SCIOD 8: The Secret Basis of Glut

Even though it appeared "when the factory system was comparatively but little developed," Marx observed that Ure's work, "perfectly expresses the spirit of the factory, not only by its undisguised cynicism, but also by the naïveté with which it blurts out the stupid contradictions of the capitalist brain." The most glaring contradiction Marx pointed to involved the relationship between unionism and the pace of technological change. In the early pages of the book, Ure noted the "instructive warning to workmen to beware of strikes," posed by the invention of the dressing machine, which proved:

…how surely science, at the call of capital, will defeat every unjustifiable union which labourers may form… Were it not for unions, the vicissitudes of employment, and the substitution of automatic for hand work, would seldom be so abrupt as to distress the operative.

Yet in the third section, Ure asserted that:

[h]ad it not been for the violent collisions and interruptions resulting from erroneous views among the operatives, the factory system would have been developed still more rapidly and beneficially for all concerned than it has been…" 

Perhaps, though, the contradiction is not quite as stark as it appears. Maybe Ure is assuming that capitalists would introduce different, more benign machines if they could confidently rely on docile workers? In that case, though, the contradictions are only displaced from the nature of machines to equally naïve and cynical assumptions about the inherent benevolence of the masters and malevolence of the "hands" (as Ure frequently referred to workers).

The section in Capital immediately following Marx's critique of Ure examines "The theory of compensation as regards the workpeople displaced by machinery." One might expect to find there a critique of Say's Law – or rather of the maxim that eventually came to be known as Say's Law. Instead, Marx referred to the insistence of "James Mill, MacCulloch, Torrens, Senior, John Stuart Mill, and a whole series besides…"

The only mention of Jean-Baptiste Say appears in a footnote referring to "a disciple of Ricardo, in answer to the insipidities of J. B. Say…" It repays the effort to ferret out the anonymous pamphlet cited by Marx, "An Inquiry into those Principles Respecting the Nature of Demand," &c. The anonymous pamphleteer presented a comprehensive critique of Say's maxim in pages 14 to 33 and returned to that topic on page 72, comparing specialized labour to fixed capital, in the passage Marx cited:

The habits of the labourers, where division of labour has been carried very far, are applicable only to the particular line they have been used to; they are a sort of machines. Then, there is a long period of idleness, that is, of labour lost; of wealth cut off at its root. It is quite useless to repeat, like a parrot, that things have a tendency to find their level. We must look around us, and see that they cannot for a long time find a level: that when they we cannot but see, that they are unable to find their level for a long time; and that when they do, it will be a far lower level than they set out from.

In Theories of Surplus Value, Marx described the pamphlet as "one of the best of the polemical works of the decade," notwithstanding disparaging remarks about "the infinite narrow-mindedness of these fellows" when examining capital. There he addressed "Say’s earth-shaking discovery that “commodities can only be bought with commodities…" and again quoted the above passage regarding the effects of division of labour. A few paragraphs later, he remarked, "What the author writes about Say is very true." "The theory of compensation as regards the workpeople displaced by machinery" can be read as a veiled response specifically to Say's maxim. Marx's critique owes a great deal to the anonymous pamphleteer, whom he both praised and disparaged.

It is curious that Marx didn't take the opportunity to directly confront Say, particularly as his discussion of the pamphlet in Theories of Surplus Value bears directly on the issue of crises of overproduction. After quoting the author's observation that "glut is synonymous with high profits," Marx affirmed that this was, "indeed the secret basis of glut." A few paragraphs later, his summary response to the pamphlet's argument is a succinct expression of Marx's crisis theory:

Over-production, the credit system, etc., are means by which capitalist production seeks to break through its own barriers and to produce over and above its own limits. Capitalist production, on the one hand, has this driving force; on the other hand, it only tolerates production commensurate with the profitable employment of existing capital.

Bernice Shoul mentioned neither the anonymous pamphlet nor the section in Capital on the theory of compensation in her 1957 article, "Karl Marx and Say's Law."

Immigration analysis on job market "refuted" with red herring

Dear Bob Birrell and Carla Wilshire,

In her attempt to refute Bob Birrell's analysis, Carla Wilshire makes the following claim:

Birrell chooses to ignore the dynamic effects of the labour market. The assumption that there are only so many jobs to go around has been roundly rejected. Labour economists have long known the number of jobs is not fixed. According to Nobel Laureate Paul Krugman, this lump of labour fallacy “encourages fatalism” and “feeds protectionism”. The trouble with promoting such notions is that policy-makers stop thinking about ways to create jobs.

There are so many errors in that brief paragraph, it is hard to know where to begin. But let's start with Paul Krugman. Krugman has indeed criticized the lump-of-labor assumption but he has also criticized, as "equally fallacious," the counter assumption (often referred to as Say's Law), that demand for labour increases with its supply. In fact, Paul Krugman has spent far more time recently refuting Say's Law than he has the lump of labor.

http://krugman.blogs.nytimes.com/2013/02/10/still-says-law-after-all-these-years/
http://krugman.blogs.nytimes.com/2014/02/21/hearsay-economics-2/

The problem with the supposed refutation of the supposed lump-of-labour fallacy goes deeper than that, though. Ultimately the refutation is based on the same hidden assumption as the alleged "fallacy" -- what was known in classical political economy as the wages-fund doctrine. In short, the fallacy and its supposed refutation are simply two sides of a paradox that arises from the static nature of analysis, similar to Zeno's paradox of the arrow.

Wilshire uses the word "dynamic" incorrectly. Wilshire is making the mistake of assuming that the colloquial connotation of "dynamic" is the same as the technical one. This is not acceptable in the context of claims about economic theory (see John Maurice Clark's discussion of "The Relation between Statics and Dynamics" or Alfred Marshall's discussion in "Distribution and Exchange").

What she presumably means by "dynamic effects" are the 'long term' effects of economic growth. But "what labour economists have long known" about the number of jobs in a growing economy is itself based on another static analysis, not on a dynamic analysis. The assumptions of the latter static analysis may be more realistic to the extent that they are based on empirical observation but that doesn't make the analysis dynamic. Often, though, the refutation is not based on empirical observation, in which case it is pure, empty assertion. There is nothing "inevitable" about economic growth.

Ms. Wilshire may have an alibi for her misuse of dynamic in that economists often make the same error of referring to static analyses as "dynamic" just because they incorporate a few rudimentary moving parts ( for example, DSGE: "dynamic" stochastic general equilibrium models). This is like referring to an animated GIF file as a "full-length moving picture."

Of course, Bob Birrell will be quite aware that he didn't assume a "fixed amount of work" (which is not the same thing as "only so many jobs to go around"). If at time "t" there are 10 jobs and 11 workers and at time "t+1" there are 12 jobs and 14 workers, then the amount of work is clearly not fixed but the number of unemployed has doubled and the unemployment rate has increased from 9% to 14%. The allegation of a belief in a "fixed amount" of work here is clearly inapplicable.

Accusing one's opponent of committing a lump-of-labour fallacy is such a hackneyed, inadequate argument, that it immediately raises suspicions that the person making the claim has no substantive argument to make.

Yours sincerely,

Tom Walker, author of
"Why economists dislike a lump of labor" and
"The "lump-of-labor" case against work-sharing: populist fallacy or marginalist throwback?"

Disperse Mobs with Radio Police Automaton!

Robots, again?

