Introduction to Three Notes on Budgetary Priorities

At the time that my university system faces almost half a billion dollars (yes, with a B) in budget cuts, I have felt the need to rant about budget priorities. As Joseph Schumpeter wrote: "the budget is the skeleton of the state stripped of all misleading ideologies."

People outside of California could not possibly comprehend the perverted logic of our prison system, which consumes more of the budget than state support of higher education. The number of public needs that deserve serious funding is enormous. The most ridiculous waste of money is the military.

I intended to write today about the military budget, going beyond Joseph Stiglitz and Linda Bilmes's estimate of the $3 trillion dollar war, looking at the harm done to and by veterans, over and above the medical costs that Stiglitz and Bilmes count.

I had planned to begin with Dave Philipps' articles on the how the war experience has screwed up soldiers' minds. He documents a rash of murders occurred near Fort Carson, Colorado. The murderers are from a small unit that experienced exceptionally heavy fighting and casualties. This morning I was pleasantly surprised to hear Philipps interviewed on Democracy Now, going into more detail.
The next note will point to the problem of homelessness among veterans.

The final note will note the recent discovery that Agent Orange did more harm to veterans health than previously recognized. I suspect that more information about Gulf War Syndrome will trickle in.


The point is not that veterans should be the highest budgetary priority. Social spending needs of all kinds go unmet.

Besides, the easiest policy to reduce the kind of costs noted here is to avoid fighting wars. (Has any empire ever been involved in so many foreign conflicts?)

Even so, the hypocrisy of supposed reverence for veterans in the face of the neglect of their needs is worthy of note. Just as much policy is designed to protect the fetus and then shortchange the kids, the country pours money into high tech military hardware, applauds the soldiers, then ignores the damage done to the veterans.

First Note:
Philipps, Dave. 2009. "Casualties of War, Part I: The Hell of War Comes Home." Colorado Springs Gazette (26 July).

The series discusses: Army unit whose members have been accused of at least 10 murders in the past several years highlights the risks of prolonged warfare.

"In August 2007, Louis Bressler, 24, robbed and shot a soldier he picked up on a street in Colorado Springs. In December 2007, Bressler and fellow soldiers Bruce Bastien Jr., 21, and Kenneth Eastridge, 24, left the bullet-riddled body of a soldier from their unit on a west-side street. In May and June 2008, police say Rudolfo Torres-Gandarilla, 20, and Jomar Falu-Vives, 23, drove around with an assault rifle, randomly shooting people. In September 2008, police say John Needham, 25, beat a former girlfriend to death. Most of the killers were from a single 500-soldier unit within the brigade called the 2nd Battalion, 12th Infantry Regiment, which nicknamed itself the "Lethal Warriors.

Second Note:
Eckholm, Erik. 2009. "For Veterans, a Weekend Pass From Homelessness." New York Times (26 July): p. A 13.

"The future mix of homeless veterans was signaled here last weekend at Stand Down, an annual three-day tent city that provides respite and aid to former members of the armed forces whose lives have collapsed. The number of homeless veterans who made their way to a high school's athletic fields for the gathering reached a record high, some 950 compared with last year's record of 830. The job-devouring recession is pushing up the numbers, but organizers said they were also starting to see younger veterans of the Iraq and Afghanistan wars, some with traumatic brain injuries or psychological stresses, who had fallen through the safety nets with unusual speed."

"According to V.A. estimates, the overall number of homeless veterans declined in recent years, from about 250,000 who lacked shelter at some point in 2006 to perhaps 200,000 last year. The share of women is climbing, and while they account for 4 percent of all homeless veterans, they make up 9 percent of those under 45, said Pete Dougherty, director of homeless programs at the department. The agency has so far detected about 3,700 homeless veterans who served in Iraq and Afghanistan, but with one million troops now home from these regions and more returning every week, Mr. Dougherty said, that figure is sure to climb. In an ominous harbinger, a recent study found that more than one-third of Iraq and Afghanistan war veterans who enrolled in the veterans' health system since 2001 had already displayed post-traumatic stress disorder, depression or other mental health problems."

Third Note:
Lorber, Janie. 2009. "Report Sees Agent Orange Link to More Illnesses." New York Times (25 July): p. A 12.

"An expert panel reported on Friday that two more diseases may be linked to exposure to Agent Orange, a defoliant used by the American military during the Vietnam War. People exposed to the chemical appear, at least tentatively, to be more likely to develop Parkinson's disease and ischemic heart disease, according to the report. The report was written by a 14-member committee charged by the Institute of Medicine with determining whether certain medical conditions were caused by exposure to herbicides used to clear stretches of jungle."

Tom Palley Writes to the Queen of England

Letter to the Queen: Why No One Predicted the Crisis

Her Majesty The Queen
Buckingham Palace
London
SW1A 1AA
29 July 2009
MADAM,

In response to your question why no one predicted the crisis you have recently received a letter from Professors Tim Besley and Peter Hennessy, sent on behalf of the British Academy. They claim economists’ failure to foresee the crisis was the result of a “failure of the collective imagination.” That claim is tendentious and will mislead you.

