Prior to his accession to the throne of the world's largest oil exporter yesterday, pretty much all reports one could find had then Crown Prince Salman ibn Abdulaziz ibn Abdul Rahman al Sa'ud as the Man In Charge during the final decline of his predecessor, the late King Abdullah ibn Abdulaziz ibn Abdul Rahman al Sa'ud, who died at the age of 90, having been born by all publicly available reports in Riyadh on August 1, 1924, reportedly not the fave son of his old man as his mother was the widow of the last al Rashidi Emir of Hail, the ancient family enemies of the Sa'ud family (bear with me, this is relevant later, really). However, if one googles Salman today, one finds that in fact his mind is "ravaged with dementia" or lesser claims of this sort, with many news sources simply reporting now as a fact that the new king of Saudi Arabia is "demented." Really?
So, it turns out that all these reports come from a single source, although when I sent it to the blog Crossroads Arabia they refused to print it, today's Washington Post, a story on A16 by Kevin Sullivan and Liz Sly, both of whom should be taken out and publicly flogged in Jama'a Square of Riyadh for writing one of the most incompetent stories ever to appear in that newspaper.
They quote a single source for the claim that Salman is as they claim, Baker Chair Holder at the Institute for Near East Policy, Simon Henderson, who used to be a reporter for the Financial Times, and who in 2009 wrote a book on Saudi succession. He is quoted as saying, "Having a king with dementia is the last thing they need at this difficult time...Yemen is falling apart, ISIS is knocking at the door...this is an extraordinarily dangerous Middle East from a Saudi perspective." Wow, hot stuff. Aside from the report on Salman nobody knew of this prior to his informing us of it.
So, I did some digging. While nobody else on the planet has provided such claims, Henderson has been putting this stuff out since late December when he reported that he had heard of people meeting with Salman, then Crown Prince with his predecessor in the hospital, telling him that Salman could talk sensibly for several minutes, but then would become "incomprehensible." Maybe, although it should be kept in mind that there was a battle royal going on behind the scenes with certain Saudi family factions trying to weaken Salman's claim on the monarchy at that crucial time.
So, just how credible more generally is Simon Henderson? Well, in his December report he was claiming that King Abdullah was 91 years old and that Salman was 78 years old. Every source I can find has, as I noted earlier, Abdullah being born on August 1, 1924, and Salman being born on December 31, 1935. I have seen no sources providing any other dates. You all can do the math.
How about WaPo? Well, it was bad enough that the authors of this story relied so heavily on the incredibly unreliable Henderson, but they also made even more elementary mistakes. So, in the very second line of the story they manage to misspell the name of the father of the dead king (and the new king) as "Adbul Aziz." He was Abdul Azis, although I prefer the more academic and widely used "Abdulaziz." Anyway, they got the b and d reversed in the name of the founder of the Kingdom of Saudi Arabia. This is like reporting on "George Wahsington."
Then these incompetent clunks report the age of the new Crown Prince, Muqrin ibn Abdulaziz ibn Abdul Rahman al Sa'ud, as 71. Every source I can find has his birth date as September 15, 1945. As I said earlier regarding the reporting by Simon Henderson of ages of Saudi royal family members, you all can do the math. One of the most incompetent articles ever published in the WaPo. Really.
So, what has happened since this demented king took power? Well, he has formally appointed Emir (Prince) Muqrin (also known as "Moqrin" and "Mogren") Crown Prince, despite his having a Yemeni concubine for a mother. Furthermore, he appointed his son, Mohammed, to succeed him as Minister of Defense and also to be Chair of the Royal Court. I have already reported that another son, Abdulaziz, is a Deputy Minister of Petroleum, and another, Sultan, was the first Arab in space going on a US space shuttle in 1985 and is now the Minister of Tourism and Antiquities, while another, Faisal, is Governor of Madinah province. What a loser, this demented king. Not on top of things at all. Just totally incomprehensible.
Furthermore, the second generation succession problem, regarding which enormous amounts of ink ha been spilled, and gobs of dollars have been spent on conferences declaring this problem could not be solved, not to mention Henderson's book, has been resolved by an announcement by this demented king. He has appointed a new Second Deputy Prime Minister, the oddly named position that has served since the now late Abdullah was appointed to it in 1982 after he threatened a coup by his SANG units, as the position from which one will become Crown Prince on the death of the current king, with new Crown Prince Muqrin having been in exactly that position until the clearly demented Salman moved him up to his current position. The new Second Deputy Prime Minister, and thus likely Second-in-Line to become Malik {King) of al Mamlaka as-Sa'udiya al 'Arabiya (the Kingdom of Saudi Arabia) is Mohammed ibn Nayef ibn Abdulaziz al Sa'ud, the first person to be in line for this position who is a son of a son of the nation's founder rather than being one of his 43 sons, of whom Muqrin is the youngest at (yes!) 69.
I had not had him on my short list, but he is of the several hundred grandsons of Abdulaziz ibn Abdul Rahman ibn Faisal al Sa'ud one who has some serious things going for him. His late father was Crown Prince until he died and was the hardline Minister of the Interior to which position his son succeeded when he died, and Nayef was the next to last to die of the "Sudairi Seven" sons of the favorite wife of the nation's founder, his first cousin, Assa as-Sudairi, with the last of those sons being the new king, the reputedly demented Salman. Adding to Mohammed ibn Nayef's cred is that in 2009 al Qaeda attempted to assassinate him, which, as some have noted means that he is obviously a serious person in their eyes. It took them awhile, but eventually the Saudi royal family figured out that al Qaeda was their mortal enemy.
In any case, probably this is all a show, cooked up previously by the 35 member Allegiance Council, set up by Abdullah some years ago to deal with the succession issue, and they acted ahead of time, which explains why gullible Simon Henderson was being fed half-baked rumors, foreseeing that the successor to Abdullah might not be 100% on top of things, so they really needed to get this all resolved before Abdullah died. We shall not know, but the secretive Saudis have clearly been more than one step ahead of the outsiders trying to report on their decisions, and certainly far ahead of the ludicrous Simon Henderson, not to mention the even more pathetically incompetent Washington Post.