This time its a viral Youtube video by CGP Grey. A million and a half views in four days. For those who don't have the attention span to sit through a 15-minute video, the script is posted at CGPGrey and concludes:

This video isn't about how automation is bad -- rather that automation is inevitable. It's a tool to produce abundance for little effort. We need to start thinking now about what to do when large sections of the population are unemployable -- through no fault of their own. What to do in a future where, for most jobs, humans need not apply.

Joshua Gans at Digitopoly presents an inadequate counter-argument to that conclusion, based on static analysis and wishful thinking: "I have faith that if it is in the interests of both business and consumers that money go from the employed to unemployed, it will. It will happen." and:

If the worker owns the robot, the quality advantage accrues to them. But in terms of their willingness to pay, there is an important difference between the two. If the capitalist does not own the robot, they can employ the worker (with their robot) as they always have done and so will they will appropriate part of the quality advantage. By contrast, if the worker does not own the robot, the worker gets nothing.

As I've been arguing in the Supply Creates Its Own Demon series, the problem is much, much more complicated than that. It can't be solved by static economic analysis. To put it as simply as possible: machines don't have the fantastic generative powers that have been attributed to them.

What a machine can do is strictly limited by the properties of the materials that it works on and is powered by and by the physical properties incorporated in it by its designer. What dazzles observers is simply the disclosure of the physical properties of matter and energy and the ingenuity of human science and applied social organization in revealing and operating on those physical properties.

The machinery debate that has been going on for two and a half centuries is a diversion. The "demon" in this debate, the alleged automaton, is an illusion -- at worst a hoax -- that distracts from the scale of human intervention required make the automaton's motion appear autonomous. The more remotely human intervention can take place, the more effective is the illusion. The operator has an alibi.

It was not, after all, the sheep who enclosed the commons and evicted the tenants.

Elsewhere and Nowhere: Alibi and Utopia

Such is the strategic logic of the commodity which makes [use value] a satellite of and an alibi for [exchange value]. -- Jean Baudrillard, The Political Economy of the Sign.

As court and council gathered in the robing room after an acquittal... the judge said to the successful lawyer, "That was the most convincing alibi that I have ever had proved before me." 

"Thank you, sir", replied the lawyer. "it is particularly gratifying to hear you say that. I value your judgment most highly and I am pleased to find that in this case it coincides with mine. I chose that alibi as the best of three that the defendant had." -- "No Alibi," ABA Journal, March 1951.

...alongside the eighteenth-century emergence of the realistic, but fictional, narrative form later called the novel, the word alibi also entered into ordinary English discourse. Technically the legal plea of 'elsewhere,' culturally speaking, an alibi indicated the mounting of a realistic story narrated in a law court. (This initial, specific sense of alibi as a story told in court contrasts with its use since the beginning of the twentieth century, when it began also to refer to a story that keeps one out of court or to any form of excuse tale.) -- Jonathan Grossman, The Art of Alibi: English Law Courts and the Novel.

If the elasticity of substitution is not constant, what is crucial is what happens to the elasticity asymptotically as resource input goes to zero. In these cases the produced input is sufficiently substitutable for the natural resource that the decrease in supply of the natural resource can be compensated for by an increased supply of capital. Of the two cases, the Cobb-Douglas case is clearly the most interesting for there natural resources are essential in the sense that some input of the natural resource is required for production (the isoquants never do hit the axes). But a small input of natural resource can be compensated for by a sufficiently large input of capital, and whether that is feasible for the economy depends simply on the relative shares of the two. -- Joseph Stiglitz, "Neoclassical Analysis of Resource Economics." 

"...this is not the only force driving men to thievery. There is another that, as I see it, applies more specially to you Englishmen." 

"What is that?" said the Cardinal. 

"Your sheep", I said, "that commonly are so meek and eat so little; now, as I hear, they have become so greedy and fierce that they devour human beings themselves. They devastate and depopulate fields, houses and towns. For in whatever parts of the land sheep yield the finest and thus the most expensive wool, there the nobility and gentry, yes, and even a good many abbots -- holy men -- are not content with the old rents that the land yielded to their predecessors. Living in idleness and luxury without doing society any good no longer satisfies them; they have to do positive harm." -- Sir Thomas More, Utopia, Book 1.

An escapist fiction, Book 2 allows the negotiator of wool contracts an alibi for being "elsewhere" just as it affords England the luxury of being purified as myth. As Richard Marius points out in his biography of More, there was a distinct need for the writer of Utopia to have available just such an alibi, so much are the circumstances of Utopia's composition at odds with its idealistic pretensions: 

It has usually gone unnoticed that More's embassy on which he began writing Utopia was intended to increase commerce, especially in wool, and that while he penned these immortal lines, he was working hard to add to the wealth of those classes in English society whom Raphael castigates for their heartless greed.

At this stage in the composition of Utopia, the hedging off of the island from historical contingencies reflects More's own personal situation. -- John Freeman, "Discourse in More's Utopia: Alibi/Pretext/Postscript"

Another offender of this class [of overworked words] is "alibi." Alibi is a legal term, meaning a plea on the part of the accused that he was somewhere else when the alleged act was committed.. I imagine that somebody came out of a court house one day after hearing this term used, and since it was new to him, and he fancied the sound of it, he began making use of it himself in a pedantic sort of way whenever opportunity offered. Finally his friends and admirers took it up, and now eight people out of ten think it quite the thing to do, when denying any sort of innocent accusation, to say, "I can prove an alibi." But a mere denial is not an alibi. -- M. V. P. Yeaman, "Speech Degeneracy."

In a legal context to be elsewhere necessitates the supporting details and corroboration provided by a narrative account of being elsewhere. Here—reversing the cliché—it is deeds without words that are empty. Alibi is thus especially well suited for narrative, for there is always a story or relevant sequence of events that depicts being elsewhere. 

…narrative alibis draw on the special significance of an absence. Beyond the legal context, an alibi is thus something we can give whenever we are called to account for ourselves. When we speak of whether someone "has" an alibi or not, we implicitly allude to the importance that having a story, being able to tell the story of oneself, holds for modern identity (even if it is the possession of a kind of absence). 

An alibi is an unusual form of narrative precisely because it is generated by absence, and thus alibi is a small, well-defined instance of the philosophical concept of negativity. Though a negative concept, an alibi does real work; it functions in a system of legally binding processes and confers a status upon those who employ it rhetorically. An alibi is a speech act rendering the real act, the crime, impossible, at least for the accused. The narrative opposite of a confession, it exculpates rather than implicates. An alibi is an account of not being there. So, an alibi is a kind of anticonfessional narrative. -- Justin Weir, Leo Tolstoy and the Alibi of Narrative.

Anatomically homologous to the two largest bones found in the human finger, the pastern was famously mis-defined by Samuel Johnson in his dictionary as "the knee of a horse". When a lady asked Johnson how he came to do so, he gave the much-quoted reply: "Ignorance, madam, pure ignorance." -- Wikipedia, "Pastern."

Everyone Should Have The Right To Marry Whom They Wish To Marry.

