Since the commentary is continuing on the apparent political damage that the Wright affair has had on the Obama campaign, let me add my own view. Obama’s appeal to whites is based on his presentation as completely “safe” and unaggressive, the opposite of the feared “black militant” that still haunts white America’s imagination. He overflows with nice in order to neutralize racial paranoia. And this is why his association with Rev. Wright has been so costly: it reignites subterranean white fears that Obama’s political style takes such great pains to allay. Context is everything. (And the lack of a corresponding context is what makes McCain’s association with frothing right wing ministers politically irrelevant.)
This has nothing to do with what you may think about the good reverend’s jeremiads, some of which I think are right on target and others bizarre. It’s about a battle of racial subtexts.
It also poses another problem for Obama down the road. Quite a few voters think he’s a Muslim, and the web rumor mill will crank this up to a fever pitch as the election approaches. The simplest rebuttal would be to emphasize his church-going, but this will remind people once more of Wright. Forget about the flag pin; Obama needs to wear a giant neon cross.
Saturday, May 10, 2008
Limitation of the Vend
by the Sandwichman
In their Industrial Democracy, Sidney and Beatrice Webb raised an interesting point I'd like to follow up on.
They observed that, "Restriction of output is, in fact, an employer's device, not a workman's..." and went on to cite the "Coalowners' 'Limitation of the Vend'". The Webb's were discussing frequent complaints that trade union policies restricted output. They argued that although some unions did indeed advocate the restriction of output, they had little power to enforce such demands.
Restriction of output is the essence of economists' lumpoflabor fallacy claims. Ironically, the Webbs, in disputing the salience of such claims, are one of the few sources that presented evidence that some unions, at some times, did exhibit lumpoflaborite beliefs.
Now, remember coal was a BIG DEAL in the days of the Industrial Revolution, so restricting its output to boost its price would have been a BIG DEAL in the economic history of Great Britain. Paul Sweezy studied it back in the day. So naturally I wondered how many 20th century economics textbooks even mentioned it. Not just any textbooks but those that made a big deal about lumpsoflabor. I've collected 580 sources from Google Books, over a hundred of them have every appearance of being textbooks (ie., 600-800 pages long with titles like "Principles of Economics"). The answer: 0.
Well, alright... "limitation of the vend" may be a bit narrow and obscure. How about "price fixing", then? Of the 580? Three mentions.
With all their ranting and raving about alleged beliefs of workers, most economics textbook authors managed to mantain a discrete silence about the documented activities of capitalists. This is significant because to the extent workers might have had the views claimed by economists, it is plausible that they acquired them not by invention out of thin air but by observing capitalism in practice.
In their Industrial Democracy, Sidney and Beatrice Webb raised an interesting point I'd like to follow up on.
They observed that, "Restriction of output is, in fact, an employer's device, not a workman's..." and went on to cite the "Coalowners' 'Limitation of the Vend'". The Webb's were discussing frequent complaints that trade union policies restricted output. They argued that although some unions did indeed advocate the restriction of output, they had little power to enforce such demands.
Restriction of output is the essence of economists' lumpoflabor fallacy claims. Ironically, the Webbs, in disputing the salience of such claims, are one of the few sources that presented evidence that some unions, at some times, did exhibit lumpoflaborite beliefs.
Now, remember coal was a BIG DEAL in the days of the Industrial Revolution, so restricting its output to boost its price would have been a BIG DEAL in the economic history of Great Britain. Paul Sweezy studied it back in the day. So naturally I wondered how many 20th century economics textbooks even mentioned it. Not just any textbooks but those that made a big deal about lumpsoflabor. I've collected 580 sources from Google Books, over a hundred of them have every appearance of being textbooks (ie., 600-800 pages long with titles like "Principles of Economics"). The answer: 0.
Well, alright... "limitation of the vend" may be a bit narrow and obscure. How about "price fixing", then? Of the 580? Three mentions.
With all their ranting and raving about alleged beliefs of workers, most economics textbook authors managed to mantain a discrete silence about the documented activities of capitalists. This is significant because to the extent workers might have had the views claimed by economists, it is plausible that they acquired them not by invention out of thin air but by observing capitalism in practice.
Tuesday, May 6, 2008
Heterodox and Orthodox Economics at Notre Dame Again
Students at the University of Notre Dame are petitioning their administration to hire more economists who will teach about "heterodox theories" and adopt a "plurality of views," along with emphasizing an "overview of the history of economic thought." One can access the petition to read it more thoroughly (and maybe sign it) at http://www.petitiononline.com/econnd.
This is a followup to the scandalous situation at ND where in 2003 the administration took away the graduate program in economics and gave it to a newly formed "Department of Economics and Econometrics," which describes itself as "neoclassical." The administration has been spending huge amounts of money to bring in people as chaired professors who have published articles in the AER, JPE, QJE, and JET. The dean there wanted a department with a high ranking, with such rankings being determined by pubbing articles in such journals. Publishing books do not count. So, Phil Mirowski in the old department, has published books that are far more influential than anything published by any of these new hires, but they do not "count."
Frankly, the ND administration is wasting its money, besides contributing to the narrowing of economic thought and perspectives. They could have spent half as much and gotten themselves the leading heterodox department in the US, maybe even in the world. As it is (and I am not out to insult particularly anybody in this new department), the best they will do is what Robert Solow said when he opposed all this back in 2003, that they will get a "third-rate version of the MIT department." He said that was not what we needed, and I agree.
This is a followup to the scandalous situation at ND where in 2003 the administration took away the graduate program in economics and gave it to a newly formed "Department of Economics and Econometrics," which describes itself as "neoclassical." The administration has been spending huge amounts of money to bring in people as chaired professors who have published articles in the AER, JPE, QJE, and JET. The dean there wanted a department with a high ranking, with such rankings being determined by pubbing articles in such journals. Publishing books do not count. So, Phil Mirowski in the old department, has published books that are far more influential than anything published by any of these new hires, but they do not "count."
Frankly, the ND administration is wasting its money, besides contributing to the narrowing of economic thought and perspectives. They could have spent half as much and gotten themselves the leading heterodox department in the US, maybe even in the world. As it is (and I am not out to insult particularly anybody in this new department), the best they will do is what Robert Solow said when he opposed all this back in 2003, that they will get a "third-rate version of the MIT department." He said that was not what we needed, and I agree.
