwarzenegger plan will effectively ratchet down government spending. During bad times, you will get spending cuts. During good times, you will get saving and then tax cuts, which will create budget deficits requiring less savings. Grover Norquist would be proud that our governor would have turned to state into a bathtub, into which he could shrink the state.

Do We Have to Cut Social Security Benefits?

I was going to pass on the latest from Robert (no relationship to Paul) Samuelson until Greg Mankiw offered the silly oped to his readers without critical comment. The most offensive line in my view was:

Lightening the burden on the young requires cutting retirement benefits for the old - raising eligibility ages, being less generous to richer retirees and making beneficiaries pay more for Medicare. Simply increasing taxes or cutting other programs won't work. The problem is not just closing the budget deficit.

In other words, we must cut Social Security benefits according to Mr. Samuelson. Part of my objection to this silliness has been outsourced to Dean Baker:

Robert Samuelson has yet another diatribe talking about the budget breaking cost of "Social Security, Medicare and Medicaid." As CBO director Peter Orszag has tried to teach those willing to learn, the problem is health care, not aging.

Simply put – the expected future payments to Social Security recipients do not exceed the expected future payroll taxes dedicated to this program by all that much with the really big ticket items coming from things like expected future health care costs and expected future Defense Department costs relative to expected future income taxes under what those in the Republican Party (including that current President that Greg used to work for) wish to have as permanent policy. So when Samuelson makes claim that members of both parties are making false promises, then he must think George W. Bush is a Democrat.

We have all sorts of means for closing the fiscal gap including raising income taxes, cutting defense spending, and yes finding some means for providing for health care at lower costs. While Samuelson may be correct that we cannot simultaneously keep tax rates low, defense and health care spending high AND maintain the current level of Social Security benefits, his oped becomes yet “another diatribe” as Dean puts it when he limits his choice of policy options to slashing Social Security benefits. Now we know Samuelson and the Washington Post have had a slew of such silly opeds in the past, but why can’t Greg Mankiw point out even the obvious to the readers of his blog?