In 1975 in Helsinki a Cold War negotiation led to the Helsinki Accords, much derided at the time by various parties in various nations, but nevertheless ultimately officially signed on to by all the major parties of that now distant era, including the USA and the then existing USSR.  Many did not take it seriously, including individuals in the US State Department as late as 1986, when at the Reykyavik, Iceland summit those who were legally engaged as were me and my now wife, Marina Rostislavna Vcherashnaya Rosser (not to be imprecise here, although there are alternative transliterations of her last name from the Cyrillic) were not supported by the US negotiaters, despite a personal promise made to me at the time by then Deputy Secretary of State, John Whitehead.
      This would lead to me not too long after having a showdown with Thomas Simon, the Assistant Secretary for European Affairs, over this matter, after Whitehead's promise in front of a large group of people over this matter, with me holding a press conference in front of the State Department in which I publicly denounced both the US and USSR governments for conspiring to keep people legally engaged to marry from marrying, and my wife Marina and I had become legally engaged to marry on November 13, 1984 at 3 PM according to the Soviet Ministry of Marriages, "ZAGS."  I crucially had a piece of paper documenting this, which did not happen because the Soviet government refused to let me have a visa to re-enter the country to marry her at that time, after having received the official permission to do so in writing at that time from ZAGS.  We were unable to marry at the designated time, and my then legally designated fianceee, Marina, was subsequentlny fired from her job as a Senior Economist at the Institute for World Economy and International Relations (aka IMEMO).  Only on April 4, 1987 would she be allowed to go to the US, with us marrying finally on May 24, 1987. 
      We were the first such marriage to be allowed after much personal suffering and international protest. We were the first to be approved,with the US State Department finally supporting us after protests by me and others. Our case rewrote the rules, although it would still take lovers to provide written evidence of their having been blocked from legally getting married abroad to receive US official approval and support officially as well as in Helsinki in 1975.  Needless to say, we fully support the extension of this right to same sex couples, which the most recent court rulings appear to be about to allow such marriages to take place in Virginia. We look forward to celebrating with our friends who will be marrying soon here.

Barkley Rosser

Common Pools and Wage Funds -- A Reply to Simon Wren-Lewis

Simon Wren-Lewis raises an extremely important issue regarding Inequality and the common pool problem: "there is a clear connection between the rise in incomes at the very top and lower real wages for everyone else."

Wren-Lewis explains the common-pool problem as being "about how the impact of just one fisherman extracting more fish on the amount of fish in the lake is small, but if there are lots of fishermen doing the same we have a problem." This needs a bit more explanation. The problem has to do with the difficulty of excluding fishermen (or limiting the catch of any particular fisherman) and with the limitation on the amount of fish in the lake. The essential reference on this is Elinor Ostrom's discussion of common-pool resources.

Two caveats: difficult does not mean impossible and limited doesn't mean non-renewable or fixed in quantity.

When it comes to income, it is easy to get lost in a money illusion. Yes, incomes are measured and paid in money amounts. But what they provide are rights of access to material things -- goods and services, "the power of purchasing; a certain command over all the labour, or over all the produce of labour, which is then in the market" (Smith).

Nominally, the amount of income can increase without limit. But in real terms, increases in income are constrained by the amount of goods and services available in the market. That last qualification, the amount of goods and services available in the market, has led to a prodigious amount of confusion in economic thought. The classical wages-fund doctrine assumed that the amount of wage goods available at any given time was fixed. Accordingly, if one group of workers formed a union to enforce a wage increase, their gain would be at the expense of other workers.

The amount of goods and services in the market at any given time is not fixed. But the key to the confusion is not the stipulated quantity but the imaginary temporal dimension of a "given time." Zeno's paradox of the arrow involves the same logical conundrum of dividing time into points.

In 1869, W. T. Thornton argued persuasively that the wages-fund doctrine was erroneous and John Stuart Mill concurred and "recanted" the wages-fund doctrine. Exactly what Mill recanted may be in dispute but that is beside the point -- the classical doctrine was consigned to the dustbin of history of political economy. Or so we are told...

By virtue of one of the most miraculous metamorphoses imaginable, the old wages-fund doctrine, used by polemicists as a club against unions demanding higher wages was transformed into the theory of the lump-of-labor, allegedly assumed by trade unionists, whose fallacy was used by economists as a club against unions demanding higher wages. "Heads I win" seamlessly became "tails you lose."

But, getting back to Wren-Lewis, isn't his contention that higher executive pay "has to come from somewhere [that is, from the other 99%]" a reversion to the wages-fund -- or lump of labor -- doctrine/fallacy? No, it isn't. But this requires more explanation. There are not one, but two illusions at work here. One is the money illusion. The other is the point-in-time illusion. Combined, these two illusions constitute a powerful temptation to cognitive dissonance.

To dispel those two illusions, let's first go back to Adam Smith's definition of wealth: "a certain command over all the labour, or over all the produce of labour, which is then in the market." 'Labor' appears to refer to a definite quantity and 'then' appears to refer to a definite point in time. Labor is not, however, a discrete distinction and a "point" in time is strictly conceptual. The amount of work to be done at any point in time is not only "not fixed" it is also not "an amount."

Just as with Zeno's arrow, no labor is performed in a "point in time." Labor can only be performed over a duration, be it an hour, a day, a week, a year or a lifetime. Furthermore, the amount of labor performed by one person during any interval of time is variable. It is not infinitely variable but it is flexible within certain definite limits. The expression labor-power indicates this characteristic of labor as potentially equivalent to a given quantity of production.

So, we can now amend Smith's definition as follows: income represents command over a portion of the labor-power in the market during a given extension of time. This definition could be further refined but the point that I want to get to is that it is the labor-power that constitutes the common-pool resource. The amount of goods and services that corresponds to this amount of labor-power is not fixed -- but neither is it "infinitely" variable.

The extent to which real GDP may vary depends on people's capacity to work, on their motivation and on their opportunities for employment, all of which may be affected by the distribution of income. In other words, great inequalities of income may well diminish the common pool of goods and services -- and ultimately of labor-power itself -- from which incomes are derived.

That is, executive pay may be taking a bigger slice of a pie that is smaller than it would be if executives weren't taking such a big slice of it. Or to put it bluntly, they may be being richly rewarded for a negative contribution to social production that results from their excessive incomes!

There is much more that can said (and has been said) about both the implications and the background of the analysis of labor-power as a common-pool resource. I will pause for now to see how the conversation unfolds.

SCIOD 7: The Frankenstein Factory

Andrew Ure's The Philosophy of Manufactures owes a considerable debt to Tufnell's Royal Commission report. The books 150-page third section, "Moral Economy of the Factory System" relies almost entirely on evidence from the Tufnell report. Ure shared Tufnell's antipathy toward trade unions and makes no secret of his admiration for this "masterly report" by a "most able and candid observer." So fond was Ure of Tufnell's argument that he adopted some of the text, word for word, without quotation marks or attribution.

Ure was trained as a physician but practiced medicine for only three years until he was appointed professor of chemistry and philosophy at Glasgow University. His writing on chemistry, displayed "a fatal facility… for discovering exact mathematical laws in a mass of inaccurate measurements."