The failure was due to the sociology of the economics profession. This failure was a long time in the making and was the product of the profession becoming increasingly arrogant, narrow, and closed minded. One was compelled to adhere to the dominant ideological construction of economics or face exclusion. That was the mindset of the IMF and the World Bank with their “Washington Consensus”, and it was the mindset of central bankers (including your own Bank of England) with their thinking about the sufficiency of inflation targeting and hostility to regulation.

The crisis was predictable and was predicted. See, for example:

(1) "The Weak Recovery and the Coming Deep Recession," Mother Jones, March 2006.

(2) "Debt and Lending: A Cri de Coeur," Levy Institute, April 2006.

(3) "The Fallacy of the Revised Bretton Woods Hypothesis: Why Today’s Financial System is Unsustainable," Levy Institute, June 2006.

Professors Besley and Hennessy’s letter is another example of the economics profession’s complete inability to come to grips with its sociological failure which produced massive intellectual failure with huge costs for society. This is a very serious social problem and we will all continue to pay the costs as long as it is unaddressed.

Respectfully yours,

Tom Palley

Hours of Labour 3

by Sydney J. Chapman (translated and condensed by the Sandwichman)

So far I have dwelt on two aspects bearing upon the hours of labor: first, the effect of industrial development in intensifying the work performed during the working day and thereby increasing the output; second, the subjective effect of the increasing strain associated with such advance. I have now to add another influence: the enhancement of the value of leisure that must accompany a rise in wages, improved education, and social progress generally. The amount of the real wage yielded by a given money wage necessarily varies with the time left to spend it; and, further, the value of leisure is a function of the goods that can be enjoyed in the period of leisure. The acute worker would aim at so distributing his time between work and recreation that the gain resulting from a little more leisure would equal the loss consequent upon the implied diminution of wages. Hence, when the volume of goods per capita annually supplied to labor increase, an attempt would almost certainly be made by the workers to buy more leisure, even if the satisfaction derived from leisure were unaffected, which it would not be, because the satisfaction derived from leisure must rise when each hour of leisure is enriched by greater possessions. As regards the effect of education, it is sufficient to point out that the value of leisure is a function of appreciative power and that this is developed by education. On the other hand, the higher appreciative power might also enhance the satisfaction got out of the work itself, and this effect could offset the effect on the value of leisure, or even more than counteract it. Ambitions would be further awakened, but the ambitious worker would probably demand, as a rule, more time for study. I think it unquestionable that, on the whole, educational advance causes a curtailment of hours.

But unfortunately human nature improves slowly, and in nothing more slowly than in the hard task of learning to use leisure well. In every age, in every nation, and in every rank of society, those who have known how to work well have been far more numerous than those who have known how to use leisure well. But on the other hand it is only through freedom to use leisure as they will that people can learn to use leisure well; and no class of manual workers who are devoid of leisure can have much self-respect and become full citizens. Some time free from the fatigue of work that tires without educating is a necessary condition of a high standard of life. – Marshall, Principles of Economics, 5th ed., pp. 719-20.

Social progress creates new claims on leisure by complicating life and rendering formerly vague feelings of social obligation more definite and insistent.

Generally it can be said that the more complex the social organism becomes, the more its constituent individuals must devote time, apart from work and business, to the family and recreation, to education and general affairs, the more necessary is a general social arrangement concerning the distribution of time between the several purposes which it has to serve. – Schmoller, Grundrisse der allgemeinen Volkswirthschaftslehre, p. 741.

Next

The Bill O’Reilly Life Expectancy Theorem Applied to California

Paul Krugman said he needed a drink after seeing this:

Bill O’Reilly explaining that of course America has lower life expectancy than Canada - we have 10 times as many people, so we have 10 times as many deaths.

OK, I had a few drinks last night too but am all sober now and thinking how this pearl of wisdom applies to estimating life expectancy for the state of California. First, some background – the CIA World Factbook tells us that life expectancy in the U.S. is 78.1 years and our population is 307.2 million, while in Canada – life expectancy is 81.2 years and its population is 33.5 million. The Census Bureau tells us that California has a population less than 37 million so doesn’t the O’Reilly theorem suggest that life expectancy should be in excess of 80 years since California’s population is roughly the same as that of Canada?

Then again – California has the highest population of any state in the Union so one might also infer from the O’Reilly theorem that is life expectancy is among the lower of any of the 50 states in the Union, which would put it below 78 years. OK – I need another drink!

Fordy Hours

by the Sandwichman

There seems to be a bit of a buzz around Utah's 4-day, forty-hour workweek. Last Friday, Scientific American posted an article, "Should Thursday Be the New Friday? The Environmental and Economic Pluses of the 4-Day Workweek,". Then on Monday, the New Republic's environment and energy blog, The Vine picked up on "The Case For A Four-Day Workweek," channeling the Scientific American piece. Tuesday it was Derek Thompson's Atlantic magazine business blog echoing TNR echoing SA in "In Praise of the Four-Day Workweek." Today the "A Four Day Work Week" meme surfaced at Andrew Sullivan's Daily Dish.