Barkley Rosser
Update: A further note I should add is that arguments have been made that not only the accession of Salman, but most importantly the announcements of the new deputy Crown Prince and the elevation of his son to two powerful positions represents a victory by the powerful faction of the "Sudairi Seven" of whom Salman is the last living member. But, both Mohammed ibn Nayef and Mohammed ibn Salman are junior members of this faction. So, pretty clearly their elevation shows that the Sudairi Seven and more specifically their offspring, have won the succession struggle and are in charge.
In particular, the elevation of Mohammed ibn Nayef to be second in line to the monarchy as the first of the second generation to be so in line does put him ahead of some better known and powerful competitors. Curiously, one of the most well known rivals is Bandar bin Sultan, another offspring of one of the Sudairi Seven, who was born in 1949 compared with Mohammed who was born in 1959. Some of this may be a matter of age, and this certainly applies for some of the other rivals. In any case, Bandar's father was a full brother of both Salman and Nayek (and late King Fahd) and was Minister of Defense for decades and was named Crown Prince when Fahd died and Abdullah became king.
Furthermore, Bandar had long been one of the most powerful and prominent of the second generation, serving as Ambassador to the US between 1983-2005 (the year Abdullah became king). He has also served as Chair of the Security Council and was Intelligence Chief from 2012 to 2014. Close friend of the Bush family and a longtime heavy hitter, he was an obvious candidate for elevation. However, apparently he has been in conflict with various parties in Riyadh. He completely disappeared between 2008 and 2010, only to reappear in triumph. It has been rumored that despite his past friendship with Americans, he has advocated an approach more independent of the US, particularly with regard to Syria, where he advocated funding and supporting radical Sunni opponents of the Bashar regime. He was also a leader of those who criticized Obama for not following through on his threat to bomb Syria after the chemical war attacks. It may be that Bandar was removed from running Intelligence over these issues, and this may have also ended his chances for moving up, even if his father was Crown Prince before the full brother of his father who was father of the guy who did get moved up.
There is another faction of second generation leaders in Saudi Arabia, some of whom are the most powerful people in the nation, with all of them cut out. Probably the problem is age. I am referring to the sons of the most powerful and revered of all the 43 sons of the nation's founder, the late King Faisal, who was assassinated in 1975. In that year his second oldest son, Saud, born in 1940, was named Foreign Minister. Princeton-educated Saud is still Foreign Minister, by now by far the world's longest lasting Foreign Minister, and possibly the most powerful person in Saudi Arabia, aside perhaps from Salman. Rumor has it that he is not in good health and has tried to retire from his current position, but has remained in it at the strong urging from his family members. In any case, as his revered father's successor as Foreign Minister, he clearly could have moved up. But age and health have prevented him (Faisal's oldest son, Mohammed, is the Founder of the Islamic Development Bank and a world leader of the international Islamic banking movement).
Another of Faisal's sons is Harvard-educated Turki, born in 1945, who ran Saudi intelligence from 1979-2001, and has also served as Ambassador to both the US and UK. He has been a very public figured, commenting on Saudi affairs around the world. He seems to be in good shape, but he seems to suffer from a similar taint as Bandar, too much time out of the country and too much of a loose cannon not in synch with the family. In any case, he did not get it.
Finally, we have the "al Faisal" (these brothers now go publicly by that moniker as their last names, implying that they are a new family line separate from the al Sa'ud)., Khalid, born in 1940 and a half brother of Saud and Turki. He is in good health and currently Minister of Education as well as having previously served as Governor of Mecca and of another province earlier. At the time that the youngest of the first generation, Muqrin, was named Deputy Crown Prince a few years ago, rumor had it that Khalid was his main rival, even thought Khalid was older than Muqrin. Reportedly, Khalid had much favor with the late King Abdullah. But, in the end, the Allegiance Council, the 35 who decide these things, were not yet ready to bit the bullet and select someone from the second generation, instead giving the first generation one last round as king. By now, with Abdullah's influence gone, Khalid is too old, and for whatever reason, the al Faisals are not getting the ring, with a young member of the Sudairi clan getting it instead. If there was an ultimate showdown, this was probably it, between the Sudairis and the al Faisals, who have not been mentioned at all in any of the stories about the succession. In any case, they lost.
Saturday, January 24, 2015
Friday, January 23, 2015
The Economic Case Against the Keystone Pipeline
It’s pretty obvious. If there is meaningful regulatory action on climate change, a majority of existing fossil fuel reserves will stay in the ground. Given the carbon intensity of the Alberta deposits, their development will certainly cease. Any investments in them will become valueless.
Therefore the proposal to build the Keystone pipeline is a bet that climate action can be put off until there is a return on the investment. I don’t know how long its payback period is supposed to be, nor who picks up the tab if regulation turns off the tap before that point is reached. (This should be a journalistic priority, by the way.) I do know that (1) the resources devoted to this pipeline are real and will be indisputably wasted if policy shuts it down, and (2) those whose lives and livelihoods are sacrificed, like the Harrington sisters mentioned in this New York Times report, will have paid a price for no corresponding social good.
These are economic arguments, to be added to the environmental one, that building the pipeline, by expanding demand, will likely increase the extraction rate of a resource whose every barrel brings us that much closer to a climate nightmare.
Therefore the proposal to build the Keystone pipeline is a bet that climate action can be put off until there is a return on the investment. I don’t know how long its payback period is supposed to be, nor who picks up the tab if regulation turns off the tap before that point is reached. (This should be a journalistic priority, by the way.) I do know that (1) the resources devoted to this pipeline are real and will be indisputably wasted if policy shuts it down, and (2) those whose lives and livelihoods are sacrificed, like the Harrington sisters mentioned in this New York Times report, will have paid a price for no corresponding social good.
These are economic arguments, to be added to the environmental one, that building the pipeline, by expanding demand, will likely increase the extraction rate of a resource whose every barrel brings us that much closer to a climate nightmare.
Expect No Change In Oil Policy With The Passing Of Abdullah Ibn Abdulaziz Ibn Abdul Rahman al Sa'ud
Abdullah ibn Abdulaziz ibn Abdul Rahman al Sa'ud, king of Saudi Arabia from 2005 until some hours ago, has died at the age of 90. He has been succeeded already by the Crown Prince, Salman ibn Abdulaziz ibn Abdul Rahman al Sa'ud, age 79, last of the powerful Sudairi Seven I(one of whom, Fahd, preceded Abdullah as king), who served as Governor of Riyadh province from 1963 until 2011, when he became Minister of Defense on the death of then Crown Prince Sultan, another of the Sudairi Seven, the sons of the favorite wife (and first cousin) of their father, the founder of modern Saudi Arabia, Abdulaziz ibn Abdul Rahman ibn Faisal al Sa'ud, known widely as "Ibn Saud."