In November of 1818, in collaboration with Dr. Jeffray, a professor of anatomy, Ure performed a series of galvanic experiments on the corpse of a freshly-executed criminal named Clydesdale. These experiments took place in the same year that Mary Shelley's Frankenstein was published. Speculation that Ure was the model for Victor Frankenstein, however, would be anachronistic since the novel was published in March, eight months before the experiments took place and even longer before they were publicized. Nevertheless, Ure's account of his experiments is ghastly and adds a further insight into his eagerness to leap to astonishing (and self-aggrandizing) conclusions based on flimsy evidence:

The subject of these experiments was a middle-sized, athletic, and extremely muscular man, about thirty years of age. He was suspended from the gallows nearly an hour, and made no convulsive struggle after he dropped; while a thief, executed along with him, was violently agitated for a considerable time. He was brought to the anatomical theatre of our university in about ten minutes after he was cut down. His face had a perfectly natural aspect, being neither livid nor tumefied; and there was no dislocation of his neck.
…
In the judgment of many scientific gentlemen who witnessed the scene, this respiratory experiment was perhaps the most striking ever made with a philosophical apparatus. Let it also be remembered, that for full half an hour before this period, the body had been well nigh drained of its blood, and the spinal marrow severely lacerated. No pulsation could be perceived meanwhile at the heart or wrist; but it may be supposed, that but for the evacuation of the blood,—the essential stimulus of that organ,—this phenomenon might also have occurred.
…
…by running the wire in my hand along the edges of the last trough, from the 220th to the 270th pair of plates: thus fifty shocks, each greater than the preceding one, were given in two seconds. Every muscle in his countenance was simultaneously thrown into fearful action; rage, horror, despair, anguish, and ghastly smiles, united their hideous expression in the murderer's face, surpassing far the wildest representations of a Fuseli or a Kean. At this period several of the spectators were forced to leave the apartment from terror or sickness, and one gentleman fainted.
…
In deliberating on the above galvanic phenomena, we are almost willing to imagine, that if, without cutting into and wounding the spinal marrow and blood-vessels in the neck, the pulmonary organs had been set a-playing at first, (as I proposed), by electrifying the phrenic nerve, (which may be done without any dangerous incision), there is a probability that life might have been restored. This event, however little desirable with a murderer, and perhaps contrary to law, would yet have been pardonable in one instance, as it would have been highly honourable and useful to science.

What makes this ghoulish, galvanizing episode relevant to Ure's Philosophy of Manufacture is the overarching use in that book of the body as a metaphor for the factory. It is not just any image of a body – an automaton body. Ure described manufacturing as having "three principles of action, or three organic systems: the mechanical, the moral and the commercial, which may not unaptly be compared to the muscular, the nervous, and the sanguiferous systems of an animal." Predictably, the mechanical system corresponds with the interests of the workers and should always be subordinated to the moral constitution," which is to say the factory owner. "The principle of the factory system this is, to substitute mechanical science for hand skill," with the eventual objective of eliminating skilled labor and replacing it with "mere overlookers of machines."

Ure's ideal, then is for the factory system to perform as a "vast automaton, composed of various mechanical and intellectual organs, acting in uninterrupted concert for the production of a common object, all of them being subordinated to a self-regulated moving force." Ure preceded this image of the automaton factory with three pages of discussion of automatons, including the "chess-player of M. Maelzel" which "imitates very remarkably a living being, endowed with all the resources of intelligence, for executing the combinations of profound study." Ure appears to have been unaware that the chess-player had been frequently suspected of being a hoax. His next paragraph, though, mentions a harpsichord automaton that "was found to contain an infant performer."

Although he mocked Ure as the "Pindar of the automatic factory," Karl Marx borrowed liberally from his imagery, only reversing its political polarity. The following passage from Capital is unmistakably a critical tribute to the central metaphors of Ure's vision:

An organised system of machines, to which motion is communicated by the transmitting mechanism from a central automaton, is the most developed form of production by machinery. Here we have, in the place of the isolated machine, a mechanical monster whose body fills whole factories, and whose demon power, at first veiled under the slow and measured motions of his giant limbs, at length breaks out into the fast and furious whirl of his countless working organs [emphasis added].

How To Turn Economic Loss Into Political Gain: Putin's War Economy

I have been struck by an outpouring of commentary on Facebook and elsewhere by professional economists just flabbergasted that Vladimir Putin has responded to the tightening of economic sanctions by the US and EU (and some other nations also) by all but forbidding food imports from those nations.  The flabbergast comes from realizing that the impact on the living standards of most of the Russian population will be noticeably hit by this move, with the total  economic costs to the Russian economy and population far exceeding (certainly in percentage terms anyway) the costs of this on the exporting nations, not to mention substantially exceeding the costs of the western sanctions put in place so far.  For the US, probably the worst hit sector will be poultry, where 7% of chicken exports go to Russia, where the frequently imported drumsticks are known colloquially as "Barbara Bush legs," a reminder that it was under George  H.W. Bush that the Cold War came to an end the Soviet Union collapsed, not during the presidency of Ronald Reagan, as many Americans seem to believe.

In today's Washington Post, a column by Masha Gessen, "Putin's War Economy," explains what is up and how Putin is making political hay out of all this.  The crucial quote is "Russians are to think of their losses as heroic sacrifices made for the war effort."  This becomes a way of reinforcing the narrative that has been relentlessly propagated to the population that this is the Great Patriotic War (aka WW II) redux, that the Ukrainians are a bunch of fascists, and so just like their forebears, patriotic Russians must do without to overcome the evil fascist foreigners.  Most Russians probably will go along with this, as most are apparently buying what has already been sold, even when this amounts to looney bin stuff such as the seriously reported claim that the bodies in the MH17 flight were already dead, and were shot down by Ukrainian fighter planes anyway. (I do note that one of the minority parties in the Ukrainian government, Svoboda (ironically meaning "Freedom") can be reasonably accused of being effectively neo-fascist.  But then the same can be said about several parties in Western Europe that are loudly supporting Putin, such as France's National Front.)

Gessen adds a further twist I had not seen reported on elsewhere.  Along with the banning of many food imports (and it must be recognized that some of these foods can be obtained from nations not under the ban), PM Medvedev has also banned free Wi-Fi in restaurants.  Gessen says that a sub-text of all this is attacking "the cafe society" in Moscow where those who know foreign languages and have access to foreign media and have demonstrated in the past against Putin hang out and hatch their plots.  Some of the fancier food imports that are coming, which also grace the tables in the fancy restaurants where some of these intelligentsia dissidents do their internet plotting, mostly go to Moscow and St. Petersburg.  The solid rural supporters of Putin who might see their farm products selling for higher prices will not be negatively affected by not being able to buy "Italian mozzarella, Australian rib eye, Finnish yogurt and even cheap American drumsticks."  Those unpatriotic big city whiners can take the hit and also be partially silenced at the same time.  Let them eat good Russian bread and potatoes!

Barkley Rosser

Why Is Green Politics a Virtual Oxymoron?

These thoughts are occasioned by reading Crow Planet by Lyanda Lynn Haupt, this year’s mandatory all-campus reading at my college.  (I had nominated Behind the Beautiful Forevers, but common readings aren’t allowed to be downers.)

In many ways this is an admirable book.  It’s rather well-written.  I learned a lot about crows, which is important because I probably see them more often than any other animal except humans.  It also reminds us that nature is not some exotic place we have to travel to get to, but is all around us—and within us—all the time.  Good!

But it is also suffused with a sort of pop environmental psychology that is the bane of green politics, or more precisely, makes rational green politics a non-possibility.  Here is my caricature of this view of the world:

Modern people are surrounded by artificiality—artificial goods, artificial jobs, artificial needs—that make it difficult to realize our place in nature.  This is why we have screwed up our environment.  The solution is for each individual to cultivate a true appreciation for the natural world.  We should learn about the environment, beginning with our local ecoregion, and how each of our actions affects it.  We should develop a consciousness, or even a spirituality, based on the intricate web of interconnections that tie us to all of nature.  In doing this we will obtain wisdom for ourselves and become agents for the social change that’s needed to halt ecological destruction.

Sound familiar?