What's wrong with this picture? For starters, the four-day, 32-hour week was the big story back in 1957. That's more than a half century ago. Chevrolets had big tail fins, then. Remember? There's nothing sacred about 40 hours. But there appears to be an apprehension that there is something sacred about that number. Hey, that's the length of the workweek that Henry Ford introduced in 1926, one year before he introduced the Model "A" Ford. "The five day week is not the ultimate, and neither is the eight hour day," wrote Samuel Crowther in 1926. The forty hour workweek is, at best, a "Model 'A'" workweek.

Will you ever work a four-day week?

Do you really want a four-day week
By Sid Ross and Ed Kiester
Parade Magazine, September 1957

Will you ever work a four-day week?

Vice President Nixon thinks you will. During last fall's Presidential campaign, he predicted an industry-wide four-day schedule “In the not too distant future.”

Walter Reuther, president of the United Auto Workers, thinks you should. Next year, he has announced, he will ask auto manufacturers to place workers on a shorter workweek without reducing their pay. Battle lines already are being drawn.

But do you really want a four-day week? Is it really “inevitable,” as the UAW likes to suggest, in view of automation and increased production? Or is it more likely to disrupt all of America — its jobs, its homes, its schools, its likes and dislikes?

One of the “hottest” controversies in the U.S. today is wrapped up in the answers to these questions. To find them, PARADE talked to industrialists, labor leaders, Government spokesmen, economists, sociologists, psychologists, educators, clergymen— all of whom have a stake in a four-day week. Briefly, here are highlights from what they had to say:

Some Differences of Opinion

• Most Americans don’t want a four-day week, even at the same pay, according to the Trendex News Poll and the American Institute of Public Opinion.
• Increased productivity will make the four-day week a strong possibility by 1970, a Department of Labor expert says, if workers prefer it to extra income.
• A four-day week might be short-sighted. We Americans, some economists and industry groups claim, could double our standard of living in 25 years by staying on a five-day week.
• If a change comes, it will be gradual, beginning in assembly-line industries and working down to service jobs like police, hospitals, stores.
• Many workers probably would take a second job in preference to a third day off.
• Some businesses probably would have to adjust, but others would boom: sports equipment, vacation resorts, garden supplies, gasoline, autos.
• Prices probably would increase further; crime rates might rise. Family breakups might be more widespread. But, conversely, some families probably would be drawn wore tightly together.
• The whole question may be decided not by workers but by their wives. Do you think,’ one psychiatrist asked PARADE, “that American women can stand to have their husbands underfoot three days in a row?”

And women, according to the American Institute of Public Opinion (the Gallup Poll), are more opposed to the shortened workweek than men. Gallup’s figures show that 67 per cent oppose the idea (after all, their workweek wouldn’t be reduced) while only 54 per cent of men do.

Trendex, surveying union members, learned that 47 per cent favored a five-day week. Nearly 30 per cent wanted a four-day week now, and 14 per cent suggested keeping the five-day schedule a little longer, but voted for a four-day week eventually.

Most workers told Trendex they need more income, not more free time. When the poll suggested a choice between a four-day week at present pay levels or a five-day week with increased pay, most workers voted for the pay raise. Businessmen point also to Akron’s rubber workers, who work a six-hour-day, six-day week.

They are openly opposed to returning to a five-day schedule. Reason: More than a third of them use their free time to hold down a second job.

Some industrialists— and some labor leaders —think the Reuther campaign is aimed not at more time but at more money. (Ford’s top negotiator, John Bugas, has called the plan “a smokescreen,”) The UAW, these sources say, wants to work the same number of hours but wants overtime pay to start earlier. In any case, they contend, the auto industry is unlikely to grant a four-day week next year.

“We could work a one-day week right now,” says a spokesman for the National Association of Manufacturers, if we wanted to give up a lot of things. But of course no one does. Adds Dr. Solomon Fabricant, a New York University economist: “I doubt that a four-day week is likely in the near future without a reduction in pay — and people won’t pay the price.”

But by 1970 things may be different. Increasing productivity will make four days at slightly higher pay a strong possibility, according to Charles D. Stewart. deputy assistant secretary for standards and statistics of the U.S. Department of Labor. Even then, would you want to work four days—or shoot for more money by working five?

Three Months Off at a Time?

The answer: No one is certain. Some union officials think you might prefer to stay on a five-day week and take the extra time off in long week ends or three months off every five years. When Trendex asked one machinist how be felt about a four-day week, he replied, “With a four-day week, I’d have another day at home with nothing to do.”

What would you do with an extra day off? Many businessmen predict a further boom in leisure-time industries. More families would tackle the mushrooming outdoor sports, like boating, skiing, skin-diving.

Husbands would attempt new and more involved do-it-yourself projects. Movies would draw more customers, more television sets would be sold, sports events would play to bigger houses.