Salman has been replaced as Crown Prince by the youngest of the living 43 sons of Abdulaziz, Moqrin, age 69, who has served as a provincial governor, director of Saudi intelligence, and most recently as a deputy minister of defense, whose mother was from Yemen, a circumstance long thought to damage his chances for the succession. He is in far better health than the new king. There are two other sons left, Talal, born in 1931 and Ahmed born in1940, but Moqrin will almost certainly outlive both of them to be the last of the sons of the nation's founder. What this means is that when he finally dies, which could be a few decades from now, the nation will finally fully face the long simmering succession issue of which line of sons of Abdulaziz will become the new royal family line, with this possibly being faced sooner when Salman dies and a new crown prince must be named.
While Abdullah has often been described as a reformer or moderate within the family, both Salman and Moqrin probably deserve this label more than he did. In fact, prior to his accession, he was viewed as among the more conservative members of the Saudi royal family, very strict religiously and close in friendship with the Bedouin tribesmen. He had served since 1962 as the Commander of the Saudi Arabian National Guard (SANG), the tribally based military not under the Minister of Defense. In 1979 when ultra-fundamentalists took control of the Grand Mosque in Mecca, the conventional military was unable to dislodge them, but SANG eventually did. Its HQ was long on the personal palace grounds of Abdullah, and one of his sons succeeded him as its commander in 2010. His supposed reformism (allowing women to vote and participate in the Olympics and attend the university named for him King Abdullah University of Science and Technology, KAUST), reflected a sort of "Nixon goes to China" syndrome in that he had such a rep for conservatism and religiosity that he could get away with it, although he never did get around to allowing women to drive.
While will oil policy not change? One of the new king's sons, Abdulaziz ibn Salman ibn Abdulaziz al Sa'ud is the deputy minister of oil under current minister al Naimi. Without question he has been part of the targeting of the price of oil to be in its current price range of $45 to $50 per barrel that appears to be being enforced by the Saudis and is consistent with what they expected when they announced their planned budget in November. Salman has a reputation as getting along with the many factions of the royal family,after having built the capital city, Riyadh, into its current magnificence. He is certainly in agreement with the current policy, indeed, is rumored to have been effectively in charge of the Saudi government recently with the failing of his older half brother. The new policy of a target oil price between $45 and $50 per barrel most certainly had and has his approval.
Barkley Rosser
Salman has been replaced as Crown Prince by the youngest of the living 43 sons of Abdulaziz, Moqrin, age 69, who has served as a provincial governor, director of Saudi intelligence, and most recently as a deputy minister of defense, whose mother was from Yemen, a circumstance long thought to damage his chances for the succession. He is in far better health than the new king. There are two other sons left, Talal, born in 1931 and Ahmed born in1940, but Moqrin will almost certainly outlive both of them to be the last of the sons of the nation's founder. What this means is that when he finally dies, which could be a few decades from now, the nation will finally fully face the long simmering succession issue of which line of sons of Abdulaziz will become the new royal family line, with this possibly being faced sooner when Salman dies and a new crown prince must be named.
While Abdullah has often been described as a reformer or moderate within the family, both Salman and Moqrin probably deserve this label more than he did. In fact, prior to his accession, he was viewed as among the more conservative members of the Saudi royal family, very strict religiously and close in friendship with the Bedouin tribesmen. He had served since 1962 as the Commander of the Saudi Arabian National Guard (SANG), the tribally based military not under the Minister of Defense. In 1979 when ultra-fundamentalists took control of the Grand Mosque in Mecca, the conventional military was unable to dislodge them, but SANG eventually did. Its HQ was long on the personal palace grounds of Abdullah, and one of his sons succeeded him as its commander in 2010. His supposed reformism (allowing women to vote and participate in the Olympics and attend the university named for him King Abdullah University of Science and Technology, KAUST), reflected a sort of "Nixon goes to China" syndrome in that he had such a rep for conservatism and religiosity that he could get away with it, although he never did get around to allowing women to drive.
While will oil policy not change? One of the new king's sons, Abdulaziz ibn Salman ibn Abdulaziz al Sa'ud is the deputy minister of oil under current minister al Naimi. Without question he has been part of the targeting of the price of oil to be in its current price range of $45 to $50 per barrel that appears to be being enforced by the Saudis and is consistent with what they expected when they announced their planned budget in November. Salman has a reputation as getting along with the many factions of the royal family,after having built the capital city, Riyadh, into its current magnificence. He is certainly in agreement with the current policy, indeed, is rumored to have been effectively in charge of the Saudi government recently with the failing of his older half brother. The new policy of a target oil price between $45 and $50 per barrel most certainly had and has his approval.
Barkley Rosser
Wednesday, January 21, 2015
Econometric Ventriloquism
If you want to know what people believe, ask them. If you want to know what they believe about a complex and controversial policy issue, ask them lots of questions specifically about what their beliefs are about that issue.
Asking lots of people lots of questions is a lot of work. Wouldn't it be easier if we could infer their answers to other questions from their answer to one question? That's where econometrics comes in. By making a bunch of assumptions and calling some variables "control variables," you can get the survey respondents to give you answers to questions they were never asked. It's magic!
You've heard of "dummy variables"? Well, these are dummy survey respondents. And the econometrician gets to be the ventriloquist!
The other day, I ranted about an article by Achim Kemmerling, which purported to wring lump-of-labour blood from a Eurobarometer survey turnip about early retirement. Achim corresponded with me and he seems like a nice enough guy with good intentions. In my reply to him, I mentioned a survey of sympathizers and skeptics of work-time reduction I had done back in 1997 and offered to try to dig up a copy. Thanks to the Wayback Machine, I found my write up of the survey results, Sabbath of the Land, which I have converted to a pdf file and uploaded to Scribd. Re-reading it after nearly two decades, it impresses me as a substantive rebuttal to claims that support for policy "A" implies belief in idea "B".
