The Greek Transportation Giveaway “Scandal”, or Why Germans Are Furious at Greeks

The public mood in Germany is one of outrage at Greece—their belief that Greeks think they have a permanent right to other people’s money, the dishonesty of the Greeks, the way they will promise anything in order to continue the same corrupt policies, their inability to follow the rules.  Schäuble speaks for most of his countrymen when he says that Greece has no business being in the euro zone, but if it has to stay it must be kept on the tightest possible leash and given no relief from its obligation to pay as much as possible.  Non-Germans may wonder where these attitudes come from.  Is there some deep problem with German culture, a Teutonic meanness kept hidden since 1945 but now back in full view?

No.  Most Germans are reasonable and are motivated by goodwill toward others, at least in the way that most people everywhere are.  But they live in an information bubble which spawns a further echo chamber of public commentary, so the mental world they live in is simply different from the one outside their borders.  (I don’t know first-hand, but there may be a similar bubble enveloping the Netherlands, Finland and a few other countries.)  Inside this bubble there is a steady stream of “news” whose common denominator is that slippery, corrupt Greeks are scheming to take advantage of Germans’ hard-earned wealth.  This is something that every German now “knows”, part of the conventional wisdom that forms the bedrock for political analysis.

To really understand how this works you would have to be there.  It’s not a matter of one or two biased news reports, but a steady stream of news, every day, in little snippets and major headlines, that reinforce the underlying message.  Here I’ll present a small example that, multiplied by a hundred, gives a sense of what’s going on.

So have you heard the latest?  In order to prop up his political support Tsipras has made public transportation free in Athens!  Can you believe it?  Here’s a country that’s bankrupt, that’s sucking in our money to stay afloat, that should be spending every spare penny on the poverty of its own citizens, and instead it’s the same old clientelism: hand out favors, buy a few votes.  That’s how he bought those “no” votes in the referendum.  We have to pay for transportation in Frankfurt and Hamburg!  Why should they demand our money so that their people can have something we don’t have?  Hasn’t it occurred to them that transportation and everything else has to be paid for, that people need to work and produce so that society can afford it?  But I guess that’s how it is with those Greeks.

Now tell me: have you heard anything at all about free transportation in Greece?  No?  It was a big story in Germany, written up in all the major papers and discussed on radio and TV.  Here, for instance, is Handelsblatt, the main business newspaper:

The state coffers are empty in Athens, hundreds of thousands of pensioners are waiting for their pensions, but Premier Alexis Tsipras wants to keep people happy before the referendum on Sunday.  After Tsipras on Tuesday introduced a zero tariff for public transport operators in Athens, on Wednesday the Greeks got a 50 percent discount on all tickets of the national railway company OTE. The discount is allegedly designed to facilitate people taking part in the referendum on Sunday.

(Handelsblatt, July 1)

In most of the world this was a non-story, unreported.  One brief notice appeared in Straits Times, the respected English-language newspaper published in Singapore:

The Greek government has declared public transport free in Athens this week to ease difficulties created by the closure of the banks and a rush on petrol stations.
Greece's transportation minister, Christos Spirtzis, has announced that buses, trams, trolley-buses, and the Athens metro will not require fares until next week.
The offer is set to last until July 7, when in principle the banks will re-open.
(Straits Times, July 1)

Outside of Germany, Greece was scrambling to keep the economy going in the teeth of an intense liquidity crisis set off when the ECB froze its support of the country’s banking system.  Germans however saw another shameful case of clientelism and corruption at the expense of hardworking taxpayers in the rest of Europe.  Now imagine this being repeated every day for months and you get some idea of the different mental world Germans inhabit.

(Incidentally, if I thought Tsipras was buying votes by giving Greeks benefits the country can’t afford, billing it to Europe, and then demanding that it all be wiped out in a future default, I’d be pretty angry too.)