The nation would need more highways because more people would use their spare time to travel. More cars and more gasoline would be sold; vacation resorts would be overrun. (But one businessman points out, logically, that more leisure requires more spending money. Could you afford a four-day week?)

A switch to four days’ work would give you more time with your family, but this is a two-edged sword, PARADE was told repeatedly. One psychiatrist predicted a four-day week would mean more broken homes. “There are a lot of marginal families based on keeping out of each other’s way,” he told PARADE. “Husband and wife are thrown together just two days a week; they can stand that. But the extra day might be enough to push them over the brink.”

For other families, another psychiatrist says, three days together could be a great boon “It could be the answer to the problem of father-son relationship we see so much of now,” he says. The Rev. Dr. Ralph W. Stockman, of National Radio Pulpit, adds: “The American family could well be drawn more closely together, and stronger moral fiber might be the result. But with three days of leisure, Americans might face many, many more temptations.”

Dr. Stockman does not subscribe to the idea that work is virtuous and play sinful. It’s simply that, mathematically, there’s more time to be tempted. Unfortunately, psychiatrists told PARADE, many people do regard work as “good,” and play as “bad.”

These are victims of what psychiatry calls ‘the Sunday neurosis.” At work, they feel satisfied, convinced they really are worth something; at rest, they are gnawed by feelings of guilt.

One psychiatrist who has specialized in the psychological overtones of leisure believes Americans can’t cope with three days off unless they have definite interests and hobbies with specific goals. For them to get the most from it, their spare hours will have to be planned — by themselves or others.

Dr. Eli Ginsberg, a Columbia University economist, once studied a group of movie projectionists who worked a four-day schedule. He found the same leisure-time pattern as for a two-day week end— only more of it.

“Time definitely did not hang heavy on their hands,” Dr. Ginsberg says.

“These men occupied themselves helping their wives, or with do-it-yourself projects, or watching ball games.”

But one psychiatrist predicts further scrambling of the jobs of husband and wife: “If the husband is home three days a week and spends his time washing dishes or cleaning the living room, how can a child tell who’s mother and who’s father?”

One of the biggest dislocations might be in the schools. Recently Dr. William E. Stirton, vice president of the University of Michigan, urged educators to plan now for an avalanche of students as workweeks shorten, Other educators also anticipate a boom in adult education — either by workers looking for “something to do” or by those trying to reach executive ranks (where, one hard-pressed executive told PARADE acidly, “they can then work 60 or 70 hours a week”).

Will the schools follow the pattern and cut back to four days? Many educators don’t see how the number of school days could be reduced without children being short changed. Dr. Earl J. McGrath, former U.S. commissioner of education, points out that many elementary schools already are experimenting with even longer school terms.

From parents, however, Dr. McGrath anticipates pressure to bring schools into line with the workweek. Absenteeism may increase as parents utilize three-day week ends for family trips.

“At the moment,” Dr. McGrath says, “most educators would oppose shortening the school week. It’s not the same as speeding up an assembly line.”

To many experts, this is the big stumbling block to a four-day week. As Reuther begins dickering with the Big Three of the auto industry, you’ll hear more and more of the UAW arguments: that a four-day week would spread jobs, that automation is displacing workers, that continually increasing productivity means workers are making more goods in less time, and this savings in time should go to the workers.

Today, however, nearly 50 per cent of Americans are providing services, not manufacturing products. Automatic assembly lines don’t include them. Yet if factories should cutback to a four-day week, inevitably a cry would go up for a four-day week in these fields, too.

One economist told PARADE a cut in hours would mean another rise in prices — and again the service workers would be the victims. Dr. William Haber, a University of Michigan economist, suggests that the most practical course would be to continue a five-day week. American living standards would increase and the nation could mop up some of its shortages — in highways and schools, for instance.

The Labor Department’s Stewart thinks industry might drop back to a four-and-a-half-day week, then to four days, just as the six-day week went to five and a half, then five. Other experts agree that the progress of the shorter workweek — if and when it comes —will be uneven, touching an industry here and there and leaving others on five days and some even on six.

Reuther’s demands have dramatized the issue. But no expert interviewed by PARADE believed a switch to four days of eight hours each is practical now, or even five years from now.

Both the National Association of Manufacturers and the U.S. Chamber of Commerce have assigned study committees to the subject, knowing that it will crop up frequently in the future. (Other unions already have taken their cue from the UAW and made similar demands.) They want to know, among other things, whether Americans really want to work only four days.

“Maybe what we’ll see is people trying to hold down two jobs,” says one industry spokesman. “Instead of a five-day week, they’ll choose a seven-day week.” Like many business figures, he feels that the abbreviated week will be theoretically possible someday — maybe in 20 years, maybe in 30 years, maybe more. Whether it will ever come true in fact is another question.

Will you ever work a four-day week? You can tomorrow, if you want to. But do you really want to? These, as the experts see them, are the terms.