Krugman: Oil is a Minor Issue
In case you were wondering how deeply Paul Krugman’s judgment could be impaired by his attachment to Brand Hillary, Exhibit O (for oil) is today’s post on his NYT blog. He argues that, unlike the differences between Obama’s and Clinton’s health care plans, their split on gas taxes is minor stuff. Economists are miffed at HC because tax incidence is their lamppost, says Paul, but what to do about high oil prices is second order.
He’s got to be kidding.
The best that can be said for the gas tax holiday is that, in its Clintonoid version, it is nearly pointless. A few cents per gallon get shifted from federal taxes to oil companies, since price at the pump is largely governed by demand, and then they get shifted back to the government with Hillary’s windfall oil profits tax. It is a big, meaningless shuffle that sells itself as populism. Since the dollars more or less end up in the same pockets they start out in, you might say Krugman is right.
But this is not why the vast majority of economists are perturbed. Yes, there is a matter of professional pride at stake, but it is more justified than Krugman is willing to admit. Clinton’s proposal, featured in her latest round of TV ads, is transparently dishonest: it promises something she and every reasonably well-informed observer knows to be false. The appropriate analogy is not to disagreements on trade, which Krugman brings up, but to supply-side snake oil, the claim (which McCain seems to be embracing) that cutting taxes raises revenues. The issue is not good versus bad policy, but honesty versus dishonesty. Economists are trained to see the cynicism behind such ploys, and they do a service to call attention to it.
But there is an even bigger issue lurking just beneath the surface. Without a doubt, one of the biggest challenges all of us, in the US and around the world, will face during the coming years is the increasing scarcity and rising price of oil. We will experience this as a threat to our living standards, a barrier to global rebalancing (getting the US trade deficit under control), and perhaps even a trigger for catastrophic military confrontation. (For a blast of sanity on this last point, see Michael Klare.) At the same time, the imperative of reducing carbon emissions will require us to wean ourselves from oil even faster than market forces alone would dictate.
Of course, no rational politician will tell us how he or she plans to get us out of the era of cheap oil. Any discussion of politics has to take place against a backdrop of cowardice and insincerity. That means we have to read the tea leaves, like the current dustup over whether to suspend gas taxes. So what does this “unimportant” proposal say about Clinton’s plans for a future oil policy? Taken at face value—and how else should we take it?—it suggests that she will delay measures to reign in demand or even try to subsidize fuel consumption for short term political advantage. Unless this election-year idea is just a charade, it portends a phony populism that places our well-being, and possibly our survival, at even greater risk.
Here is the short reply to Krugman: yes, health care is very important, but taking proactive measures to transition our economy out of dependence on oil is very, very important. Anyone with even a modest training in economics understands that promising the public more oil at cheaper prices, even for a few months during an election year, is profoundly wrong-headed.
I signed the economists' petition. I wonder what petition on this subject Paul K. would be willing to lend his far more valuable name to.
He’s got to be kidding.
The best that can be said for the gas tax holiday is that, in its Clintonoid version, it is nearly pointless. A few cents per gallon get shifted from federal taxes to oil companies, since price at the pump is largely governed by demand, and then they get shifted back to the government with Hillary’s windfall oil profits tax. It is a big, meaningless shuffle that sells itself as populism. Since the dollars more or less end up in the same pockets they start out in, you might say Krugman is right.
But this is not why the vast majority of economists are perturbed. Yes, there is a matter of professional pride at stake, but it is more justified than Krugman is willing to admit. Clinton’s proposal, featured in her latest round of TV ads, is transparently dishonest: it promises something she and every reasonably well-informed observer knows to be false. The appropriate analogy is not to disagreements on trade, which Krugman brings up, but to supply-side snake oil, the claim (which McCain seems to be embracing) that cutting taxes raises revenues. The issue is not good versus bad policy, but honesty versus dishonesty. Economists are trained to see the cynicism behind such ploys, and they do a service to call attention to it.
But there is an even bigger issue lurking just beneath the surface. Without a doubt, one of the biggest challenges all of us, in the US and around the world, will face during the coming years is the increasing scarcity and rising price of oil. We will experience this as a threat to our living standards, a barrier to global rebalancing (getting the US trade deficit under control), and perhaps even a trigger for catastrophic military confrontation. (For a blast of sanity on this last point, see Michael Klare.) At the same time, the imperative of reducing carbon emissions will require us to wean ourselves from oil even faster than market forces alone would dictate.
Of course, no rational politician will tell us how he or she plans to get us out of the era of cheap oil. Any discussion of politics has to take place against a backdrop of cowardice and insincerity. That means we have to read the tea leaves, like the current dustup over whether to suspend gas taxes. So what does this “unimportant” proposal say about Clinton’s plans for a future oil policy? Taken at face value—and how else should we take it?—it suggests that she will delay measures to reign in demand or even try to subsidize fuel consumption for short term political advantage. Unless this election-year idea is just a charade, it portends a phony populism that places our well-being, and possibly our survival, at even greater risk.
Here is the short reply to Krugman: yes, health care is very important, but taking proactive measures to transition our economy out of dependence on oil is very, very important. Anyone with even a modest training in economics understands that promising the public more oil at cheaper prices, even for a few months during an election year, is profoundly wrong-headed.
I signed the economists' petition. I wonder what petition on this subject Paul K. would be willing to lend his far more valuable name to.
Monday, May 5, 2008
Diehl Channels Cheney Lies about Iraq
I am not a fan of Brad Delong's "death spiral" stuff about the major newspapers, but today the Washington Post was worse than usual, putting a column by Jackson Diehl in a box on its editorial column page. In this column Diehl compares the US situation in Iraq with that of Israel in Gaza and Lebanon, in particular claiming that both are facing bad people firing rockets with bombs at them. Now, I am not going to defend Israeli policy in either Gaza or Lebanon at all. However, this comparison by Diehl is a slander on the Israelis, at keast in comparison with the US policy. In both places, Israel withdrew its military (and in Gaza its settlers), actions that have been followed, especially in Gaza, by said rocket bombing campaigns.