The insidious thing is that it’s not all wrong.  It is a good idea to learn more about your surroundings and your place in them.  Paying attention to other living things, individually and collectively, can be deeply satisfying.  There is probably truth to the notion that it’s not enough to just have an intellectual understanding of a problem, whether social or environmental; there also needs to be a passion that turns understanding into action.

But there are also two enormous problems with pop ecopsychology.

First, by exalting the select few with advanced ecological consciousness, it implicitly denigrates everyone else.  If acquiring personal ecological wisdom is the path to solving environmental problems, those not undertaking this journey must be the ones making the problem worse.  And who are these despoilers?  You know, the people who drive big cars or eat fast food or live in suburban housing developments.  They have a bad lifestyle, and the good, ecologically aware people need to either enlighten them so that their consciousness changes or force them to live more in harmony with the Earth.

My advice: if you want to make political change, you don’t start out by defining everyone who is not part of your movement—a substantial majority of the population in fact—as evil or benighted.  It’s not a great strategy for outreach.  In addition, there is something to be said for observing your fellow humans with the same open-mindedness you should bring to crows and spiders.  You might just find that there are plausible reasons why people drive big cars or eat fast food or live in the burbs.  That doesn’t mean their consumption patterns don’t have broader effects or are even in the best interest of those that engage in them, but they are not products of pure ignorance either.

  

The second problem is that, by passing immediately from individual consciousness to collective problems (like climate change), pop ecopsychology simply eliminates any role for the things that social scientists study, like social norms, economic interests, political structures, etc.  The notion that environmental problems stem from shortcomings of consciousness and that solutions depend on individual transformation is essentially religious.  In fact, the crow book makes repeated comparisons between the acquisition of eco-consciousness and the monastic discipline of the Benedictines.

Preaching to others that they might acquire the elevated level of consciousness you have already attained is not a political strategy.  At least since Aristotle, the terrain of politics has been understood as the “we”, the networks, structures, and interests that we jointly create and that create us.  Yes, the personal is political, but the opposite is not true: the political is not just the personal added up.  It’s something we do together, finding common interests across our myriad differences.

SCIOD 6: A Trick! Of the Clumsiest Description!

Peter Ewart acted as conduit for another cultural transmission, this one political-economic rather than mechanical. If Grimshaw's mill hadn't burnt down, it is likely that Edmund Cartwright would have profited significantly from the enterprise and there would have been no occasion for the petition to parliament on his behalf. By the early 1830s, workers' anxiety about being displaced by new machines or by downturns in trade was channeled into proposals for reducing the hours of work rather than into frenzies of machine breaking. Cotton spinning was almost entirely industrialized and weaving was well on its way. The growing population of factory hands was approaching parity with that of the rapidly declining handloom weavers.

In April 1833, the governing Whigs in the U.K. appointed a Royal Commission on the employment of children in factories to head off legislation for a ten-hour day supported by a coalition of Tories and Radicals in Parliament. At the end of November, the Society for the Promotion of National Regeneration met in Prince's Tavern in Manchester and issued a manifesto calling for an eight-hour day. Such calls for shorter hours of work were denounced in the supplementary Royal Commission report of Edward Carleton Tufnell, assistant examiner, as "schemes for the advancement of wages":

They [the factory workers] see that the fixed expences [sic] of the establishment remaining the same, and a smaller quantity being produced, the prices of the cotton goods would probably rise. A rise of prices they have usually found to cause an increase of wages, and therefore they conclude that a rise of prices caused by. the Ten Hour Bill will do so: thus committing the blunder of confounding a rise caused by increased demand with a rise caused by increased difficulty of production… They go on to argue, that, in consequence of less being produced, new mills will be erected to supply the deficiency; that this will cause a demand for fresh hands; and thus the workmen out of employ will be engaged, and prevented from beating down wages by their present competition for employment. So the Ten Hour Bill is to cause all to be in work for ten hours instead of twelve, and wages are to be the same for the former time as the latter. 

Tufnell went on to write the influential anti-trade union tract, Character, Object and Effects of Trades' Unions, which repeated and amplified the allegations of a nefarious ulterior design whose logic was based on fallacious opinions. The source for Tufnell's claims undoubtedly came from Peter Ewart's testimony before the Royal Commission – not from the factory workers themselves – and specifically from Ewart's answer to Tufnell's question, "What do you suppose to be the chief motive for the operatives here advocating the Ten-Hour Bill?":

Many of them expect to receive the same wages for ten hours as they now receive for twelve. The mule-spinners earning high-wages appear to be almost the only class of workpeople in this quarter who are in favour of a ten-hour bill. Many of that class have been thrown out of employment in consequence of their combinations to keep up nominal high wages. Their earnings are greatly encroached upon by the contributions they are compelled to make for the support of those who are unemployed, and they imagine that if the hours of work are to be limited to ten, new mills must be built to supply the diminished quantity of yarn, and that the unemployed hands which they now have to support will then be employed in these new-erected mills. This expectation is obviously fallacious, as the cost of yarn and cloth produced would be so much increased by the same expence [sic] of fixed capital falling on a smaller quantity that the demand cannot be expected to continue, especially as we have to meet the competition of foreigners who are working longer hours, and at much lower charges.

In Character, Object and Effects of Trades' Unions, Tufnell rendered Ewart's tale in the following manner:

The Union calculated, that had the Ten-hour Bill passed, and all the present factories worked one-sixth less time, one-sixth more mills would have been built to supply the deficient production. The effect of this, as they fancied, would have been to cause a fresh demand for workmen; and hence, those out of employ would have been prevented from draining the pockets of those now in work, which would render their wages really as well as nominally high. Here we have the secret source of nine-tenths of the clamour for the Ten-hour Factory Bill, and we assert, with the most unlimited confidence in the accuracy of our statement, that the advocacy of that Bill amongst the workmen, was neither more nor less than a trick to raise wages -- a trick, too, of the clumsiest description; since it is quite plain, that no legislative enactment, whether of ten or any other number of hours could possibly save it from signal failure.

Peter Ewart's speculation about what the workers' motives remained uncorroborated by any evidence from workers themselves. Nevertheless, it was elevated by Tufnell from a supposition (What do you suppose to be the chief motive…") to a fact, asserted "with the most unlimited confidence in the accuracy of our statement."

Ewart's supposition can best be understood as a rote recitation of the inverted form of our old friend, the wages-fund doctrine, "formed from the facts of a perfectly exceptional time," as James Bonar described it, "and on the strengths of two truths misapplied, the doctrine of Malthus (on Population) in its most unripe form, and of Ricardo (on Value) in its most abstract." Jane Marcet's fictional 1816 conversation on what determines the rate of wages remains the clearest exposition of the doctrine, as well, perhaps, as its origin:

Caroline: …what is it that determines the rate of wages 

Mrs. B: It depends upon the proportion which capital bears to the labouring part of the population of the country. 

Caroline: Or, in other words, to the proportion which subsistence bears to the number of people to be maintained by it? 

Mrs. B: Yes; it is this alone which regulates the rate of wages, when they are left to pursue their natural course. It is this alone which creates or destroys the demand for labour.

Ewart disagreed with the workers' objectives, so he simply assumed that their motives were based on the opposite of what he believed was the correct analysis. There is too much symmetry in this assumption, as well as too much certainty. As Chapman later observed in his history of the Lancashire cotton industry, "those who advocated shorter hours, both in this period and later, found also many sound reasons for their action in the expected effect on the health and comfort of the operatives." Moreover, the cogency of the wages-fund doctrine was already being challenged in the radical press of the 1820s, long before Mill's recantation. Thomas Hodgkins, for example, argued that consumption articles for workers are not accumulated in advance as a stock but are constantly replenished as a flow.