Keynes' Friends

In his book, English Pasts, reviewing a volume of Bertrand Russell's correspondence, Stefan Collini quotes from one of the letters:

'"I saw Moore in the evening, and discussed whether there was any difference between knowing Arithmetic and knowing one's grandmother; he thinks not."'

Words fail me. At one point I wanted to go to grad school in philosophy. Professors who thought Russell was the epitome of a philosopher put me off the idea. How to answer the question of whether or not the present King of France was bald - this was a burning philosophical problem chez Russell!

(Answer: both the statement that he is and that he isn't are false, in case you're wondering.)

How Norton Antivirus Sucks

I just got back from a trip, where I got hit with the Virtuemonde virus. Norton never even picked it up. When I contacted Norton, they told me that they would escalate the problem, which I learnt meant paying Norton $99 to fix it.

Fortunately, Malwarebytes, along with Spybot, fixed it. I wonder what Norton actually does except slow down my computer.

Hours of Labour 2

by Sydney J. Chapman (translated and condensed by the Sandwichman)

The road of economic advance proceeds by specialization. Just as there has been specialization in tools and in division of labor, so has there been a specialization of labor during working hours and of leisure and social intercourse in non-working hours. Specialization on the one side implies the elimination of waste, whether of means or of time and it has therefore meant to the laborer the partial or occasionally complete elimination of the leisure that used to be interspersed within working hours. In a modern workshop, noise, the necessity of discipline, or of a continuously absorbed state of the attention, frequently reduce the possibilities of conversation to the barest limits. Humanity has no doubt been relieved of the heaviest burden of toil by inventions relating to the mechanism of production, but their application has been accompanied on the whole by the closer concentration of some kind of effort in time. The intensification of labor in a more confined sphere of activity may, as Professor Münsterberg argues, exercise more fully the higher human faculties and thereby bring with it a deeper interest, but it will almost certainly prove more exhausting, even apart from the elimination of change, leisure, and social intercourse. Decade-by-decade, with the speeding up of machinery, we can expect to find more nervous strain accompanying the process of production. That industrial functioning has become a severer tax on the energy of the workman is fully borne out by the evidence of numerous reports on industrial conditions.


Although it is not the only possible explanation, the increasing nervous strain of industrial work would account sufficiently for the curious circumstance that there is apparently no finality about any solution of the ever-recurring problem of the normal working day. The workman whose day has been reduced soon demands even shorter hours. Pessimists infer from this that the establishment of shorter hours leads the community down a slippery slope descending from competition, striving, achievement and progress toward economic stagnation. They deplore the indolence and apathy of the present generation. But an examination of the effects that work-time reduction has on output suggests the pessimists are wrong.

A mass of material for a study of this question exists in official and other reports in more than one advanced industrial country. Beginning with the writings of Robert Owen and Daniel le Grand, both of whom stressed moral and social elements, an investigator would find an almost unbroken sequence of evidence. Mr. John Rae collected a volume of facts in 1894, and these may now be supplemented by the experiences of yet another half generation. Limitations of space forbid that I should quote examples, but I may at least roughly generalize from the recorded facts. I have found no instance in which an abbreviation of hours has resulted in a proportionate curtailment of output. There is every reason to suppose that the production in the shorter hours has seldom fallen short by any very appreciable amount of the production in the longer hours. In some cases, the product, or the value of the product, has actually been augmented after a short interval. In a few cases, the reaction of the shorter hours on the output per week has been instantaneously noticeable and the new level of production has surpassed the old before mechanical methods could be improved. Further, for some industries – for instance, for the Lancashire cotton industry – we have preserved for us the results of a string of observations reaching back about three-quarters of a century. It would appear from them that the beneficial effects wrought upon output by the shortening of hours were substantially repeated, though of course in different degrees, at each successive reduction of the working day.

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Arm the Hypocrites in the US Senate?

Oh, I should not post here on gun issues, but... So in today's Washington Post, E.J. Dionne has a column, "Arm the Senate." He points out the hypocrisy of senators constantly wanting to make it easy for people to walk into churches and bars with concealed weapons, reduce gun control in Washington, D.C, make it possible for people to take guns to states and cities that would otherwise restrict them, and so on. At the same time, nobody is allowed to take a gun into the US Congress, which has metal detectors at the entrances to forbid it.

So, Dionne reasonably asks if it is so wonderful and crime-reducing for the rest of society to have people walking in and out with concealed weapons, why does this not apply to the US Senate? I must agree that this is an excellent sign of their hypocrisy and their kowtowing to the worst of the gun nuts at the National Rifle Association.

Janet Yellen for Fed Chair?

I am one of those who think that Ben Bernanke literally saved the world in mid-September from a 1931-style global economic collapse. He is not getting much credit for that from Congress or many other people, and is increasingly becoming a generalized scapegoat for the continuing recession, even if it probably would be a whole lot worse now if not for his actions then. However, I grant that he can be criticized for many things, including being probably too slow ahead of time to admit things were dangerous (although actions after August 2007 suggest the Fedsters knew bad stuff was up, despite their public rhetoric), along with things like how the Merrill Lynch purchase by Bank of American was handled and the details of the banks bailouts, and other stuff. So, maybe he is damaged goods, kind of like Frodo after Gollum bit his finger off when getting the Ring of Power into Mount Doom, and he should retire into the West.