However, in Iraq, Moqtada al-Sadr had declared a cease fire, which was in place and holding and credited by many with playing a major role in the reduction in violence that the administration touted as evidence of the success of its "surge" campaign. Then, for no clear reason whatsoever, the US supported an unprovoked military campaign by the al-Maliki government against the Sadrists, first in Basra, then in Baghdad, attacking the 2 million people in Sadr City there. The rocket-bomb attacks on the Green Zone out of Sadr City have been in response to this campaign, which continues to go on, and included killing 30 people in a hospital the other day. On top of this, the US spouts misinformation about the sources of the Sadrists's weapons (from Iran!!!), claims not actually supported by a major Iraqi official spokesman, who agrees there are some weapons from Iran, but not clear they came from the government (especially as Iran is backing the government over the Sadrists, according to credible reports). But, again, the US government spouts drivel, and Jackson Diehl seems to be a complete tool in this, along with WaPo.
However, in Iraq, Moqtada al-Sadr had declared a cease fire, which was in place and holding and credited by many with playing a major role in the reduction in violence that the administration touted as evidence of the success of its "surge" campaign. Then, for no clear reason whatsoever, the US supported an unprovoked military campaign by the al-Maliki government against the Sadrists, first in Basra, then in Baghdad, attacking the 2 million people in Sadr City there. The rocket-bomb attacks on the Green Zone out of Sadr City have been in response to this campaign, which continues to go on, and included killing 30 people in a hospital the other day. On top of this, the US spouts misinformation about the sources of the Sadrists's weapons (from Iran!!!), claims not actually supported by a major Iraqi official spokesman, who agrees there are some weapons from Iran, but not clear they came from the government (especially as Iran is backing the government over the Sadrists, according to credible reports). But, again, the US government spouts drivel, and Jackson Diehl seems to be a complete tool in this, along with WaPo.
Sunday, May 4, 2008
The question everyone is asking.....
How will I spend my gas-tax holiday?!! Can I go to Guam on the savings?! I don't know about you'all, but before the McCain/Clinton Promise, I was as angry and bitter as a professor grading final exams could be. Now, it's A's all around. Even for those who tell me that inflation is bad because it reduces purchasing power.
Necessary Sacrifices for Environmental Sanity?
According to the Wall Street Journal, golf courses consume enough water to supply the household needs of two-thirds of the U.S. population. Can you imagine the ruling class acting to limit its favorite "sport"? Newport, John Paul. 2008. "Play It as It Dries." Wall Street Journal (3 May): p. W 1.
Nationwide, golf-course irrigation consumes less than half of 1% of the 408 billion gallons of water used daily, a golf-industry report concludes. Even so, that's a lot of water -- two billion gallons a day, or enough to satisfy the household needs of more than two-thirds of the U.S. population, according to the U.S. Geological Survey.
Saturday, May 3, 2008
LONDON LABOUR LUMPED
by the Sandwichman
Conservative Boris Johnson was elected mayor of London yesterday. Mr. Johnson first came to the Sandwichman's attention two years ago with his imaginative description of the lump-of-labour fallacy as "Colbertian".
Posted to MaxSpeak, April 20, 2006
Boris Johnson is Conservative MP for Henley. According to Mr. Johnson, the French lump of labour is "Colbertian", which is to say mercantalist (in France, by the way, the lump-of-labor fallacy is sometimes referred to as le malthusianisme). In today's Telegraph, Johnson wrote:
At last someone at the top of French government has rejected the Colbertian lump of labour fallacy, the idea that there will be more work to go round if you restrict the amount that each person does, an economic misconception that has turned potentially productive French workers into lumps of inertia.
Last May, Mr. Johnson wrote in the Telegraph:
The reason the French have massive and chronic unemployment is that they are governed by an élite still gripped by a demented belief in the Colbertian lump-of-labour fallacy. They have excessive taxation, regulation and bureaucracy, and the last thing the French (or anyone) need is more detailed prescriptions from Brussels about the labour market or anything else.
Meanwhile, his Wikipedia entry describes Mr. Johnson as is a "self-centred pompous twit" who "cultivates an image as an eccentric, straw-haired fop, disorganised and scatty..."
''It would be unfair to say it looks as if he dresses at a charity shop, because no charity shop would accept stuff in that condition.'' (Simon Hoggart, The Guardian).
Conservative Boris Johnson was elected mayor of London yesterday. Mr. Johnson first came to the Sandwichman's attention two years ago with his imaginative description of the lump-of-labour fallacy as "Colbertian".
Posted to MaxSpeak, April 20, 2006
Boris Johnson is Conservative MP for Henley. According to Mr. Johnson, the French lump of labour is "Colbertian", which is to say mercantalist (in France, by the way, the lump-of-labor fallacy is sometimes referred to as le malthusianisme). In today's Telegraph, Johnson wrote:
At last someone at the top of French government has rejected the Colbertian lump of labour fallacy, the idea that there will be more work to go round if you restrict the amount that each person does, an economic misconception that has turned potentially productive French workers into lumps of inertia.
Last May, Mr. Johnson wrote in the Telegraph:
The reason the French have massive and chronic unemployment is that they are governed by an élite still gripped by a demented belief in the Colbertian lump-of-labour fallacy. They have excessive taxation, regulation and bureaucracy, and the last thing the French (or anyone) need is more detailed prescriptions from Brussels about the labour market or anything else.
Meanwhile, his Wikipedia entry describes Mr. Johnson as is a "self-centred pompous twit" who "cultivates an image as an eccentric, straw-haired fop, disorganised and scatty..."
''It would be unfair to say it looks as if he dresses at a charity shop, because no charity shop would accept stuff in that condition.'' (Simon Hoggart, The Guardian).
Friday, May 2, 2008
Back to School on Money Illusion
You just can’t keep a bad idea down. The New York Times, reporting on Europe’s economic angst here and here, wallows in money illusion. Let’s survey the scene of the crime and speculate on the motives.
The way I teach it in introductory macro, there are two types of money illusion. In Type I you are aware of wage increases but not price increases; you think you have more purchasing power than you really do. In Type II you are aware of price increases but not wage increases; you think that if only prices would stop going up you would have more purchasing power than you do. Both are fallacies, since wages are prices, or to put it differently, the money you spend for the things you buy all ends up as someone’s income. It is a logical impossibility for Europeans as a whole to suffer loss of real income as a result of inflation. (And, just to provide context, recall that the rate of price increases over there is in the 3-4% range, not good but certainly sub-ferocious.)