Asking lots of people lots of questions is a lot of work. Wouldn't it be easier if we could infer their answers to other questions from their answer to one question? That's where econometrics comes in. By making a bunch of assumptions and calling some variables "control variables," you can get the survey respondents to give you answers to questions they were never asked. It's magic!
You've heard of "dummy variables"? Well, these are dummy survey respondents. And the econometrician gets to be the ventriloquist!
The other day, I ranted about an article by Achim Kemmerling, which purported to wring lump-of-labour blood from a Eurobarometer survey turnip about early retirement. Achim corresponded with me and he seems like a nice enough guy with good intentions. In my reply to him, I mentioned a survey of sympathizers and skeptics of work-time reduction I had done back in 1997 and offered to try to dig up a copy. Thanks to the Wayback Machine, I found my write up of the survey results, Sabbath of the Land, which I have converted to a pdf file and uploaded to Scribd. Re-reading it after nearly two decades, it impresses me as a substantive rebuttal to claims that support for policy "A" implies belief in idea "B".
Tuesday, January 20, 2015
Why Gossip Trumps Ideas
Nick Rowe kvetches:
I'm sure you could find a scientific paper on this but why bother. It's obvious. Gossip trumps ideas. You don't see scholarly publications on sale near the supermarket check out counter. What is that telling us? It tells me that people are more interested than anything else in what other people are saying about what other people are doing. Keynes's beauty contest. Mimetic desire.
Where do "expectations" come from? They come from hearing what other people are saying about what their expectations are. Or thinking you've heard what other people have said...
"What bugs or puzzles me is that this rather unoriginal and not very great post, which I nearly didn't bother publishing at all, is getting all the attention in the econoblogosphere, while my following post, on red money, which (I think) is far more original, and far more interesting, and a far better post, is getting almost none."Every once in a while I post something worthwhile that grabs a lot of views, sometimes even a few comments. Often, though, the views and comments are in inverse proportion to the originality and importance of the post. Sometimes I deliberately post trash talk just for the thrill of getting a few extra hits. Everything is data.
I'm sure you could find a scientific paper on this but why bother. It's obvious. Gossip trumps ideas. You don't see scholarly publications on sale near the supermarket check out counter. What is that telling us? It tells me that people are more interested than anything else in what other people are saying about what other people are doing. Keynes's beauty contest. Mimetic desire.
Where do "expectations" come from? They come from hearing what other people are saying about what their expectations are. Or thinking you've heard what other people have said...
The Luddites Had a Time Machine! (and other claims the truth or falsehood of which is not relevant)
According to Achim Kemmerling, a political economist at Central European University in Budapest, the truth or falsehood of claims is irrelevant ("The end of work or work without end? How people’s beliefs about labour markets shape retirement politics," Journal of Public Policy, Published online: 12 January 2015).
Now, I have taken Kemmerling's statement somewhat out of context. His original statement, with emphasis added to the parts left out, was:
What are those claims? The claims Kemmerling says he is investigating are:
A rash of subsidiary claims follow from those. The most important (for the purposes of Kemmerling's article) is that "some people believe in them." The second is that the claims are fallacies. A third is that the assertion that "some people" believe in these ideas is itself false or at least grossly exaggerated. The truth or falsehood of the claims being investigated is thus relevant at least to the extent of its bearing on these subsidiary claims.
Kemmerling extrapolates belief in the lump-of-labour idea from agreement with Eurobarometer survey question 68.1: "People in their late 50s should give up work to make way for younger and unemployed people." As he admits, the survey question "imperfectly proxies the idea of a trade-off between these two types of workers." Although he concedes "there is no perfect remedy" for this discrepancy, he maintains, "one can arguably control for alternative explanations such as norms."
That's nonsense. The word "arguably" must be construed as referring to plausible arguments. Kemmerling presents none. Instead, he reports on variations in responses from different sub-groups and speculates on norms that might account for those differences.These are not controls. These are excuses.
One can only marvel at the heroic lengths Kemmerling goes to to coax the sought after answer out of the recalcitrant data. But why on earth would he even bother if "it is not relevant whether the claims are true or false"? Despite that discrete disclaimer, Kemmerling assumes that the lump-of-labour is indeed a widespread belief and a fallacy and implies that it is an obstacle to presumably (from his perspective) more rational policy reform. More crucially he assumes that not just some but many people believe in the fallacious, obstructive idea. The tell-tale appears in his reference to the nineteenth century Luddites:
From Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu, James Robinson. page 85:
How did the nineteenth century Luddites burn down a mid-eighteenth century house? The obvious answer is they must have had a time machine (assuming that it is not relevant whether or not Acemoglu and Robinson's claims are true or false).
The claim about the Luddites is a historical claim, as is the claim about belief in a lump-of-labour fallacy. No amount of agnosticism about the truth or falsehood of claims or appeal to control variables for alternative explanations will enable a researcher to arrive at conclusions regarding subjects' beliefs about A from their answers to questions about B, especially if the researcher isn't aware that "beliefs about A" is an old, old fable with propagandistic origins.
Some more context:
Walker 2015 regrets that he was not aware at the time that Pigou (1913) and Dobb (1928) had beaten him to the punch with their respective ignoratio elenchi critiques of the supposed fixed work-fund fallacy (another name for the lump-of-labour). A.C. Pigou argued that it would:
Maurice Dobb's critique was more direct and decisive. He pointed out that even under the assumption that restriction of the supply of labour would decrease aggregate income per worker it could still "increase wages in proportion to the worker's expenditure of energy and his 'wear and tear,' and it can increase Relative Wages, or wages as a proportion of the total social income."
In short, it's not only about how much you can get for your labour but also how much you have to work to get it. "Opportunity cost," in economist jargon. There may indeed be more jobs and more total income if older workers stay in the work force longer but that could also mean everyone was working more for proportionately less pay.
The more elaborate answer to the presumed lump-of-labour idea is the analysis of the social cost of labour as articulated by John Maurice Clark and K. William Kapp. As Robert Prasch has pointed out, analysis of the social cost of labour:
UPDATE: Further evidence of Luddite time travel from Crandall, Parnell and Spillan, Crisis Management: Leading in the New Strategy Landscape, 2010:
Now, I have taken Kemmerling's statement somewhat out of context. His original statement, with emphasis added to the parts left out, was:
For the purposes of this article, however, it is not relevant whether the claims are true or false, as long as (some) people believe in them.Kemmerling is dead wrong. Whether the claims are true or false is relevant for the purposes of his article -- no less than the context of his claim about its supposed non-relevance.