If so, the two candidates people are mostly talking about to replace him are Larry Summers and Janet Yellen. I will not say anything about Summers other than to say I would far prefer Bernanke to him. But Janet Yellen is quite another matter, a worthy rival to Bernanke for the position. She is certainly more progressive, and also has lots of personal cool and common sense, as well as being exceptionally intelligent and knowledgeable. She currently serves as president of the San Francisco Fed, second most important after the New York one, and is a voting member of the FOMC. She was on the Board of Governors under Greenspan in the early-mid 90s but left to serve as CEA Chair from 97-99. Long at Berkeley, and married to Nobelist George Akerlof, with whom she has coauthored some innovative and influential papers on macroeconomics, she also was on the Board of Governors staff in the late 70s in the international finance division. In short, she knows her way around the place, including the basements where all the wonks and geeks hang out, and I have heard personally from people at the SF Fed that she is a great boss whom they all can say nothing but the most admiring things about.

Hours of Labour I

by Sydney J. Chapman, (translated and condensed by the Sandwichman)

Among the most insistent problems to be found in industrial societies are those concerning wages, conditions of work and living, and the hours of labor. The problem of the hours of labor has, perhaps, not received as much practical consideration as the others. Expressed in another way, our topic is the value of leisure, the bearing of industrial development upon it, and its effectiveness in shaping economic arrangements. The demands continually made for shorter hours and a normal day; the widely supported claim that the State should intervene; and the fact that some Governments have intervened, even to the length of regulating the hours of adult male labor, are additional grounds for trusting that this topic will be of more than academic interest.

Why doesn't the question of leisure assume prominence until modern industrialism has supplanted a simpler economy? Why is much less heard of it among agricultural than among industrial communities? In the hand industries of the past, the hours of labor were excessively long in comparison with modern industrial standards. Among the peasantry and pioneering farmers, work never wholly ceases in waking hours, except for short breaks for meals, throughout much of the year. Yet little complaint would seem to have reached us from either source. The explanation may lie partially in the fact that new grievances emerged with the spread of the wages system – the problem of the working day does not present itself in quite the same light to wage earners and to the self-employed. Furthermore, these grievances are rendered more articulate by group production and the concentration of people from one economic class lends cohesion and volume to the demand for reform. The hardships suffered by a scattered population, occasioning discontents, which, however, stop short of provoking outbreak, seldom succeed in attracting public notice. People acting in isolation are naturally timid. But this is not the sole explanation. The character of much of the world's work has changed and so have the demands made upon leisure.

Industrial work on the whole has certainly become more regular and continuous throughout the year. Analysis would seem to show that work per unit of time gets more severe, in a sense, as communities advance, though a strong case could be made for the view that economic progress fosters work that is generally more satisfying and conducive to human development. Mechanical improvements frequently bring with them a new monotony of work. However, higher wages may offset that new monotony of work by offering broader opportunities for living. Mechanical improvement proceeds by "specializing out" mechanical tasks, the performance of which by hand must be a dreary occupation. But each step in the march of invention seems to create, by its incompleteness, tasks involving a new and more intensified monotony despite the fact that it may result in less tedium per unit of output. Any work whose pace is set by a machine and kept absolutely steady must be wearisome. We may usefully compare mechanical improvements with discoveries relating to the re-use of by-products. The latter always recover from waste something of value to the community, but they generally leave a residue more concentrated than that with which they began.

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Organized Labor's Exhausted Paradigm

by the Sandwichman

On the Relentlessly Progressive Economics blog, Andrew Jackson, Chief Economist and National Director of Social and Economic Policy for the Canadian Labour Congress, approvingly cited a policy paper, "America's Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession," written for the New America Foundation by Thomas Palley, former Assistant Director of Public Policy at the AFL-CIO.

At page 11, the Sandwichman threw up his hands in despair:

"The implementation of neo-liberal economic policies destroyed the stable virtuous circle growth model based on full employment and wages tied to productivity growth, replacing it with the current growth model based on rising indebtedness and asset price inflation."

Just what "stable virtuous circle" did Brother Dr. Palley have in mind?
Why the 1945-1980 Golden Age, of course. And just how does Dr. Palley envisage restoring that lost paradise?

"...restoration of worker bargaining power in labor markets through strengthened unions, a higher minimum wage, and stronger employee protections; restoration of full employment as a macroeconomic policy objective; restoration of the legitimacy of regulation and increased government provision of public goods; a new international economic accord that addresses the triple hemorrhage problem created by the flawed model of global economic engagement; and reform of financial markets and corporate governance that ensures markets and corporations work to promote national economic well-being."

There's just one catch: "While the economics are clear, the politics are difficult..."