So what are the real problems? The biggest one is income distribution, which is becoming more unequal across the continent as moderating institutions are eroded under the pressure of global competitiveness. This has the most immediate effect on workers who produce goods and services for export or which compete with imports, and it spills over into other labor markets as the wages of the most vulnerable workers slip backward. Firms are also adjusting their organizational strategies to the new world of global competition, relying progressively less on long-term relationships with employees shielded from market forces.
Another possibility, hinted at in these articles, is an adverse shift in the terms of trade, as oil and gas imports become more expensive relative to manufactured exports. Food is less clear, however, since Europe exports vigorously (and controversially) in agricultural products, which leads one to wonder where are the farmers, and those who sell to them, in these tales of Euro-woe.
By blaming the deterioration in living standards on the wrong culprit, these stories detract attention from the true causes. The ECB can crank its rates as high as it wants in order to snuff out inflation, but this won’t restore real income to the average European—quite the contrary, actually, since high rates will produce more unemployment while further elevating the already too-high euro. Wrong diagnosis, wrong treatment.
The question that comes to my mind is why this nonsense about inflation lowering real incomes still has traction after all these years. The disproof is no more complex than the old, familiar circular flow diagram. My suspicion is that it can be attributed to the fundamental political economy fact about inflation: that unanticipated increases in inflation reduce the wealth of net creditors, who map more or less perfectly on the rich as a whole. There will always be a need to find a reason to make inflation the scapegoat for whatever ails the general public, and simple logical error will not constitute a disqualification.
The way I teach it in introductory macro, there are two types of money illusion. In Type I you are aware of wage increases but not price increases; you think you have more purchasing power than you really do. In Type II you are aware of price increases but not wage increases; you think that if only prices would stop going up you would have more purchasing power than you do. Both are fallacies, since wages are prices, or to put it differently, the money you spend for the things you buy all ends up as someone’s income. It is a logical impossibility for Europeans as a whole to suffer loss of real income as a result of inflation. (And, just to provide context, recall that the rate of price increases over there is in the 3-4% range, not good but certainly sub-ferocious.)
So what are the real problems? The biggest one is income distribution, which is becoming more unequal across the continent as moderating institutions are eroded under the pressure of global competitiveness. This has the most immediate effect on workers who produce goods and services for export or which compete with imports, and it spills over into other labor markets as the wages of the most vulnerable workers slip backward. Firms are also adjusting their organizational strategies to the new world of global competition, relying progressively less on long-term relationships with employees shielded from market forces.
Another possibility, hinted at in these articles, is an adverse shift in the terms of trade, as oil and gas imports become more expensive relative to manufactured exports. Food is less clear, however, since Europe exports vigorously (and controversially) in agricultural products, which leads one to wonder where are the farmers, and those who sell to them, in these tales of Euro-woe.
By blaming the deterioration in living standards on the wrong culprit, these stories detract attention from the true causes. The ECB can crank its rates as high as it wants in order to snuff out inflation, but this won’t restore real income to the average European—quite the contrary, actually, since high rates will produce more unemployment while further elevating the already too-high euro. Wrong diagnosis, wrong treatment.
The question that comes to my mind is why this nonsense about inflation lowering real incomes still has traction after all these years. The disproof is no more complex than the old, familiar circular flow diagram. My suspicion is that it can be attributed to the fundamental political economy fact about inflation: that unanticipated increases in inflation reduce the wealth of net creditors, who map more or less perfectly on the rich as a whole. There will always be a need to find a reason to make inflation the scapegoat for whatever ails the general public, and simple logical error will not constitute a disqualification.
Thursday, May 1, 2008
THE WORK OF MYTHSHARING
"It was the very dawning of day when the term 'Dignity of Labor' meant something" – George E. McNeill
In 1884, the Federation of Organized Trades and Labor Unions proclaimed that as of May 1, 1886, eight hours would become the length of the working day. In the months leading up to that deadline, thousands of workers across the country joined the struggle. On Mayday, hundreds of thousands went out on strike for shorter hours. In Chicago, “no smoke curled up from the tall chimneys of the factories and mills, and things had assumed a Sabbath-like appearance.” Then on May 4, reaction set in. Jeffory Clymer set the scene in "The 1886 Chicago Haymarket Bombing and the Rhetoric of Terrorism in America":
On 4 May 1886, about two thousand Chicagoans gathered at Haymarket Square to protest against the city's police, who had shot and killed at least two striking workers outside the McCormick reaper factory on the previous afternoon. The demonstration was peaceful, and only a few hundred people remained when, late in the evening, 170 Chicago policemen suddenly arrived and demanded that the protesters disperse. Nonplused by the anticlimactic arrival of the police at the close of a peaceful rally, Samuel Fielden, the evening's last speaker, pointed out the meeting's non-violent nature in response to the peremptory dispersal order. At this point in the exchange, someone tossed a dynamite bomb into the police ranks. The explosion immediately killed Officer Mathias Degan, wounded several others, and prompted a cacophony of gunfire, most of it from police pistols. In the chaos, the police shot several of their own officers as well as many of the fleeing civilians. While the number of dead among the police rose to seven over the next few days, the actual number of casualties among the protesters, like the bomb thrower's identity, was never determined.
In the aftermath, eight Anarchist labor leaders were put on trial as "accessories to murder":
August Spies
Albert Parsons
Samuel Fielden
Adolph Fischer
George Engel
Michael Schwab
Louis Lingg
Oscar Neebe
It was a kangaroo court with a rigged jury and predetermined outcome. Four of the convicted men were hanged. Louis Lingg escaped the noose by taking his own life. The remaining three were freed in 1893 by Illinois Governor Altgeld because they – and the dead men – were innocent of the crimes for which they had been convicted.
Eight hours for work, eight hours for rest, eight hours for what we will…
Ira Steward was a pioneering American labor leader and early proponent of the eight-hour day. His wife, Mary, is said to have written the couplet, which became popular among eight-hour day activists in the 19th century, "Whether you work by the piece or you work by the day, decreasing the hours increases the pay."