The purpose here, though, is not to quarrel with the wages-fund doctrine or its shadow, the fixed-amount-of-work fallacy, or to uphold some alternative argument. Rather, it is a matter of tracing the career of the argument. From whence came it and how did it got credentialed, amplified and promoted until it was accepted as unquestioned and unquestionable axiom of economic science. Whether right or wrong, Ewart's and Tufnell's suppositions about workers' motives and their interpretations of political economic doctrine were transparently partisan and overtly hostile toward collective action by workers. Tufnell's framing of the underlying motives of trade unions – sometimes his exact words – echo through the works of subsequent writers hostile to trade unionism such as Andrew Ure, John Ramsay McCulloch, Edward Baines and James Ward (who plagiarized entire passages from Tufnell's book in the 1860s).

The Continuing Effort To Properly Credit Lionel McKenzie Regarding General Equilibrium Theory

One of the bigger long-running scandals in the economics scientific credit game has been the downgrading of the role of the late Lionel W. McKenzie in proving the existence of a competitive general equilibrium, generally credited to Arrow and Debreu.  Roy Weintraub, who has championed McKenzie's cause for over 30 years, has a new book out with Till Duppe from Princeton University Press, _Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit_, which reveals fresh details about the matter.  David Warsh at economics principals has written an interesting summary with solid background, with Mark Thoma also linking to Warsh's excellent account (sorry I am failing to get the direct link to Warsh's account working, titled "The Startling Story behind a Famous Footnote").

The big new news from this book is about the role of Debreu in delaying the publication of McKenzie's paper and also suppressing knowledge of it, particularly to his coauthor, Kenneth Arrow (who, arguably, should have found out about the paper on his own).  McKenzie's paper was finished first and even though Debreu as referee for it at Econometrica delayed it, it actually came out one issue ahead of the slightly more general paper by Arrow and Debreu.  McKenzie cited their paper, but theirs did not cite his, which had been presented a day before theirs at a 1952 Econometric Society conference, with Debreu attending McKenzie's talk, which Arrow did not do, and Debreu not tellling Arrow about it.  Of these parties, only Arrow remains alive.  BTW, while it may be less general, McKenzie's proof is quite a bit simpler and has shown up in some textbooks over the years.

Weintraub also reports that McKenzie long ago accepted that he was going to get less credit and be forgotten largely, taking a philosophical attitude and noting all the famous and deserving people who never got the Nobel Prize in their fields.  More power to him on that, although one must feel sorry about the whole thing, with Weintraub attributing this to a "Matthew Effect" of who is already rich gets richer and who is poor gets poorer.  Weintraub continues to campaign that general equilibrium should be called "Arrow-Debreu-McKenzie" (or ADM), but with only a few people following his advice on this, even though properly it should be called "McKenzie-Arrow-Debreu."  This is definitely a case of somebody getting the shaft big time, although it is not the only such case out there, but then this is one of the most influential ideas in all of economics, so a pretty big deal.

I shall add an arguably irrelevant but ironic anecdote from personal experience about McKenzie and the economics Nobel.  It dates to my first attendance at an AEA meeting in Dec. 1973 in New York.  I remember that I was in an elevator in the Hilton and was randomly in there with Lionel McKenzie (I saw his name badge) and somebody else I did not recognize the name of.  I knew of McKenzie and even at that time about how he had gotten screwed over on this matter.  He and his companion were discussing the economics Nobel (please, no comments on how it is really the Swedish Bank Prize, I know, I know), and I note that this was just four years after the prize had been established.  Most of the "big trees in the forest" had not yet gotten it, although Arrow had, shared inappropriately with Hicks, so the fix was already in regarding what would happen to McKenzie (Debreu got it later by himself).

So, McKenzie argued to his friend that the next recipient would be Joan Robinson, and that the committee would give it to her for her 1933 book, _The Economics of Imperfect Competition_, which would certainly have been a justifiable award.  He then rather sarcastically commented that he expected her to reject the award for not being for her later work, leading to the two of them laughing quite a bit, although as far as I was concerned she also deserved it for her later work as well.  That was it as they then left the elevator.  Of course, neither Robinson nor McKenzie ever got the award, but I have always heard that she did not get it partly because of her politics and partly because of their fear that she would engage in some combative misbehavior from their perspective.

Barkley Rosser

The Pathos of Aggregate Demand Management

"One way to understand Keynes's General Theory is that Say's Law is false in theory but that we can build the running code for limited, strategic interventions that will make Say's Law roughly true in practice." Brad DeLong, January 14, 2009 

"One way to think about the Federal Reserve’s mission is that it’s job is to try to make sure that spending is matched to production–to make Say’s Law true in practice, even though it is not true in theory."  Brad DeLong, February 24, 2014 

"Why Hayek could not see with everybody else–including Milton Friedman–that the Great Depression proved that Say’s Law was false in theory, and that aggregate demand needed to be properly and delicately managed in order to make Say’s Law true in practice is largely a mystery." Brad DeLong, August 9, 2014 

"The working class is either revolutionary or it is nothing." Karl Marx.

Adam Smith's "obvious and simple system of natural liberty" like Karl Marx's class struggle conception of history, relied on the semi-autonomous (some might say 'mechanical' or 'self-adjusting') action of an institution. In Smith's case it was the market. The individual "intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." Say's Law presumably explained the mechanism by which individuals' production is transformed automatically into demand for the aggregate of what is produced.

Is the economic system 'self-adjusting', as the classical analysis suggested? Keynes clearly thought not.

On a second question, whether the required adjustments could be achieved through government policy, Keynes was more optimistic, although somewhat equivocal. He wrote, for example, a sarcastic allegory about people desiring the moon and having a central bank that produces green cheese, which it tells them is the same thing. He agreed with J. M. Clark's worries about the danger of a Keynesian 'school' growing up, which might indiscriminately apply a single policy formula "to conditions by no means parallel."

There is a deeper theoretical breach in the notion of simulating a self-adjusting economic system through government policy, though. The managed system can no longer be regarded as "obvious and simple" or as "natural." Thus the traditional rationale for the market system loses any legitimacy that it obtained from those claims. This argument deserves to be worked out in detail for Keynes and Keynesianism but a parallel instance was elaborated brilliantly for Marx and Marxism by Harold Rosenberg in "The Pathos of the Proletariat," published in the Autumn 1949 Kenyon Review.

To paraphrase Rosenberg's argument in terms of DeLong's rhetorical figure of making what is false in theory true in practice: "the Party's mission was to make Marx's theory of the proletariat as the revolutionary subject of history true in practice, even though it was (at least provisionally) false in theory."

For the sake of reading flow, I've taken the liberty of condensing key excerpts from Rosenberg's essay without indicating ellipses. The passages below represent around ten percent of the essay. 

Excerpt from "The Pathos of the Proletariat," by Harold Rosenberg"

The hero of history was to be a social class, a special kind of collective person. The German Ideology describes a class in general terms. As distinguished from other unions, "there exists," says Marx, "a materialistic connection of men with one another." Yet, though it is the basic bond among men, the class is not a mere collection of human beings. "The class in its turn achieves an independent existence over against the individuals." Corporeal and combative, the class stands apart from them and impresses them into an adventure of its own. 