What are those claims? The claims Kemmerling says he is investigating are:
- "that there is an upper limit to the total number of jobs in a society" and/or
- "that this upper limit of total jobs will fall as time passes due to processes of globalisation or technological change."
A rash of subsidiary claims follow from those. The most important (for the purposes of Kemmerling's article) is that "some people believe in them." The second is that the claims are fallacies. A third is that the assertion that "some people" believe in these ideas is itself false or at least grossly exaggerated. The truth or falsehood of the claims being investigated is thus relevant at least to the extent of its bearing on these subsidiary claims.
Kemmerling extrapolates belief in the lump-of-labour idea from agreement with Eurobarometer survey question 68.1: "People in their late 50s should give up work to make way for younger and unemployed people." As he admits, the survey question "imperfectly proxies the idea of a trade-off between these two types of workers." Although he concedes "there is no perfect remedy" for this discrepancy, he maintains, "one can arguably control for alternative explanations such as norms."
That's nonsense. The word "arguably" must be construed as referring to plausible arguments. Kemmerling presents none. Instead, he reports on variations in responses from different sub-groups and speculates on norms that might account for those differences.These are not controls. These are excuses.
One can only marvel at the heroic lengths Kemmerling goes to to coax the sought after answer out of the recalcitrant data. But why on earth would he even bother if "it is not relevant whether the claims are true or false"? Despite that discrete disclaimer, Kemmerling assumes that the lump-of-labour is indeed a widespread belief and a fallacy and implies that it is an obstacle to presumably (from his perspective) more rational policy reform. More crucially he assumes that not just some but many people believe in the fallacious, obstructive idea. The tell-tale appears in his reference to the nineteenth century Luddites:
The causal belief investigated here is the lump-of-labour idea... This idea is far from new. In the early nineteenth century, the Luddite movement destroyed factory machines as technical progress threatened to make workers redundant.How did the Luddites answer Question 68.1 of the 1811 Eurobarometer survey? There was no Eurobarometer survey in 1811! There also was no Eurobarometer in 1753 when Peter Kay, inventor of the flying shuttle, had his house burnt down by Luddites EVEN THOUGH LUDDITES DIDN'T EXIST UNTIL THE NINETEENTH CENTURY!
From Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu, James Robinson. page 85:
How did the nineteenth century Luddites burn down a mid-eighteenth century house? The obvious answer is they must have had a time machine (assuming that it is not relevant whether or not Acemoglu and Robinson's claims are true or false).
The claim about the Luddites is a historical claim, as is the claim about belief in a lump-of-labour fallacy. No amount of agnosticism about the truth or falsehood of claims or appeal to control variables for alternative explanations will enable a researcher to arrive at conclusions regarding subjects' beliefs about A from their answers to questions about B, especially if the researcher isn't aware that "beliefs about A" is an old, old fable with propagandistic origins.
Some more context:
Hence, the question of the lump-of-labour fallacy is a controversial one even among academics (Walker 2007). For the purposes of this article, however, it is not relevant whether the claims are true or false, as long as (some) people believe in them.Walker 2007 challenged the authenticity of the fallacy claims. More specifically, Walker 2007 challenged the assertion that support for certain policy proposals implied an underlying and motivating belief that there is a fixed amount of work.
Walker 2015 regrets that he was not aware at the time that Pigou (1913) and Dobb (1928) had beaten him to the punch with their respective ignoratio elenchi critiques of the supposed fixed work-fund fallacy (another name for the lump-of-labour). A.C. Pigou argued that it would:
...be unwarrantable to conclude that, because the reasons which popular thought offers in defence of any thesis are invalid, therefore, that thesis is untrue. If it were a good ground for rejecting an opinion that many persons entertain it for bad reasons, there would, alas, be few current beliefs left standing!He concluded that some (though not all) restrictions on the supply of labour can expand employment on the condition that they "succeed in rendering the labour and capital of the rest of the community more effective in production."
Maurice Dobb's critique was more direct and decisive. He pointed out that even under the assumption that restriction of the supply of labour would decrease aggregate income per worker it could still "increase wages in proportion to the worker's expenditure of energy and his 'wear and tear,' and it can increase Relative Wages, or wages as a proportion of the total social income."
In short, it's not only about how much you can get for your labour but also how much you have to work to get it. "Opportunity cost," in economist jargon. There may indeed be more jobs and more total income if older workers stay in the work force longer but that could also mean everyone was working more for proportionately less pay.
The more elaborate answer to the presumed lump-of-labour idea is the analysis of the social cost of labour as articulated by John Maurice Clark and K. William Kapp. As Robert Prasch has pointed out, analysis of the social cost of labour:
...presents us with an underlying logic of labor market regulations. Laws concerning wages, hours, health, or safety may still, of course, be criticized for being misspecified or ineffective. However, acknowledging the existence of a social cost of labor means that they can not be considered, ipso facto, to be "distortions." On the contrary, they represent a civilized society's response to the inevitable limitations of relying solely on market prices to ensure the sustainability of the economy, society, and polity.It would be presumptuous to attribute subjects' answers to Question 68.1 of the 2001 Eurobarometer survey to a sophisticated grasp of the social cost of labour. However it would be no more presumptuous than attributing the answers to a belief in a lump-of-labour idea. And a lot less preposterous.
UPDATE: Further evidence of Luddite time travel from Crandall, Parnell and Spillan, Crisis Management: Leading in the New Strategy Landscape, 2010:
History is full of examples of those who have shunned technology. For some, technology itself was the crisis. The Luddites, for example, carried out violent attacks on technology in the early 1800s by smashing machines in industrial settings. However, the attacks, which originated in England during the Industrial Revolution, were actually more of a social protest against falling wages, unemployment, and rising food prices (Malcolm. 1970; Wren. 1987). In such an environment the threat that machines would displace jobs seemed realistic. Unfortunately for the Luddites. their actions went too far, even to the point of burning down the houses of machine inventors John Kay and James Hargreaves (Wren, 1987). --.Interestingly enough, Crandall et al. get the story right about the Luddites actions being "actually more of a social protest against falling wages, unemployment, and rising food prices." I can't confirm whether or not the claim that Luddites burned down John Kay's house came from "Wren 1987."