Frank Fetter was an economics professor in the early 20th century and an early adherent in the US to the Austrian school of economics. His textbook, Economics, published in 1916, contained one of the earliest textbook treatises on "the shorter day and the lump-of-labor notion." In his discussion, Fetter argued that the view that the shorter day would result in higher pay is "connected with the lump of labor notion" and is based on the assumption that "there is so much work to be done regardless of wages."
Although the dismissive phrase "fallacy of the lump of labour" had been coined by an economist, David Frederick Schloss, its use as a conclusive put-down of eight-hour day advocates was charted by the same yellow journalism pack of newspapermen who hanged Parsons, Engel, Spies and Fischer. To be fair to Fetter, his overall discussion of the shorter day did acknowledge the potential benefits of reduced working time. But his discussion was contorted into a frame that emphasized the supposedly fallacious thinking of eight-hour day advocates. No mention there of hanged labor leaders or lynch-mob newspapers.
O Kapteyn, My Kapteyn…
Fast forward to 2004. Professor Arie Kapteyn was lead author of an article titled "The Myth of Worksharing" published in Labour Economics. An earlier version of the article was issued as a discussion paper in 2000 by the Institute for the Study of Labor: "a place of communication between science, politics and business." One of the Institute’s current priorities is "mobility and flexibility of labor markets."
The framing of Kapteyn’s analysis follows a predictable lump-of-labor motif:
In public discussions the idea of worksharing often emerges as a potential instrument for reducing unemployment… However, economists as well as employers are mostly skeptical about the success of this policy prescription. The fallacy of this seemingly simple idea is made clear in the literature especially by its impact on wages, wage costs, and output.
A footnote on "fallacy" cites a 1997 Economist article, "One lump or two?" "It is depressing that supposedly responsible governments continue to pretend to be unaware of the old 'lump of labour' fallacy: the illusion that the output of an economy and hence the total amount of work available are fixed."
Aside from the unequivocal title of the article and the confidently formulaic framing of worksharing as being based on a fallacy, the paper’s conclusions are equivocal. The results from the authors’ literature survey are inconclusive. Their empirical analysis "does not provide any ground for the proposition that worksharing would reduce unemployment," which is a rather weaker claim than the "myth" and "fallacy" labels would suggest. And, hey, who knows? Reduction of working time might be a good thing ("welfare enhancing") after all.
But let’s return to Kapteyn’s empirical analysis for a moment:
Thus, the picture emerges that a reduction in working hours causes an increase in the real wage rate and, consequently, annihilates positive a direct effect of a reduction in working hours on the employment rate (Table 3) and turns it into a (insignificant) negative effect (Table 5).
Or, as a partial effect, "a one percent reduction in working hours results in a 0.38 percent increase in the employment rate and a 1.15 percent increase in the real wage rate." Substituting the wage equation into the employment equation, Kapteyn concludes that a "one percent reduction in working hours results, in the long run, in a 1.04 percent increase in the real hourly wage rate." Suggesting – as Mary Steward’s doggerel had it (and contra Frank Fetter) – that, "decreasing the hours increases the pay."
The bad news… wait for it… is that after substitution the employment rate goes from a 0.38 increase to a 0.27 decline that Kapteyn labels "insignificant". I’m guessing that means statistically insignificant. Which is to say, the model-building empirical mountain labored and gave birth to a mouse. Reading the fine print, there’s all sorts of stuff I could take issue with in the paper’s model specification. But to do so would be academic in the who-cares sense of the word. The point remains that the model-building, ‘empirical’ hocus pocus takes second billing to the myth/fallacy genuflection – a fallacy cut from the same evidential cloth as the Haymarket convictions in pursuit of the same end: suppression of the workers’ movement for an eight-hour day.
And on and on it goes...
September 2007, Marcello Estevão and Filipa Sá of MIT, the IMF and the IZA analyze the effects of the French 35-hour workweek in a paper prepared for the Panel Meeting of Economic Policy. They cite Kapteyn and present the following "rationale" for job creation through work sharing:
The idea of work sharing as an employment creation policy is simple: if the production of goods and services in an economy is fixed, then a reduction in hours can re-distribute the fixed amount of work across more people, increasing employment. In spite of its intuitive appeal, economists and policy makers are skeptical about the success of work sharing as it is rooted in the so-called “lump-of-labour fallacy”: the false premise that the amount of output in the economy is fixed.
They then go on to "analyze" the effects of the French policy using a model that presupposes precisely the optimizing equilibrium relationships between hours, wages and employment that the real theory of the hours of labor – Chapman’s – puts into question. The problem is, if you understand the implications of Chapman’s theory, you can’t do the kind of model building these folks do to “find” the conclusions they do. Why? Because the whole model building enterprise is explicitly predicated on a suspension of Chapman’s theory. It would make as much sense to conclude that since Parsons, Engel, Spies and Fischer were hanged, they must have been guilty.
The great "myth of worksharing" is that these economists who purport to analyze it empirically are doing any such thing. The touchstone is the ritual incantation of the bogus lump-of-labor fallacy claim.
Put up or shut up
Is there no economist with the integrity to stand up and defend the lump of labor fallacy claim that they reiterate with such abandon? Or are they like the jurors at the trial of the Haymarket martyrs?
I am offering a $10,000 prize, in Canadian funds, to be awarded to the author who directly and conclusively refutes the argument in "Why Economists Dislike a Lump of Labor," (Review of Social Economics, September 2007). My argument is that the authenticity of the lump-of-labor fallacy claim, with regard to unemployment and the hours of work, is questionable; that various explanations of it are inconsistent and contradictory and that Sydney J. Chapman’s neglected theory of the hours of labor presents a more coherent analysis of the reduction of working time than the often-cited fallacy claim.
The article must be accepted for publication in one of the 30 top-ranked economics journals. Only anonymously peer-reviewed articles are eligible, not book reviews, commentary or other journal front or back matter. Journal rankings will be taken to be those specified in Kalaitzidakis, Mamuneas and Stengos "Rankings of Academic Journals and Institutions in Economics." Journal of the European Economic Association 1 (December 2003).
(And, no, it won't count if the article simply re-asserts the fallacy claim and follows that by grinding out yet another "empirical analysis". The article must directly confront the argument of my article. The question of whether the article successfully refutes my argument I will leave to be resolved by publishability.)