Politics are always difficult. The Sandwichman doesn't think that's the problem with Palley's "clear economic" prescription, though. The problem with Palley's paradigm is that its politics are absent. I want to draw attention to the first two planks in the platform to illustrate what I mean: strengthened unions and a higher minimum wage. Both sound appealing to a left perspective. But do they go together?

Samuel Gompers didn't think so. Here's what he had to say about minimum wage legislation in 1914: "I am very suspicious of the activities of governmental agencies. I apprehend that once the state is allowed to fix a minimum rate, the state would also take the right to compel men or women to work at that rate." The rationale for Gompers's opposition to minimum wage legislation -- although not to minimum wages won by collective struggle -- was a philosophy based on collective self-determination and action.

Now I don't want to give the impression I think old Sam Gompers was a saint or always knew what was best for workers. He wasn't and he didn't. But there was a principle and logic larger than Gompers that played itself out in the first four decades of the 20th century that Sandwichman thinks has crucial bearing on the exhausted paradigms of macroeconomics and organized labor.

The Sandwichman drones on endlessly about the eclipse of the shorter working time ethic in the unions and the slander and taboo on the topic in economics. But let's forget about that for a moment and consider Supreme Court decisions and constitutional law. Allison Martens wrote a fascinating paper a few years ago titled, "Parrying with the Courts: Analyzing the Lochner Era through the Eyes of Organized Labor." I don't pretend to know much about US constitutional law myself, nor will I attempt to summarize Martens's argument here. I just want to call attention to a key switch in American Federation of Labor legal strategy that Martens highlighted in the paper and that was discussed earlier in a paper by James Gray Pope, "The Thirteenth Amendment Versus the Commerce Clause: Labor and the Shaping of the Post-New Deal Constitutional Order, 1921-1957."

Forgive me for quoting four paragraphs from the conclusion to Pope's article. The drama and the importance of what Pope is chronicling inhibits me from summarizing or paraphrasing:

"On the eve of the New Deal constitutional revolution, proponents of national labor legislation faced the momentous choice whether to ground their legislation on the Commerce Clause or on the Thirteenth Amendment. Since the early 1900s, the labor movement had claimed the rights to organize and strike under the Thirteenth Amendment. Labor constitutionalists argued that these rights were essential for workers to exercise actual liberty of contract in an industrial economy dominated by large corporations. By the early 1930s, this core theory had won wide acceptance, and legislators routinely echoed labor's claim that restrictions on worker self-organization and protest amounted to slavery and involuntary servitude.

"But labor's constitutionalists encountered stubborn opposition from the movement's own friends within the legal profession. During the campaign for anti-injunction legislation that culminated in the passage of the Norris-LaGuardia Act of 1932, a group of elite, progressive lawyers led by Professor Felix Frankfurter undercut labor's constitutional claims by refusing to acknowledge their existence in public while maneuvering behind the scenes to exclude them from legislative consideration. Their determined opposition to labor's freedom claims reflected not a tactical disagreement among allies, but a fundamental conflict over long-term, constitutional goals. While labor constitutionalists sought power for unions and workers, progressive lawyers sought power for social scientists and other professionals, including themselves. Over a period of six years, this cagey and well-connected opposition wore down labor's constitutional leaders. In the winter of 1931–1932, when presented with what appeared to be a choice between insisting on their constitutional theory of freedom and achieving anti-injunction legislation in the here and now, labor leaders chose the latter. Two years later, when Senator Robert Wagner proposed his labor disputes bill, unionists sought a constitutional foundation sounding in democracy and human rights, but again failed to force the issue.

"The result was to sever the popular demands for industrial freedom from the legal-professional campaign to validate the Wagner Act. Unionists embraced the Wagner Act as labor's latest 'Magna Charta' and declared that if the courts would not enforce it, the workers would. In his 1936 reelection drive, President Roosevelt campaigned against economic royalism and for industrial freedom, apparently endorsing the core of labor's theory. Roosevelt's landslide victory emboldened workers to stage full-blown factory occupations to enforce what they saw as their constitutional rights to organize and strike. The factory occupations, in turn, forced the Supreme Court to uphold the Wagner Act—a victory that workers across the country promptly celebrated as a 'new era' of industrial freedom.

"Meanwhile, however, government lawyers had been urging the courts to uphold the Wagner Act not as a human rights statute, but as an exercise of Congress's power to 'control' and 'punish' strikes under the Commerce Clause. And it was this view, not the popular vision of the statute as a human rights measure, that the Supreme Court embraced in the Wagner Act decisions. The Court did leave open the possibility that collective labor rights might be constitutionally protected, and—for a time during the 1940s—workers and unions won a number of decisions protecting the rights to organize, strike, boycott, and picket. But by the mid 1950s, labor's constitutional victories had been appropriated by others. Under the leadership of Justice Felix Frankfurter, the Supreme Court upheld a battery of restrictive labor laws. By the time the Court was finished, the new civil liberties won by unions and workers had been reshaped into a doctrine that, as Robert McCloskey famously put it, had the 'smell of the lamp about it.' The Constitution, it seemed, protected reasoned discussion about ideas, not appeals to labor solidarity. In class terms, then, the constitutional revolution of the 1930s represented the triumph within constitutional jurisprudence of what might be called the 'knowledge class' over the previously dominant business class. The role of the working class was to provide the foot soldiers for change."