History for Marx is the history of just such separated non-human entities. It is neither the history of individuals nor the history of ideas. Precisely because it is the history of the non-human classes must history be brought to an end. And for the same reason, only the class "character" can perform the act that will terminate it. 

Upon closer consideration, however, we note that these "mere personifications" are not, as such, historical actors but metaphors of political economy. They represent what Marx calls in the same passage the "peculiar traits" of capitalist production. They are like those little figures that illustrate statistical charts. Dramatically, they belong to the order of types in melodrama or the morality play. 

But it is the peculiarity of Marx's "political economy" that he sees this class [the proletariat] as destined to alter completely the conditions that created it. 

Within the movement of capitalism Marx might predict the general direction of certain processes -- concentration of capital, accelerated crises, etc. -- but he cannot predict the total historical situation of the masses, which includes the history of their consciousness of themselves in their situation, or their lack of it. Yet nothing less than this total situation can be meant by "existence" in its determination of consciousness.

Marxism must therefore admit that it can predict nothing concerning the consciousness of the proletariat and hence of its action, in which case the proletariat remains an hypothesis and not a certainty; or it must reduce the situation to a given number of external elements, definable in advance, and thus become identical with what is known as "vulgar materialism" or "mechanical Marxism."  

The failure of the situation to give rise to revolutionary consciousness leads Marx and Marxists to a second type of effort to guarantee the revolution: through politics and propaganda. 

For Engels in 1893 the continuity of the revolutionary movement no longer depends upon the reflexes of a proletariat that has been forced into revolt; it is no longer subject to the intermittences of the heart and mind of the working class. 

Instead of learning in action, the working class is put to school by the Party; it marches with its will in the secure custody of the leadership. Marching has indeed replaced revolutionary action, the movement which was to have been the source itself of the "alteration" of the workers. 

Was Engels' conversion of Marx's drama of history from an order assumed to be inherent in events into a didactic fable of socialist politics a betrayal of the master's thought a decade after his death? In no respect. Marx, too, had attempted to overcome by political means the laggardness of existence in producing revolutionary consciousness. 

But having translated class consciousness from tragic self recognition into political tutoring, Marxism is haunted by its philosophical premises. If its analysis is the consciousness of the socialist revolution, whose existence determines this consciousness? The class's? Or the Party's? Or is it undermined by both? So long as Marx could say, "The great social measure of the Commune was its own working existence," it was clear that theory was subordinate to the concrete action of the class and that communism was in truth attempting to be the intelligence of "the real movement that abolishes the present state of things." Once, however, class spontaneity has yielded to steady marching at the heels of the Party, the latter must look to itself as the source of historical consciousness, since it is it that experiences while the masses are undergoing the "long, persistent work" of learning. But if its own existence guides it, the Marxist Party is "an independent being" and its theory a mere ideology. In that case the high claims of socialism for the release of human individuals into unlimited creativity through the "self-activity" of the proletariat are no longer legitimate. Those hopes rested upon the origin of the collective act in history itself, in the reflex of the individuals of the class to their concrete situation, rather than, as formerly, in a separated community or ideal; but now socialism has produced its own illusory community and independently existing creation of the mind.  

Thus in the heart of Marxism a conflict prevails between metaphysics (existence determines consciousness and defeats all preconceptions) and politics ("we can initiate measures"). The "dialectical" overcoming of this conflict through combining its messianism of total liberation with guidance of the masses as an "army" results logically in a politics of hallucination. In Marx's "we can initiate measures which will later appear as spontaneous movements" -- this sentence shows the actual content of the synthesis of spontaneity and control -- a new principle is making its appearance, though dimly. It is neither the materialist principle of the primacy of existence nor the idealist one that action has its source in thought. It suggests that action can release a revealed destiny which both dominates existence and precedes thought. With the affirmation of this power we stand at the verge of 20th Century political irrationalism. 

Primarily, destiny-politics consists of a demonic displacement of the ego of the historical collectivity (class, nation, race) by the party of action, so that the party motivates the community and lays claim to identity with its fate and to its privileges as a creature of history. In What Is To Be Done, Lenin begins by denying that the proletariat can be an independent historical actor; for him it is a collective character with a role but without the revolutionary ego and consciousness necessary to play its part. Its struggles are but reflexes of economic contradictions which can never of themselves result in revolution. The giant figure of the proletariat is doomed to remain a personification of exploitation and misery until it is possessed by an alien subject that will send it hurtling along its predestined path. This conscious and active ego is the Bolshevik Party of "scientific" (destiny-knowing) professional revolutionaries. In the most literal sense the Party's relation to the class is demoniacal; after a series of paroxysms the collective body of the class is inhabited and violently moved by a separate will which is that of another group or even of one man. Lenin uses the word "subjectivity" to mean precisely the Party and its decisions.  

Political Marxism demands for itself the metaphysical privileges of class action. The violence of the "vanguard," having become "dialectically" the act of the proletariat, justifies itself by the existence of the workers as victims of the wage system. Any attack upon that system by Marxist intellectuals and wielders of power becomes a liberating movement on the part of the class. Thus the Party need not account for the means it employs -- all the more so since its program is taken to be identical with the reality which is the ground of all future values. It even denies that the form of its organization is a "principled question" -- to be totally authoritarian does not prevent its being totally democratic, since its acts are the acts of the proletariat and the proletariat is, by definition, the demos.  

As a liberating program Marxism founders on the subjectivity of the proletariat. So soon as it declares itself, rather than their common situation, to be the inspiration of men's revolutionary unity and ardor -- how else can it offer itself simultaneously to the French working class and to non-industrial French colonials? -- Marxism becomes an ideology competing with others. When fascism asserted the revolutionary working class to be an invention of Marxism, it was but echoing the Marxist parties themselves. If the class as actor is a physical extension of the Party, fascism was justified in claiming that a magical contest in creating mass-egos could decide which collectivities are to exist and dominate history. Moreover, it proved that heroic pantomime, symbolism, ritual, bribes, appeals to the past, could overwhelm Marxist class consciousness. What choice was there for the workers between the fascist costume drama and a socialism that urged them to regard their own working clothes as a costume? In Germany and Italy the working class was driven off the stage of history by the defeat of the Party -- in Russia it was driven off by its victory.

Maternity Leave and Women’s Career Prospects

There’s an article in this morning’s New York Times that summarizes some recent research on the effects that maternity leaves, paid and unpaid, have on women’s subsequent work—whether they return to the (paid) labor force, and what the long term effects are for their advancement in career ladders.  It’s obvious, for starters, that economics can go only so far in overcoming deeply-seated cultural patterns.  If women are believed to be responsible for raising children, there can be no magic remedy for the inequalities this implies for other aspects of life.

That said, here are two thoughts.  First, from a social equality point of view, as well as an economic one, leaves should be replaced by subsidized or publicly-funded childcare as soon as it’s practicable—the French model.  It works in France and should be extended everywhere.

Second, even if cultural norms result in women, rather than men, doing most of the parental leaving in the months after a new child is born, there is no reason why this time must be dead space from a career development perspective.  Here there is a role for public subsidy or provision of at-home education and training programs.  Having a child can be an opportunity to take a break from the day-to-day routine of work and retool in areas that can boost economic opportunities after the leave is over.  There has been experimentation with this approach in Germany, where it is regarded as a promising tweak to maternity policy.  I couldn’t find a reference to link to; perhaps a reader out there can help.