Enter by notifying me, Tom Walker, by mail or email that your article has been accepted for publication in one of the qualified journals. Mail address is 1204 Lakewood Drive, Vancouver, BC, V5L 4M4. Email: lumpoflabor [at] gmail [dot] com.
Deadline for entry is 11:59 p.m. on January 31, 2010. In the event an article is under review by a qualified journal on the deadline date, an extension may be granted provided the article was submitted to the journal on or before December 31, 2009. All requests for extension of the contest entry deadline must attach a copy of the submitted draft.
If no contest entry meets all of the above criteria, a consolation prize of $1000 Canadian may be awarded to an anonymously peer-reviewed article meeting the core argument criteria, published in a journal ranked 31-159 by Kalaitzidakis et al. Articles published in a non-ranked journal and articles submitted to but rejected by an economics journal may be given consideration for the consolation prize at the sole discretion of the contest organizer.
Prize money will be awarded only to the author or authors of the article specified in the winning entry. In the event of group authorship, prize money will be divided equally between the authors unless specified otherwise and agreed in advance by all authors.
In 1884, the Federation of Organized Trades and Labor Unions proclaimed that as of May 1, 1886, eight hours would become the length of the working day. In the months leading up to that deadline, thousands of workers across the country joined the struggle. On Mayday, hundreds of thousands went out on strike for shorter hours. In Chicago, “no smoke curled up from the tall chimneys of the factories and mills, and things had assumed a Sabbath-like appearance.” Then on May 4, reaction set in. Jeffory Clymer set the scene in "The 1886 Chicago Haymarket Bombing and the Rhetoric of Terrorism in America":
On 4 May 1886, about two thousand Chicagoans gathered at Haymarket Square to protest against the city's police, who had shot and killed at least two striking workers outside the McCormick reaper factory on the previous afternoon. The demonstration was peaceful, and only a few hundred people remained when, late in the evening, 170 Chicago policemen suddenly arrived and demanded that the protesters disperse. Nonplused by the anticlimactic arrival of the police at the close of a peaceful rally, Samuel Fielden, the evening's last speaker, pointed out the meeting's non-violent nature in response to the peremptory dispersal order. At this point in the exchange, someone tossed a dynamite bomb into the police ranks. The explosion immediately killed Officer Mathias Degan, wounded several others, and prompted a cacophony of gunfire, most of it from police pistols. In the chaos, the police shot several of their own officers as well as many of the fleeing civilians. While the number of dead among the police rose to seven over the next few days, the actual number of casualties among the protesters, like the bomb thrower's identity, was never determined.
In the aftermath, eight Anarchist labor leaders were put on trial as "accessories to murder":
August Spies
Albert Parsons
Samuel Fielden
Adolph Fischer
George Engel
Michael Schwab
Louis Lingg
Oscar Neebe
It was a kangaroo court with a rigged jury and predetermined outcome. Four of the convicted men were hanged. Louis Lingg escaped the noose by taking his own life. The remaining three were freed in 1893 by Illinois Governor Altgeld because they – and the dead men – were innocent of the crimes for which they had been convicted.
Eight hours for work, eight hours for rest, eight hours for what we will…
Ira Steward was a pioneering American labor leader and early proponent of the eight-hour day. His wife, Mary, is said to have written the couplet, which became popular among eight-hour day activists in the 19th century, "Whether you work by the piece or you work by the day, decreasing the hours increases the pay."
Frank Fetter was an economics professor in the early 20th century and an early adherent in the US to the Austrian school of economics. His textbook, Economics, published in 1916, contained one of the earliest textbook treatises on "the shorter day and the lump-of-labor notion." In his discussion, Fetter argued that the view that the shorter day would result in higher pay is "connected with the lump of labor notion" and is based on the assumption that "there is so much work to be done regardless of wages."
Although the dismissive phrase "fallacy of the lump of labour" had been coined by an economist, David Frederick Schloss, its use as a conclusive put-down of eight-hour day advocates was charted by the same yellow journalism pack of newspapermen who hanged Parsons, Engel, Spies and Fischer. To be fair to Fetter, his overall discussion of the shorter day did acknowledge the potential benefits of reduced working time. But his discussion was contorted into a frame that emphasized the supposedly fallacious thinking of eight-hour day advocates. No mention there of hanged labor leaders or lynch-mob newspapers.
O Kapteyn, My Kapteyn…
Fast forward to 2004. Professor Arie Kapteyn was lead author of an article titled "The Myth of Worksharing" published in Labour Economics. An earlier version of the article was issued as a discussion paper in 2000 by the Institute for the Study of Labor: "a place of communication between science, politics and business." One of the Institute’s current priorities is "mobility and flexibility of labor markets."
The framing of Kapteyn’s analysis follows a predictable lump-of-labor motif:
In public discussions the idea of worksharing often emerges as a potential instrument for reducing unemployment… However, economists as well as employers are mostly skeptical about the success of this policy prescription. The fallacy of this seemingly simple idea is made clear in the literature especially by its impact on wages, wage costs, and output.
A footnote on "fallacy" cites a 1997 Economist article, "One lump or two?" "It is depressing that supposedly responsible governments continue to pretend to be unaware of the old 'lump of labour' fallacy: the illusion that the output of an economy and hence the total amount of work available are fixed."
Aside from the unequivocal title of the article and the confidently formulaic framing of worksharing as being based on a fallacy, the paper’s conclusions are equivocal. The results from the authors’ literature survey are inconclusive. Their empirical analysis "does not provide any ground for the proposition that worksharing would reduce unemployment," which is a rather weaker claim than the "myth" and "fallacy" labels would suggest. And, hey, who knows? Reduction of working time might be a good thing ("welfare enhancing") after all.
But let’s return to Kapteyn’s empirical analysis for a moment:
Thus, the picture emerges that a reduction in working hours causes an increase in the real wage rate and, consequently, annihilates positive a direct effect of a reduction in working hours on the employment rate (Table 3) and turns it into a (insignificant) negative effect (Table 5).
Or, as a partial effect, "a one percent reduction in working hours results in a 0.38 percent increase in the employment rate and a 1.15 percent increase in the real wage rate." Substituting the wage equation into the employment equation, Kapteyn concludes that a "one percent reduction in working hours results, in the long run, in a 1.04 percent increase in the real hourly wage rate." Suggesting – as Mary Steward’s doggerel had it (and contra Frank Fetter) – that, "decreasing the hours increases the pay."