If I’m sympathetic to the average German, it’s because, as an American, I’ve lived through the same thing.  Replace “Greece” with “Saddam”, Iran, “the terrorists”, and so on, and you have plenty of information bubbles of our own.  Remember the runup to the war in Iraq?  Americans knew lots of things about Iraq’s connections to Al-Qaeda and its imminent threat to US security that made an invasion seem like a plausible solution.  The fact that this looked like a collective mass hallucination from abroad had no effect on us.  And Americans, despite their widespread support for military actions that can only be described as criminal, are not, for the most part, bad people.  They want good things for themselves and others, and, given the information world they inhabited, their political views were not out of line.

Of course, information bubbles and the attitudes they lead to present a big problem.  Wars of aggression are not OK, and neither are debtors prisons that lock up whole countries.  To build a better world we will need to understand where the bubbles come from and how they can be perforated.  Demonizing entire populations, however, is the wrong way to go.

Slush-Fund Schäuble

“He [Schäuble] admitted that he had met the arms dealer and lobbyist at the centre of the scandal, Karlheinz Schreiber, and accepted an undeclared DM100,000 (£36,300) cash donation from him.”

This inconspicuous line appeared in a BBC story Wolfgang Schaeuble: Germany's man with a Grexit plan. I hadn’t heard about this background detail before. Why not?

In November 2013, Karlheinz Schreiber was sentenced by a German court to six and a half years for tax evasion. He was also involved in "inappropriate" transactions with former Canadian prime minister, Brian Mulroney. "Mulroney admitted taking $225,000 in cash from Schreiber, but said he broke no laws or ethical guidelines."

That's a lot of cash. "Broke no laws or ethical guidelines" doesn't pass the laugh test.

The nature of Schäuble's shady dealings with Schreiber have apparently never been fully disclosed, apart from his admission that he accepted the cash, which resulted in his resignation as leader of the CDU and Angela Merkel's elevation to that post.

German party leader took cash from arms dealer, Guardian, January 11, 2000

In a new twist to the illicit funding scandal that has embroiled Germany's Christian Democrats, their leader, Wolfgang Schäuble, last night admitted he too had accepted cash from the arms dealer Karlheinz Schreiber for party funds. 

The former chancellor Helmut Kohl is already under criminal investigation after admitting last year that he funnelled cash to the Christian Democrats (CDU) through a web of secret bank accounts. He has refused to name the donors, in contravention of German law.
According to a report to be published today in the newspaper Stuttgarter Zeitung, Mr Schäuble, who has always enjoyed a reputation for integrity, has been put "under massive pressure" by Mr Kohl to own up to his role in the irregular financing. 

In an interview with the television channel ARD, Mr Schäuble said he took DM100,000 (£32,114) from the arms dealer which he had passed on to the party. He said that, unlike the money which Mr Kohl funnelled to the CDU, the cash he took did figure in the party's accounts but was reported under "miscellaneous income".
That would suggest that the handling of the donation contravened a law which calls for contributors who give more than DM20,000 to any political party to be identified. 

Mr Schäuble, who became party chairman after Mr Kohl's crushing defeat in the 1998 election, was already under pressure to explain another mysterious - and apparently illicit - movement of funds.
Revised accounts released by the CDU at the end of last year showed that in January 1997, more than DM1m was sent by the parliamentary party to party headquarters in apparent defiance of a ban on such transfers. Mr Schäuble was leader of the parliamentary party at the time.

Germany's Schreiber Affair: The Scandal that Helped Merkel Become Chancellor, Speigel Online International, August 07, 2009:

Unexpected Questions In Parliament Led To Lies  

Meanwhile Kohl’s likely successor in the CDU, Wolfgang Schäuble, was becoming ever more enmeshed in the Schreiber scandal. At the time, Schäuble was one of the most popular politicians in the country and in 1997 Kohl had handpicked Schäuble to succeed him at the head of the CDU — but because the CDU lost the election in 1998, Schäuble became the party’s chairman.

When questioned in parliament in 1999 about whether he had accepted a donation during a meeting with Schreiber, Schäuble disputed the question. But in a radio interview in January, he admitted he had met Schreiber at least once more. That created suspicion that a second donation had been made. Whatever the case, indignation within the ranks of the CDU and its Bavarian sister party, the Christian Social Union (CSU) toward Schäuble grew so much that he was forced to resign. 