I guess one could say that Palley's economic prescription, too, has something of "the smell of the lamp about it." Or, to quote Sam Gompers one last time:

"Be not deceived by any specious sympathy and guileful interest in your welfare, but like men and women work out your own problems and determine your own lives. Benefits, improvements gained by the power of collective action may be slower, but they do not menace future welfare they do not transfer to others control over future activity, policies, or methods. Self-help leads to independence, reliance, and true welfare."

Economic Illiterate: Fred Barnes v. Barack Obama

Fred Barnes tries to attack the intelligence of the President in his Know-Nothing-in-Chief. This single line should tell the reader that the rest of this Weekly Standard op-ed was a waste of time:

Demonstrating a passing acquaintance with free market ideas and how they might be used to fight the recession--that's not too much to ask.

Recessions are often seen as a gigantic market failure – letting the market decide is not a recipe for restoring full employment anytime soon. Barnes next goes onto confuse long-term issues with Keynesian remedies for the current shortfall of aggregate demand:

Obama endorsed a surtax on families earning more than $1 million a year to pay for his health care initiative. This is no way to get the country out of a recession. Like them or not, millionaires are the folks whose investments create growth and jobs--which are, after all, exactly what the president is hoping for. Another tax hike--especially on top of the increased taxes on individual income, capital gains, dividends, and inheritances that Obama intends to go into effect in 2011--is sure to impede investment.

Yes – another one of these pseudo-supply-side rants that we cannot tax high income folks lest investment will just dry up. I guess Mr. Barnes is not aware of the role of real interest rates on investment in those full employment models that free market types think rule the world. And maybe he is not aware that the current Federal Reserve is currently keeping interest rates low in the hope that investment demand will eventually regain its footing.

Steve Benen has more criticism.

Rewriting Hours of Labour +100

by the Sandwichman

Coming up is the 100th anniversary of Sydney J. Chapman's theory of the hours of labour, delivered in Winnipeg Manitoba on August 26, 1909 as Chapman's presidential address to the Economics and Statistics section of the British Association for the Advancement of Science and subsequently published in the September 1909 Economic Journal.Chapman was not a great writer. Case in point (pay particular attention to the italicized passage at the end):

The workman whose day has been reduced is soon repeating again his demand for shorter hours, and there are pessimists who infer from this that the shorter hours attained hitherto have shifted the community on to a slippery inclined plane which leads from the economic “struggle for existence” by which is meant the competitive striving for place, reputation, and achievement, whereby progress is naturally stimulated – to economic stagnation. They think they discern in the present generation a growing disinclination to make an effort and a growing disposition to take the easy path; but that the truth cannot be mainly with the pessimists an examination of the effects of curtailments of the daily hours of labour upon output would at least suggest.

Compare my translation:

The worker whose day has been reduced soon demands even shorter hours. Pessimists infer from this that the establishment of shorter hours leads the community down a slippery slope descending from competition, striving, achievement and progress toward economic stagnation. They deplore the indolence and apathy of the present generation. But an examination of the effects that work-time reduction has on output suggests the pessimists are wrong.

To celebrate the theory's centennial, Sandwichman serialize a translation of the whole article in, if not Plain English, plainer English at least. I will retain original as much as serviceable and only intervene when Chapman's convoluted phrasing and compound sentences seriously obstructs comprehension.

Kevin Drum on the Compensation of Those Not Highly Compensated

Ellen Schultz (Wall Street Journal) writes something that catches the interest of Kevin Drum:

Executives and other highly compensated employees now receive more than one-third of all pay in the U.S., according to a Wall Street Journal analysis of Social Security Administration data -- without counting billions of dollars more in pay that remains off federal radar screens that measure wages and salaries … In the five years ending in 2007, earnings for American workers rose 24%, half the 48% gain for the top-paid. The result: The top-paid represent 33% of the total, up from 28% in 2002.

Kevin follows up with:

You probably thought that the big problem with skyrocketing executive pay was the fact that it left nothing for the rest of us. And you're right: that 24% increase for "American workers" includes the 48% increase for the top earners. In other words, the executives got a 48% increase, the rest of us got approximately nothing, and it all averaged out to 24%.

There may be two problems here. Kevin is taking a simple average of 48% for the wealthy one-third and zero for the rest of us to get this 24% overall average but that’s not quite right. A weighted average where one-third received a 48% increase and two-thirds received a 12% increase is more in line with the overall increase being 24%. But if the rest of us received a 12% increase in how nominal wages over this five-year period, how does that compare to the increase in the consumer price index? If one compares the CPI as of December 2007 to the CPI as of December 2002, the increase in CPI was over 16%. In other words, those who were not highly compensated may have seen their nominal wages rise slightly but in real terms, wages declined.