Sunday, January 18, 2015
The Hours of Labour and the Problem of Social Cost
From The Hours of Labour and the Problem of Social Cost
In "The Problem of Social Cost," Ronald Coase (1960) examined one variety of presumed market failures – outcomes that Cecil Pigou (1952) had described as “incidental uncharged disservices” (or uncompensated services) but are now commonly referred to as "externalities." The incidental quality of these effects makes them a social cost. The economic analysis Coase challenged and the standard examples he re-examined were taken from Pigou's discussion in part II of The Economics of Welfare. Coase argued that the suggested courses of action in the Pigovian tradition – liability, taxation or regulation – were inappropriate and often undesirable.
Coase claimed that the traditional approach to the problem of social cost "tended to obscure the nature of the choice that has to be made" (1960, 2). He characterized the question posed by the approach as "one in which A inflicts harm on B and what has to be decided is: how should we restrain A?" He objected that the problem was really a reciprocal one and the real question should be "should A be allowed to harm B or should B be allowed to harm A? The problem is to avoid the more serious harm."
However, Coase didn't consider the full range of Pigou's examples and analysis. While Coase’s restatement of the problem may have been appropriate to the specific externality problems discussed by Pigou in part II, it entirely overlooked the radically different labour market problem encountered in part III, in which competitive pressure compels an employing firm to inflict harm on both itself and its employees and thus regulatory restraint of the firm (and competing employers) may benefit both.
Along with the majority of the preceding Pigovian tradition, Coase evaded the thorny questions of working conditions and unemployment. Whatever gains in tractability may be accomplished by such a maneuver are more than offset by a forfeit of realism and of insight into the complex interdependency of economic factors in the long period. The determination of the hours of work provides a particularly compelling example of a circumstance in which mutual benefit could result from an imposed non-market restraint.
Coase claimed that the traditional approach to the problem of social cost "tended to obscure the nature of the choice that has to be made" (1960, 2). He characterized the question posed by the approach as "one in which A inflicts harm on B and what has to be decided is: how should we restrain A?" He objected that the problem was really a reciprocal one and the real question should be "should A be allowed to harm B or should B be allowed to harm A? The problem is to avoid the more serious harm."
However, Coase didn't consider the full range of Pigou's examples and analysis. While Coase’s restatement of the problem may have been appropriate to the specific externality problems discussed by Pigou in part II, it entirely overlooked the radically different labour market problem encountered in part III, in which competitive pressure compels an employing firm to inflict harm on both itself and its employees and thus regulatory restraint of the firm (and competing employers) may benefit both.
Along with the majority of the preceding Pigovian tradition, Coase evaded the thorny questions of working conditions and unemployment. Whatever gains in tractability may be accomplished by such a maneuver are more than offset by a forfeit of realism and of insight into the complex interdependency of economic factors in the long period. The determination of the hours of work provides a particularly compelling example of a circumstance in which mutual benefit could result from an imposed non-market restraint.
Saturday, January 17, 2015
Eleventh Dimensional Chess for Beginners
Jared Bernstein at Post Everything:
At the heart of the president’s new plan is the closure of a big loophole that benefits the wealthy and inefficiently skews the tax code. When an asset (like a stock) you own appreciates, that income is known as capital gains (what’s that? you depend on your paycheck, not your cap gains? that’s kinda the point…read on). If you sell that asset, you’re taxed, and taxed at a preferential rate, on the so-called “realized” gains.
But if you hold onto that asset you pay no tax on the “unrealized” gains. That income currently escapes taxation, even when—get ready because here comes the loophole, one the White House says is “the largest capital gains loophole – perhaps the largest single loophole in the entire individual income tax code”—you check out of this crazy thing called life, i.e., you die, and you turn those appreciated assets over to an heir.As Jared notes, "progressive policy makers have decided that 'can we get this through the current Congress?' is not a useful question for crafting the necessarily [sic] policy agenda in our age of inequality." Well, yeah, but... sounds like a good idea with populist appeal. I mean, what a scam sweetheart deal for the .01%. So why didn't the Democrats propose this and campaign HARD on it in last November's midterm elections?
Kapp-and-Trade Unions
In her essay, "On Working Class Environmentalism," Stefania Barca highlighted the formative contribution of K. William Kapp to a conceptual framework of social costs that integrates occupational, environmental and public health research. In his The Social Costs of Private Enterprise (1950), Kapp advanced the thesis later summarized by Joan Martinez-Alier that, from a business perspective, "externalities are not so much market failures as cost-shifting successes." As Barca explained:
It would be easy, though, to overstate Kapp's deviation from orthodoxy and arguable that he does so in the above excerpt. Alfred Marshall was himself critical of the over-reliance on and misuse of static analysis. At the time Kapp's Social Costs of Private Enterprise was published in 1950, Institutionalist and Keynesian economists where influential both academically and in policy. Kapp's notion of cost-shifting was adopted from John Maurice Clark, who considered himself "enough of an 'institutionalist' (whatever that may mean) to have more than a lurking distrust of formulas and equations. But not enough of an institutionalist to ignore their importance..." Clark was the son of John Bates Clark, one of the pioneers of the "orthodox" marginal productivity theory.
In the years since Clark and Kapp were writing the lurking distrust has dissipated and the orthodoxy has become more rigid (in the name of "rigor"). Formerly, Robert Prasch has pointed out, the "divergence between the firm's and society's perspectives on the cost of labor was once widely understood and discussed in the economics literature." Today, however, "economists have simply dropped the concept of labor's social cost." Under idealized assumptions of perfect information, completely defined property rights and costless transactions "cost-shifting without compensation can not readily occur." In short, Kapp's caricature of the orthodoxy has become a reality.
The collective-bargaining implications of the social cost of labor are profound and far reaching. If only the wages, benefits and working conditions of currently-employed workers are on the bargaining table, then social costs and cost-shifting are expressly excluded. On the other hand, bargaining with a single employer over social cost shifting threatens to undermine that employer's competitiveness. This would appear to raise the necessity for some form of sectoral bargaining that addresses environmental and social justice issues.