So how exactly did Merkel profit from the Schreiber incident? The former party secretary became aware that, in the face of an unexpected question in parliament, Schäuble had lied about taking cash from Schreiber. Merkel realized at the time that this secret would eventually come out and would inevitably lead to Schäuble’s downfall. She also knew that, if she wasn’t careful, she could go down with him. After all, it was only logical that the general secretary of a party would have the confidence of the head of that party. 

And so she wrote about it — in what was widely described as a “Dear John” letter addressed to Kohl and published in the Frankfurter Allgemeine Zeitung newspaper on Dec. 22, 1999. In the letter she was very critical of Kohl, saying that the new generation of politicians in the CDU needed to distance themselves from him, in the same way that teenagers must distance themselves from their parents if they are to become adults. Even though Merkel had only told Schäuble about plans to publish the open letter the night before, Kohl was convinced that the missive had been published with Schäuble’s foreknowledge and approval. 

Suddenly Kohl seemed to discover his old political boisterousness, attacking Schäuble ever more vigorously. Perhaps he wanted to secure a virtuous place in the national history as the “father of German unity” — he had presided over the re-unification of East and West Germany — rather than the infamous politician with the dirty donations. A war of words, via various interviews, ensued, the likes of which had not been seen before. The fight between the two former friends and allies escalated to the point that Kohl abdicated his seat as honorary chairman of the CDU and Schäuble resigned his position with the words: “The CDU finds itself in the most serious crisis in its history.”

The scandal that rocked the government of Helmut Kohl, Deutsche Welle, January 18, 2010

Unanswered questions 

Despite the two-and-a-half year probe into the CDU's murky financial dealings, the chairman of the special parliamentary investigation committee said during the time that key questions in the affair still remained unanswered. 

"A lot of untruths have been told in this committee, to put it mildly. I can also be more brutal and say: 'a lot of lies have been told,'" said Volker Neumann, a member of the center-left Social Democratic Party. 

"For years, the CDU hasn't just breached party funding laws but it was also guilty of political corruption on several accounts under then Chancellor Kohl," Wolfgang Stroebele of the Green Party said. 

The CDU denied allegations of corruption but the affair engulfed other leading lights of the party too. In early January, 2000, CDU chief Wolfgang Schaeuble, Kohl's handpicked successor, admitted he had received a payment of 100,000 deutschmarks from Schreiber.

Money being exchanged 

But Schaeuble, Germany's current finance minister, insisted he had forwarded the money to the CDU's then treasurer, Brigitte Baumeister, and had nothing to do with the illegal booking of the money. Baumeister rejected the accusation, saying she had handed over the money to Schaeuble in an envelope.

The allegations were never proved in court but the affair cost Schaueble his job. He was replaced by Angela Merkel. 

A political scandal 

In many cases, the courts were unable to prove that CDU heavyweights were indeed involved in the affair. Proceedings against Helmut Kohl in a court in Bonn were stopped. 

And authorities in Augsburg suffered a setback when Joerg Hillinger, the public prosecutor in an investigation of the CDU party in the state of Saxony was killed in a car accident in April 1999. 

His death came shortly after investigations uncovered dubious dealings in the state party. Till today, it remains unclear whether his death was an accident or murder. 

The CDU slush fund scandal has all the makings of a political affair. Till today, the names of the donors remain unknown and it remains unclear how many millions the party actually received in secret donations. 

Investigators had hoped the arrest of former Deputy Defense Minister Holger Pfahls in July 2004 - after five years on the run - would shed more light on the affair. But that didn't happen.

Rates of Growth and the Four-Day Week

RATES OF GROWTH
Henry Hazlitt, Newsweek, August 25, 1958

Is it true, as we are now so frequently told, that Communist Russia’s economic "rate of growth" is faster than ours, or that we cannot survive unless we increase our own "rate of growth"? There are at least five main reasons why rate-of-growth comparisons are untrustworthy.

... 

Let’s stop making a fetish of national income statistics and percentage rates of growth.