The bad news… wait for it… is that after substitution the employment rate goes from a 0.38 increase to a 0.27 decline that Kapteyn labels "insignificant". I’m guessing that means statistically insignificant. Which is to say, the model-building empirical mountain labored and gave birth to a mouse. Reading the fine print, there’s all sorts of stuff I could take issue with in the paper’s model specification. But to do so would be academic in the who-cares sense of the word. The point remains that the model-building, ‘empirical’ hocus pocus takes second billing to the myth/fallacy genuflection – a fallacy cut from the same evidential cloth as the Haymarket convictions in pursuit of the same end: suppression of the workers’ movement for an eight-hour day.
And on and on it goes...
September 2007, Marcello Estevão and Filipa Sá of MIT, the IMF and the IZA analyze the effects of the French 35-hour workweek in a paper prepared for the Panel Meeting of Economic Policy. They cite Kapteyn and present the following "rationale" for job creation through work sharing:
The idea of work sharing as an employment creation policy is simple: if the production of goods and services in an economy is fixed, then a reduction in hours can re-distribute the fixed amount of work across more people, increasing employment. In spite of its intuitive appeal, economists and policy makers are skeptical about the success of work sharing as it is rooted in the so-called “lump-of-labour fallacy”: the false premise that the amount of output in the economy is fixed.
They then go on to "analyze" the effects of the French policy using a model that presupposes precisely the optimizing equilibrium relationships between hours, wages and employment that the real theory of the hours of labor – Chapman’s – puts into question. The problem is, if you understand the implications of Chapman’s theory, you can’t do the kind of model building these folks do to “find” the conclusions they do. Why? Because the whole model building enterprise is explicitly predicated on a suspension of Chapman’s theory. It would make as much sense to conclude that since Parsons, Engel, Spies and Fischer were hanged, they must have been guilty.
The great "myth of worksharing" is that these economists who purport to analyze it empirically are doing any such thing. The touchstone is the ritual incantation of the bogus lump-of-labor fallacy claim.
Put up or shut up
Is there no economist with the integrity to stand up and defend the lump of labor fallacy claim that they reiterate with such abandon? Or are they like the jurors at the trial of the Haymarket martyrs?
I am offering a $10,000 prize, in Canadian funds, to be awarded to the author who directly and conclusively refutes the argument in "Why Economists Dislike a Lump of Labor," (Review of Social Economics, September 2007). My argument is that the authenticity of the lump-of-labor fallacy claim, with regard to unemployment and the hours of work, is questionable; that various explanations of it are inconsistent and contradictory and that Sydney J. Chapman’s neglected theory of the hours of labor presents a more coherent analysis of the reduction of working time than the often-cited fallacy claim.
The article must be accepted for publication in one of the 30 top-ranked economics journals. Only anonymously peer-reviewed articles are eligible, not book reviews, commentary or other journal front or back matter. Journal rankings will be taken to be those specified in Kalaitzidakis, Mamuneas and Stengos "Rankings of Academic Journals and Institutions in Economics." Journal of the European Economic Association 1 (December 2003).
(And, no, it won't count if the article simply re-asserts the fallacy claim and follows that by grinding out yet another "empirical analysis". The article must directly confront the argument of my article. The question of whether the article successfully refutes my argument I will leave to be resolved by publishability.)
Enter by notifying me, Tom Walker, by mail or email that your article has been accepted for publication in one of the qualified journals. Mail address is 1204 Lakewood Drive, Vancouver, BC, V5L 4M4. Email: lumpoflabor [at] gmail [dot] com.
Deadline for entry is 11:59 p.m. on January 31, 2010. In the event an article is under review by a qualified journal on the deadline date, an extension may be granted provided the article was submitted to the journal on or before December 31, 2009. All requests for extension of the contest entry deadline must attach a copy of the submitted draft.
If no contest entry meets all of the above criteria, a consolation prize of $1000 Canadian may be awarded to an anonymously peer-reviewed article meeting the core argument criteria, published in a journal ranked 31-159 by Kalaitzidakis et al. Articles published in a non-ranked journal and articles submitted to but rejected by an economics journal may be given consideration for the consolation prize at the sole discretion of the contest organizer.
Prize money will be awarded only to the author or authors of the article specified in the winning entry. In the event of group authorship, prize money will be divided equally between the authors unless specified otherwise and agreed in advance by all authors.
Wednesday, April 30, 2008
Iran and Iraq: Bush Administration Stupid, Deluded, or Lying?
So, today a second US aircraft carrier has entered the Persian Gulf to "send a message to Iran," presumably about their supposedly bad behavior in Iraq. However, Juan Cole reports today that a major spokesman in Najaf for Moqtada al-Sadr, the figure the Iranians are supposedly supporting and arming against the al-Maliki government has just denounced Iran for supporting the long-term security agreement in negotiation between the al-Maliki and Bush governments, although this denunciation was in Arabic in an Arabic newspaper. This supports Cole's long-time contention that Iran is more closely allied with al-Maliki and his ally, al-Hakim, who leads the SIIC, and spent many years in exile in Tehran. In the meantime the NY Times reports that there has not been any increased flow of arms from Iran to Iraq and that it appears that they arm many militias on all sides, also a contention of Cole's (http://www.nytimes.com/2008/04/26/world/middleeast/26military/html?ref=middleeast).
So, the question is: Are the Bush people unable to read Arabic and therefore do not know what they are doing? Are they being consciously taken in by al-Maliki and his allies (perhaps because those guys speak English and the al-Sadr people do not),who are telling them that they are not allied with Iran, when they clearly are? Or are they consciously lying about what is going on to provide an excuse for beating up on Iran over its nonexistent nuclear weapons program or to provide election fodder for McCain by whipping up anti-Iran war hysteria based on garbage?
So, the question is: Are the Bush people unable to read Arabic and therefore do not know what they are doing? Are they being consciously taken in by al-Maliki and his allies (perhaps because those guys speak English and the al-Sadr people do not),who are telling them that they are not allied with Iran, when they clearly are? Or are they consciously lying about what is going on to provide an excuse for beating up on Iran over its nonexistent nuclear weapons program or to provide election fodder for McCain by whipping up anti-Iran war hysteria based on garbage?