The core idea of the book was that social costs are produced by the internal logic of private business, that is the principle of investment for profit at the individual unit level. In order to maximize profit on a given investment, entrepreneurs need to minimize relative costs: in the existing legal and political structure of the US economy, Kapp observed, entrepreneurs found it possible and profitable to shift the real cost of human and environmental health and safety on third parties, namely the workers and society as a whole.Barca described Kapp as a "non-orthodox economist." It is useful to pay close attention to precisely which orthodox premises Kapp was deviating from. In Environmental Disruption and Social Costs: A Challenge to Economics," objected to the treatment by economic theory of "allocation, production, exchange and distribution as if they occurred in an essentially closed and autonomous 'economic' sphere with only minor effects on man’s natural and social environment." Introducing the the concept of "externalities" as an after-thought to this fundamentally flawed analytical framework only serves to create a "false impression that the theory has adequately incorporated the interdependencies at work.":
In short, simplifying assumptions and empty terms create the impression of adequacy but do not solve the problem. They will give us empty conclusions such as that rational allocation and optimal efficiency will be the outcome provided that important external diseconomies (and economies) are absent. Neither the assumptions nor the concepts nor the conclusions can lay claim to any of the virtues of which neo-classical and 'positive' economics have traditionally boasted. They are neither neutral nor objective; they are misleading and apologetic if not consciously so at any rate in effect. Such assumptions and concepts do not reveal but conceal what is actually happening. Moreover, they distract our attention from what is really important and what needs to be investigated. Thus they are preventing us from formulating the problem in an adequate fashion and hence from developing adequate criteria of action and appropriate methods of control.This ad hoc treatment of social costs as incidental to the feature attractions of economic production, exchange and distribution is only aggravated by the Coasean abstractions of zero transaction costs and comprehensive assignment of property rights. Social costs appear "external" to market exchange precisely because they involve intractable transaction costs and assets for which it difficult or impossible to assign property rights. Wishes are not horses and prisoners do not have angels' wings. Calling a tail a leg doesn't make it one.
It would be easy, though, to overstate Kapp's deviation from orthodoxy and arguable that he does so in the above excerpt. Alfred Marshall was himself critical of the over-reliance on and misuse of static analysis. At the time Kapp's Social Costs of Private Enterprise was published in 1950, Institutionalist and Keynesian economists where influential both academically and in policy. Kapp's notion of cost-shifting was adopted from John Maurice Clark, who considered himself "enough of an 'institutionalist' (whatever that may mean) to have more than a lurking distrust of formulas and equations. But not enough of an institutionalist to ignore their importance..." Clark was the son of John Bates Clark, one of the pioneers of the "orthodox" marginal productivity theory.
In the years since Clark and Kapp were writing the lurking distrust has dissipated and the orthodoxy has become more rigid (in the name of "rigor"). Formerly, Robert Prasch has pointed out, the "divergence between the firm's and society's perspectives on the cost of labor was once widely understood and discussed in the economics literature." Today, however, "economists have simply dropped the concept of labor's social cost." Under idealized assumptions of perfect information, completely defined property rights and costless transactions "cost-shifting without compensation can not readily occur." In short, Kapp's caricature of the orthodoxy has become a reality.
The collective-bargaining implications of the social cost of labor are profound and far reaching. If only the wages, benefits and working conditions of currently-employed workers are on the bargaining table, then social costs and cost-shifting are expressly excluded. On the other hand, bargaining with a single employer over social cost shifting threatens to undermine that employer's competitiveness. This would appear to raise the necessity for some form of sectoral bargaining that addresses environmental and social justice issues.
I Told You So On Oil Prices
Yes, yes, eventually I shall be wrong. But a week ago here I called a bottom to the oil price decline before anybody else in the world did, and it has held, with the price fluctuating between $44 per barrel and $51 per barrel. My post simply reminded the world what most of it had paid no attention to that the Saudis had publicly stated that they were planning their budget on the basis of a world oil price between $45 and $50 per barrel (minor note that Brent is about 75 cents above West Texas, a near convergence after a long period in which they were unaccustomably quite a few dollars apart)for .
So, in that post I declared "You saw it here first," and this is certainly the case. Looks increasingly like the price is going to stay within the range that the Saudis want it to be for the near term.
In terms of details, for 8 hours a few days ago, the price went below $45, finally hitting bottom at $44, but after it rebounded it surged to $51, only to fall sharply. The market seems for the moment to believe the Saudis, and the latest closing price was a bit over $48. Deal with it and enjoy.
Barkley Rosser
So, in that post I declared "You saw it here first," and this is certainly the case. Looks increasingly like the price is going to stay within the range that the Saudis want it to be for the near term.
In terms of details, for 8 hours a few days ago, the price went below $45, finally hitting bottom at $44, but after it rebounded it surged to $51, only to fall sharply. The market seems for the moment to believe the Saudis, and the latest closing price was a bit over $48. Deal with it and enjoy.
Barkley Rosser
Friday, January 16, 2015
Breaking: Milton Friedman Wins Debate!
"Don't know much about history." -- Sam Cooke
"Milton Friedman won the debate, and John Kenneth Galbraith lost." -- Nick RoweActually the military-industrial complex won the "debate" in 1950 but had to keep it secret. Friedman was just some guy with a broom sweeping up the droppings after the parade.
Members Only Unionism
While doing some background research on non-majority collective bargaining for the labour studies class I teach I discovered there was a conference just yesterday in Washington at which Catherine Fisk presented, "In Defense of Members-Only Unionism." In Canada, Roy Adams has written about collective bargaining as a human right, outside of the administrative union certification model. The canonical source in the U.S. is Charles Morris's The Blue Eagle at Work: Reclaiming Democratic Rights in the American Workplace. John True offered the following useful summary in his review of Morris's book:
The fundamental principle animating the Wagner Act is that working people are supposed to be able to act in democratic concert, to get together, to talk with each other about the issues that concern them on the job, and to engage their employers in some constructive pushing and shoving about those issues. This right given to workers to combine, so the theory goes, will produce fairness and justice in the workplace by counteracting the innate strength of capital. Workers' institutions were supposed to prosper, to integrate themselves into the political fabric of the nation and to provide a counterweight in the market and in political discourse that was to inure to the benefit of society as a whole.