THE FOUR-DAY WEEK: HOW SOON?
Daniel Seligman, Fortune, July 1954

A calculation made by Fortune for the years since 1929 suggests that in the past quarter-century U. S. workers have been taking about 60 per cent of the productivity pie in the form of income, about 40 per cent as leisure. Assuming that the four-day week for non-agricultural employees will be attained when the total work week is in the vicinity of 32 hours, that productivity continues to increase at an average of 2 or 3 per cent a year, and that something on the order of the recent 60-40 ratio for income and leisure continues in effect, the 32-hour week should be spread throughout the whole non-farm economy in about 25 years.

Meanwhile, in the income-leisure choice for the years ahead, there will be one strong pressure for leisure: The workers who have been energetically pushing their way into the middle-income class have, naturally, become increasingly preoccupied with federal tax demands. "If we get more dough," said one AFL man recently, "the government can take back part of it. But they haven’t yet figured out a way to tax your day off."

In retrospect, the inability of the government to tax workers' days off may have been one strong pressure against leisure.

Parsing "Generic Productivity"

"Little snippets taken out of context can make anyone sound dumb." -- Kevin Drum, Mother Jones.

Kevin Drum thinks "It's Time to Cool It" on Jeb Bush's assertion that "people need to work longer hours." After all, Bush "quickly clarified" that he was talking about something totally different than what he said. Perhaps Mr. Drum would like to quickly clarify a dumb-sounding little snippet of his own with some ex post facto context? In a previous column on Bush's call for working longer hours, Drum pardoned Bush for a "confusing" reference to productivity:

It's true that Bush's use of "productivity" in the third sentence is a bit confusing because he's suddenly using it in its generic sense, not its formal economic sense, but that's no more than the slight clumsiness that's inevitable in live settings.

This is clearly wrong. There is no such thing as a "generic sense" of productivity. Furthermore, the formal economic sense of the word fits the context of Bush's statement better than would the alternative definition of productivity as the capacity to produce. Bush said, "people need to work longer hours and, through their productivity, gain more income for their families."

Bush was talking about growth -- economic growth defined as an increase in the GDP -- and hours of work. Productivity refers to a ratio between output, in the form of GDP, and inputs in the form of hours of work. If Bush had a different meaning of productivity in mind, it could as easily have been the misconception that productivity is simply a synonym for output.

What Drum is asking us to do is credit Bush for the keen insight of his retroactive clarification and at the same time give him a break on the grounds his original statement was clumsier than it appeared. Somehow Bush comes out ahead on two counts for being both smarter and dumber than he sounds.

The worst thing about Drum's apologetics is that Governor Bush is not the real problem here. The real problem is a feeble public discourse about economics in which terms like "growth," "productivity" and "hard work" are tossed around as vague euphemisms that have no definitive meaning. Bush was merely reciting a stock jumble of empty platitudes. It was the incongruity of a particularly odd arrangement of those platitudes, whether intended or not, that struck a nerve. Drum urges us to set aside the reflex of incredulity and get on with the droning monotone of platitudes -- the real business of political punditry.

This is a teachable moment. I don't see any point to "cooling it." Here's why:

First, there is the matter of the disconnect between productivity gains and income that Alan Pike mentioned at Think Progress. If greater productivity hasn't been translating into higher income for decades, why should we assume it will magically do so in the future? Regardless of whether Jeb Bush meant what he didn't say or said what he didn't mean, we should be having an intense public conversation about the disconnect between productivity gains and median incomes.

Second, and more germane to the sense in which Bush may have been misusing the term productivity, both output and productivity are weak links in the logical chain between longer hours and more income. Longer hours don't necessarily translate into increased output and increased output doesn't necessarily translate into improved productivity.

Under current conditions in the U.S. it is very likely that those links have been broken. According to a Gallop poll from last August, full-time workers in the U.S. worked an average of 47 hours a week. The Bureau of Labor Statistics gives an average of 42.5 hours a week for full-time workers. This number, however, averages in the hours of workers who usually work full time but who worked less than 35 hours in the reference week due to non-economic reasons, such as illness or family obligations. So the average hours of people who usually work full time and who actually did the week they were surveyed would be more than 42.5. For the sake of argument, let's say that full-time workers average 44 hours of work a week.