Online Interview Regarding The Confiscation of American Prosperity
Jon Bailes and Cihan Aksan of the online publication, state of nature, conducted an online interview with me regarding my book, The Confiscation of American Prosperity, which just appeared.
http://www.stateofnature.org/michaelPerelman.html
http://www.stateofnature.org/michaelPerelman.html
Tuesday, April 29, 2008
Thoughts on Naomi Klein's Shock Doctrine
I have only read a hundred pages of Naomi Klein's shocked doctrine, but I thought that it was a very valuable work so far. It should not be judged either as an work of economic history as an all-encompassing theory of capitalism.
Even so, pointing out the commonality between New Orleans, Chile, and Iraq was very valuable. Making such a point does not exclude a certain degree of voluntarism associated with capitalism. Rather, it exposes an unseemly side of capitalism that is not frequently discussed.
The connection between the dreadful psychological experiments in Montréal and Hayek in Chile is not necessarily fanciful.
The author was grateful that I pointed out to her that Hayek spent the last years of his life developing The Sensory Order, a book that expanded on the ideas of Donald Hebb, who began the work that culminated in the atrocious psychological programming of Ewen Cameron.
I am halfway through another fascinating book, written by two very conventional economists on the history of world trade.
Findlay, Ronald and Kevin H. O'Rourke. 2007. Power and Plenty: Trade, War, and the World Economy in the Second Millennium (Princeton, NJ: Princeton University Press).
I have not yet reached the period of the Industrial Revolution, so thoroughgoing capitalism was not yet part of the story. The following quote suggests the flavor of the book:
xviii-xix: "The greatest expansions of world trade have tended to come not from the bloodless tatonnement of some fictional Walrasian auctioneer but from the barrel of a Maxim gun, the edge of a scimitar, or the ferocity of nomadic horsemen .... For much of our period the pattern of trade can only be understood as being the outcome of some military or political equilibrium between contending powers."
Even so, pointing out the commonality between New Orleans, Chile, and Iraq was very valuable. Making such a point does not exclude a certain degree of voluntarism associated with capitalism. Rather, it exposes an unseemly side of capitalism that is not frequently discussed.
The connection between the dreadful psychological experiments in Montréal and Hayek in Chile is not necessarily fanciful.
The author was grateful that I pointed out to her that Hayek spent the last years of his life developing The Sensory Order, a book that expanded on the ideas of Donald Hebb, who began the work that culminated in the atrocious psychological programming of Ewen Cameron.
I am halfway through another fascinating book, written by two very conventional economists on the history of world trade.
Findlay, Ronald and Kevin H. O'Rourke. 2007. Power and Plenty: Trade, War, and the World Economy in the Second Millennium (Princeton, NJ: Princeton University Press).
I have not yet reached the period of the Industrial Revolution, so thoroughgoing capitalism was not yet part of the story. The following quote suggests the flavor of the book:
xviii-xix: "The greatest expansions of world trade have tended to come not from the bloodless tatonnement of some fictional Walrasian auctioneer but from the barrel of a Maxim gun, the edge of a scimitar, or the ferocity of nomadic horsemen .... For much of our period the pattern of trade can only be understood as being the outcome of some military or political equilibrium between contending powers."
Monday, April 28, 2008
Wikiality, or the Death of Libraries
In yesterday's Style section of the Washington Post there was an article by Monica Hesse, "Can You Handle It? Truth, Better Yet: Do You Know It When You See It?" The main thrust of the article is how people believe things even when they hear them denied, and how misinformation is everywhere, especially on the internet in Wikipedia and blogs, and so forth. But, what concerned me more than this obvious, point, is that students are apparently seriously using only the internet, especially Wikipedia, and abandoning libraries and the reading of books in droves.
I am more aware of this than usual, being in the middle of grading term papers, and seeing ones with nothing but websites with incomprehensible names as sources. Quotes from students in the article make it clear that many find it annoying when a professor demands that they use a book as a source, and many think Wikipedia is a fully sufficient source, and many never set foot in a library. Yes, Wikipedia does not do too badly compared to Encyclopedia Britannica Online, 4 found errors for every 3 in EBO, but Wikipedia remains subject to interested parties manipulating it for truthiness or wikiality, with the resulting misinformation getting spread far and wide and widely believed. Just how many people think that Iran is out to get nuclear weapons and that al Qaeda was involved in 9/11? And if you read Wikipedia entries about guns, they look like they were written by John Lott or his buddies.
I am more aware of this than usual, being in the middle of grading term papers, and seeing ones with nothing but websites with incomprehensible names as sources. Quotes from students in the article make it clear that many find it annoying when a professor demands that they use a book as a source, and many think Wikipedia is a fully sufficient source, and many never set foot in a library. Yes, Wikipedia does not do too badly compared to Encyclopedia Britannica Online, 4 found errors for every 3 in EBO, but Wikipedia remains subject to interested parties manipulating it for truthiness or wikiality, with the resulting misinformation getting spread far and wide and widely believed. Just how many people think that Iran is out to get nuclear weapons and that al Qaeda was involved in 9/11? And if you read Wikipedia entries about guns, they look like they were written by John Lott or his buddies.
Sunday, April 27, 2008
Random Notes On The Crisis
I was talking to a Costco manager who told me that sales of most items are flat, but liquor sales are brisk.
The New York Times reports on a phenomenon that I have heard of locally -- that bees are finding homes in abandoned houses. Perhaps we have found a solution to the beat collapse. I should mention that one sentence suggests that many of the bees may be Africanized. If so, those bees may not be as welcome, because they would be illegal aliens from an undesirable continent. To make matters worse, people seem to be mixing these African bees with an American Queen and then releasing them on unsuspecting plants.
http://www.nytimes.com/2008/04/20/us/20bees.html?_r=2&oref=login&oref=slogin
The New York Times reports on a phenomenon that I have heard of locally -- that bees are finding homes in abandoned houses. Perhaps we have found a solution to the beat collapse. I should mention that one sentence suggests that many of the bees may be Africanized. If so, those bees may not be as welcome, because they would be illegal aliens from an undesirable continent. To make matters worse, people seem to be mixing these African bees with an American Queen and then releasing them on unsuspecting plants.
http://www.nytimes.com/2008/04/20/us/20bees.html?_r=2&oref=login&oref=slogin
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