The NLRA also contemplates that employers -- though they have a First Amendment-based right to push and shove back against these workers' institutions -- are to permit, indeed respect, their workers' collective activities. Not only that, they are affirmatively obliged to respond in good faith to -- to bargain over -- their employees' proposals. The Wagner Act, modeled explicitly on the concepts underlying American representative democracy itself, requires nothing less than that workers be given the basic right to participate in discussions about the terms and conditions of their employment.
Why, then, does this almost never happen anymore? Why does the American labor movement-with union membership plunging below ten percent of the private-sector workforce-seem more and more "flat on its back" every time we look at it? Union leaders, members, supporters and activists ask themselves these questions incessantly, of course, and Professor Charles J. Morris is one of several eminent labor scholars among those doing so. His latest inquiry, The Blue Eagle At Work: Reclaiming Democratic Rights in the American Workplace, slaps down a dramatic and provocative challenge in the middle of this discourse. Charting a new approach (that is not so new), he proposes that democratic rights have atrophied in the workplace because unions have fallen into self-defeating, addictive reliance on elections conducted by the NLRB as the way to organize workers. They have forgotten the remarkably broad promise set out in Section 7 of the Act: that all employees -- not just those who work for an employer where a union has won an election -- have the right "to bargain collectively through representatives of their own choosing."
Ignoring the elegant simplicity of this proposition, unions have swallowed the intoxicating potion contained in the election/certification procedures provided for in Section 9 of the Act. Under its influence, they have opted to confront employers only when and if they become the certified or recognized representatives of a majority of those in "appropriate" bargaining units. Though this "all or nothing" approach led the union movement to spectacular successes in its early days, it has resulted more recently in increasingly futile attempts to win the hearts and minds of workers in situations where the odds are impossibly long. The annals of the union movement in the late twentieth century are full of bitter stories of struggle and defeat in National Labor Relations Board (NLRB)-supervised, set-piece battles in which employers hold all or most of the power.
Great Minds Thinking Alike Department: Public Venture Capital
I see that Dani Rodrik has made a proposal that echoes mine: he would have a publicly owned and administered fund that provides startup capital to entrepreneurs and gives workers a share in the returns; I would have coops contribute to a venture capital fund that helps new coops form and provides the higher-risk, higher-return portion of a balanced coop portfolio. Same idea, different venues.
As a means to fundamentally reset the distributional structure of modern capitalism, public venture capital depends on the numbers. How much capital are we talking about? How large would be the individual worker’s expected revenue stream? And how would the volatility of such a fund, even on a society-wide basis (think dotcom), be buffered through other shared assets?
Moreover, while defenders of an egalitarian capitalism, like Rodrik, have always looked to expanded participation in ownership, this strategy can only go so far. My real world benchmark is Germany, where the majority of assets in the financial system are already held in public and cooperative institutions. On its own, this is an achievement, one worth defending (from Brussels especially). But many other institutions exist there to embed capital in a wider social matrix, including co-management and other worker representation channels, public-private coordination on industrial policy, which includes an extensive role for public education, and even industry associations which, while devoutly capitalist, provide public goods and are relatively transparent. Nevertheless, even such a system is seriously biased in terms of wealth and power. There is a compact capitalist class in Germany that wields extensive power, and income inequality is a serious problem that’s growing worse. The moral is that, if you want to really transform capitalism, you have to do as much as Germany and then do more. (I leave aside the large problem that Germany, as a surplus country, exports some of its problems, like credit risk, to its trading partners and basks in an ideology according to which this state of affairs proves Germany’s virtue and its partners’ vice.)
But let’s not be negative. Public capital in many forms, decentralized and even competitive, is the way to go. Venture capital is, as they used to say, part of this nutritious breakfast. If there’s still a political left out there, the core of its strategy should be socializing capital.
As a means to fundamentally reset the distributional structure of modern capitalism, public venture capital depends on the numbers. How much capital are we talking about? How large would be the individual worker’s expected revenue stream? And how would the volatility of such a fund, even on a society-wide basis (think dotcom), be buffered through other shared assets?
Moreover, while defenders of an egalitarian capitalism, like Rodrik, have always looked to expanded participation in ownership, this strategy can only go so far. My real world benchmark is Germany, where the majority of assets in the financial system are already held in public and cooperative institutions. On its own, this is an achievement, one worth defending (from Brussels especially). But many other institutions exist there to embed capital in a wider social matrix, including co-management and other worker representation channels, public-private coordination on industrial policy, which includes an extensive role for public education, and even industry associations which, while devoutly capitalist, provide public goods and are relatively transparent. Nevertheless, even such a system is seriously biased in terms of wealth and power. There is a compact capitalist class in Germany that wields extensive power, and income inequality is a serious problem that’s growing worse. The moral is that, if you want to really transform capitalism, you have to do as much as Germany and then do more. (I leave aside the large problem that Germany, as a surplus country, exports some of its problems, like credit risk, to its trading partners and basks in an ideology according to which this state of affairs proves Germany’s virtue and its partners’ vice.)
But let’s not be negative. Public capital in many forms, decentralized and even competitive, is the way to go. Venture capital is, as they used to say, part of this nutritious breakfast. If there’s still a political left out there, the core of its strategy should be socializing capital.
Wednesday, January 14, 2015
Profit Sharing on the Plantation and the Social Cost of Slavery
Following up on my previous post, the thought occurred to me: what if someone proposed that instead of abolishing slavery (which would be detrimental to GDP growth), a system of profit-sharing should be introduced to enable the slaves to buy their freedom? The profit-sharing plan would be optimized by gradually ramping up the profit share over the span of, say, fifty years, given a discount rate of "x" determined by the projected GDP growth rate.
Then some Stanford researchers come along and point out that the social cost of slavery is actually six times as high as estimated by the standard models and that a much more stringent slavery mitigation policy is warranted.
Would it be too moralistic of me to point out that the quantitative casuistry is obscene? John Brown's body lies a mouldering in the grave.
Then some Stanford researchers come along and point out that the social cost of slavery is actually six times as high as estimated by the standard models and that a much more stringent slavery mitigation policy is warranted.
Would it be too moralistic of me to point out that the quantitative casuistry is obscene? John Brown's body lies a mouldering in the grave.
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