Making Sense of Brad DeLong's "Making Say's Law True in Practice"

Mark Thoma at Economist's View links to Brad DeLong's post Making Sense of Friedrich A. von Hayek in which DeLong once again reiterates his bizarre notion about "making Say's Law true in practice although it is false in theory." "Say's Law" (which is neither Say's nor a law!) is not even false in theory -- it is self-contradictory nonsense -- a "liar's paradox."

Making Say's Law "true in practice" is not consistent with Keynes's critique of the vulgar classical notion that "supply creates its own demand." As Keynes pointed out in chapter 23 of the General Theory, "Notes on Mercantilism...," the rejection of the wages-fund doctrine undermined one of the foundations of Say's Law: "Mill's successors rejected his wages-fund theory but overlooked the fact that Mill's refutation of Malthus depended on it." Dudley Dillard called Say's Law a corollary of the wages-fund doctrine.

But it gets weirder. As the Sandwichman has explained ad nauseum, the so-called lump-of-labor fallacy is a version of the wages-fund doctrine attributed to unions by their critics. Moreover, a standard refutation of the fallacy invokes the claim that "supply creates its own demand." The following sentence is true. The preceding sentence is false. Liar's paradox.

Brad DeLong knows that the lump-of-labor and the wages-fund doctrine are homologous. He knows that the wages-fund doctrine is a "standard move in the rhetoric of reaction." We discussed it 15 years ago.

This discussion, retrieved from PEN-L archives from January 1999, began with a discussion of a Louis Uchitelle column from the New York Times about Robert Heilbroner and his dissatisfaction with the narrow focus of modern economics. I challenged Mankiw's claim that economists do positive economics without normative judgments, arguing that economists simply disguise their value judgments as "descriptive statements" that they've cherry-picked from the data.  DeLong asked me for an examples. After giving my example. the following exchange ensued:

Sandwichman:

But, Brad, while we're asking for examples, can you give me an example of any economist who has challenged the sources of Samuelson & Nordhaus's perennial lump-of-labor fallacy? If anthropologists were as accommodating as economists, Piltdown man would still be in our evolutionary family tree.

Brad deLong:

Samuelson and Nordhaus's "lump of labor" fallacy is the Classical doctrine that fiscal and monetary policy cannot affect the total amount of employment--that the number of hours worked is fixed, unchangeable, unresponsive to government policies. And that the best we can do (when confronted with a situation like Europe's 10% unemployment today, or America's 25% unemployment in the Great Depression) is to spread the (limited) amount of work around fairly. 

But what Samuelson and Nordhaus want to argue--I think correctly--is that we know very well how to get to a better outcome in which unemployment is low not because a lot of us are working part-time (when we would rather be working full-time), but because demand for labor is high...

Sandwichman:

Ah, now we're getting somewhere. Wouldn't that Classical doctrine be what is known as the wages-fund doctrine, Brad?

Brad deLong (ellipsis in original):

Yep. But it remains alive, a standard move in the rhetoric of reaction to use against demands that the government do something to make the economy behave better... 

Sandwichman:

You bet the wages-fund doctrine remains alive as a standard move in the rhetoric of reaction. One need only peel back the textbook onion one layer from Samuelson and Nordhaus to the Raymond Bye and William Hewett textbooks of the previous generation (1930s, 1940s, 1950s). There you find the same hoary lump-of-labor fallacy forthrightly likened to the "general overprodution fallacy". Here is Bye's explanation of why the lump-of-labor fallacy is a fallacy:

"Every laborer creates a product which is offered in exchange for the products of other laborers. The demand for labor thereby grows as fast as its supply; the one cannot be greater or less than the other, for they are the same thing." 

According to this explanation, then, any monetary or fiscal action of the government for the purpose of "creating jobs" is futile because all it can do is divert the means for employing labour from its natural course (determined by the identity of supply and demand), "at the expense of the other laborers who would have been employed, and at the expense of society, which has less wealth than might have been." 

I have another question, Brad, at what point in the history of political economy did the workers, trade unions, and social democratic politicians suddenly and inexplicably embrace the reactionary doctrine of the wages-fund? I'm puzzled because all I can ever find is attribution of this theory of the lump of labor to the workers, trade unions etc. On the other hand, I can find quite a bit of repudiation and denunciation of the wages-fund doctrine from socialists, trade unionists etc. Not the least from a certain K. Marx. 

Brad deLong (ellipsis in original):

that I do not know. Let me hunt around and see if I can find anything... 

Sandwichman:

I'd be much obliged. 

Brad must not have found anything. He never got back to me on that question. A year and a half later (August 2000), though, the question of the lump of labor arose again in Brad's admiration of some passages in Paul Krugman's book The Accidental Theorist.

Brad deLong (bracketed interpolations in original):

But my most favorite pieces of the book of all are three passages that go to the heart of Krugman's commitments--both moral and intellectual. The first is a biting denunciation of William Greider for being an "accidental" theorist: someone who does not think issues through, but who just looks at surfaces without peering into depths or thinking coherently and whose thought is thus shaped by implicit, unexamined theories of which he is not conscious:

" ...reducing the number of workers it takes to make [manufactures] reduces the number of jobs in the [manufactures] sector but creates an equal number in the [services] sector, and vice versa. Of course, you would never learn that from talking to [manufacturing] producers, no matter how many countries you visit; you might not even learn it from talking to [services] manufacturers. It is an insight that you can gain only... by engaging in [economic] thought experiments."

Sandwichman:

Ironically (and ironic is too mild a term for it), the position from which Krugman criticizes Greider is itself based on an implicit, unexamined theory of which he is not conscious. That accidental theory holds that increasing the volume of trade is the only and certain way to expand employment (and, by implication, raise wages).  

BUT WAIT! Krugman's own "accidental theory" has a name. And I'm sure he's heard of it. I know Brad has. It is the wages-fund theory of classical political economy [correction 2014: I should have said "Say's Law, which depends on the wages-fund doctrine"] -- sometimes referred to as the discredited wages-fund doctrine. So Krugman beats Greider over the head with a defunct doctrine and Brad applauds. 

This indeed reminds one of Keynes. To be exact, it reminds one of Brad's "most favorite" Keynes quotes:

 "Practical men, who believe themselves to be quite exempt from any  intellectual influences, are usually the slaves of some defunct  economist. Madmen in authority, who hear voices in the air, are  distilling their frenzy from some academic scribbler of a few  years back..."

Brad and I had a brief exchange about the wages-fund theory a while back and I quote his characterization of it: "Yep. But it remains alive, a standard move in the rhetoric of reaction to use against demands that the government do something to make the economy behave better..." Putting two and two together, then, one of Brad's most favorite pieces of Krugman is when he employs a standard move in the rhetoric of reaction. Hmmmm.  

But just to carp on this theme a few moments longer, I shudder to mention that Krugman's allegation against Greider (and it is only an allegation -- a speculation really about how his thought has been "shaped") is that he, Greider, is making a static assumption, ultimately based on what was once called (Wilson, 1871), a "Unionist reading of the wages-fund theory."

I asked Brad some time ago just when it was that workers, trade unions and social democratic politicians (not to mention populist  muckrakers) enthusiastically but implicitly embraced the reactionary doctrine of the wages-fund theory. He replied: "that I do not know. Let me hunt around and see if I can find anything. . ."  

Brad didn't get back to me on that.

Brad never got back to the Sandwichman on that question. So the Sandwichman had to hunt around and see if he could find anything...