If we assume that a 40-hour workweek is optimal for total output then those extra four hours a week are not only going to significantly depress productivity but also would lower total output by a small amount. The latter conclusion follows tautologically from the assumption. What is perhaps less intuitively obvious is that even if we assume that a 44-hour workweek is optimal for total output, hourly productivity would be significantly lower under a 44-hour workweek than it would be under a 40-hour workweek. I estimate around 9% higher productivity for the 40-hour week.

One of the pioneers of national income accounting, Edward Denison, estimated in the early 1960s that as much as 10 percent of economic growth between 1909 and 1957 could be attributed to "the effect of shorter hours on the quality of a man-hour's work." During that half-century, average annual hours of work per worker declined by about 30% while total economic output nearly tripled.

This is not to say that economic output would have necessarily been less if annual hours of work had not declined as much as they did -- only that more of the output would have been attributable to long hours of work rather than increased quality of work. Workers would have received less income for more hours of work. Therein lies the cost-benefit riddle that the euphemistic false equivalence of growth, wages, productivity and hard work doesn't solve. Productivity is  not simply about how much output there is but how much output relative to effort. Way back in 1929. Lionel Robbins wrote, prematurely:

The days are gone when it was necessary to combat the naïve assumption that the connection between hours and output is one of direct variation, that it is necessarily true that a lengthening of the working day increases output and a curtailment diminishes it.

Unfortunately, those days are not gone. Instead the "naïve assumption" has triumphed over economic analysis of the hours of work and the public conversation has retreated to the glibly vicious "magazine of untruth" refuted nearly 150 years ago.

What Starbucks Could Do For Youth Employment

What Starbucks Could Do For Youth Employment

Starbucks CEO Howard Schulz headlined a 17-firm event that promised more jobs for young people over the coming years.  The employment numbers are mainly for PR purposes, so I won’t bother with them.  The bigger problem, though, is that working as a barista or an order taker at Taco Bell (another participant) normally doesn’t lead to any next step.  Career ladders that used to reach from entry level positions to middle class careers hardly exist in America any more.  If getting the first job is a problem (which it is for millions), getting the second isn’t much easier.

If a company like Starbucks really wanted to make a dent in the problem and demonstrate how the bottom end of the labor market can be lifted up, here’s something they could do:

Create an internship program.  Same workers, same responsibilities, same pay (or a little more), but a new wrinkle: provide a learning component to the work performed by young workers willing to enroll in an expanded program.  These workers could meet one day a week at a separate location, where they would study how the company organizes the work flow, manages employees, and deals with its customers.  This could be combined with more theoretical considerations—theories of process management, motivation, inventory management, quality control, marketing and so on—but in the context of their current work.  At the end, after a half year or so, they could receive a certificate documenting their accomplishments.  One could also envision a second level: once workers had familiarized themselves with the ins and outs of the operations, they could take on a project, like solving a nagging problem or envisioning a different work structure or strategy.

Clearly a program like this would benefit from academic partners, perhaps local community colleges or even universities.  Models for extended education for managers, where companies pay for their employees to take evening or weekend workshops at nearby campuses, are widespread; the proposal I’m making would ask Starbucks and other companies to pay for similar opportunities for their frontline workers.

The goal is to make an entry-level job a true starting point for workers who want to escape minimum wage work.  In a better world the government would take the lead, and unions would also play a key role.  As far as the US is concerned, that’s obviously a long time ago in a galaxy far, far away.  But if Starbucks or other companies want to help workers gain a toehold on a better life in spite of the minimal learning and advancement opportunities built into their entry-level jobs, this would be a step in the right direction.

A Curious Coincidence

Back in the mid-70s when Saud bin Faisal bin Abdulaziz al-Saud (aka "Saud al Faisal") became Foreign Minister of Saudi Arabia, finally only stepping down this past April, I thought that he resembled the famous Arab actor, Omar Sharif. As time went on, their appearances seemed to diverge, with Saud coming more and more to resemble his late father, King Faisal. Whatever one thinks of the views or policies of the late Saud al Faisal, he was probably the wisest and most capable member of the Saudi royal family, and when he stepped aside three months ago, had been serving as Foreign Minister far longer than anyone else in the world. So, the curious coincidence is that they have just died within a day of each other, Saud on July 9 at age 75, and Sharif on July 10 at 83. I learned from Juan Cole that Sharif was originally born in Lebanon of Christian parents with a very different name, but converted to Islam in the 50s when he was the top film star in Cairo and married his leading costar, who was Muslim. They never divorced, although separated. I had always read that he was Egyptian. Cole also points out that today it would be all but impossible for a Muslim Arab actor to play a Jewish part as he did in Funny Girl, much less a part such as Doctor Zhivago. He certainly was a fine actor. Barkley Rosser

People Need to Work Longer Shorter Hours

Dean Baker at the Guardian: The Hard Work Election:

Historically, the benefits from higher productivity are higher pay and more leisure – if we go back a century, for instance, work weeks of 60 or even 70 hours a week were common. But while the American work week has been largely fixed at 40 hours a week for the last 70 years, other countries have pursued policies to shorten the work week and/or work year through paid sick days, paid family leave, and paid vacation. 

Several European countries have actively pushed policies of work sharing as an alternative to unemployment: the government compensates workers, in part, for a reduction in hours rather than paying unemployment insurance to someone who has lost their job. Germany has led the way in pushing work sharing policies, which is an important factor in its 4.7% unemployment rate. And, as a result of work sharing and other policies, the average worker in Germany puts in almost 25% fewer hours each year than workers in the United States, according to the OECD. Most other wealthy countries are similar to Germany: in the Netherlands, the average work year is 21% shorter than in the US and, in Denmark, it is 20% shorter.

Alan Pike at Think Progress: What’s Missing From The Media Scrum Over Bush’s Call To ‘Work Longer Hours’:

But that back-and-forth over the “work longer hours” line misses the bigger, subtler error in Bush’s diagnosis of the economy’s present underachiever status. 

Bush claimed that if workers were able to get scheduled for more hours, they would “through their productivity gain more income for their families.” Obviously more hours would equal a larger paycheck. But Bush’s suggestion that being more productive will produce individual prosperity for American workers in the 21st century is flat wrong. 

The relationship between American workers’ industriousness and their economic security has eroded so severely in recent decades that the two concepts aren’t even on speaking terms these days.

Sandwichman at EconoSpeak: People Need to Work Longer Shorter Hours

It's great to see Dean Baker and Alan Pike raising important issues about the relationships between working time, productivity and wages. It would be fantastic if the conversation broadens and deepens to embrace the historical theory and analysis of working time. Back in December, I posted the abstract of a [still] forthcoming Economic Journal article by John Pencavel, "The Productivity of Working Hours." Here it is again:

ABSTRACT: Observations on munition workers, most of them women, are organised to examine the relationship between their output and their working hours. The relationship is non-linear: below an hour’s threshold, output is proportional to hours; above a threshold, output rises at a decreasing rate as hours increase. Implications of this finding for the estimation of labour supply functions are considered. The findings also link up with the current research on the effects of long working hours on accidents and injuries.

In the conclusion to his article, Pencavel cited the "neglect in contemporary models of labor markets" of the question of the variability of "the link between working hours and work effort or fatigue..." Addressing this theme, I sent the following email to Professor Pencavel, which I think well sums up my puzzlement and consternation at the paradigmatic incongruity of that neglect:

Dear Professor Pencavel, 

I was delighted to hear about and read your working paper and forthcoming article on the productivity of working hours. May I suggest a few further historical connections you may find of interest? 

In 1913, the British Association for the Advancement of Science established a committee to investigate "the question of fatigue from the economic standpoint." This committee presented its first interim report at the annual meeting of the Association in Manchester in September, 1915, the same month that the Health of Munitions Workers Committee was established. Philip Sargant Florence was investigator for the British Association committee. Florence later wrote Economics of Fatigue and Unrest (1924). Also on the committee was Sydney Chapman, whose 1909 presidential address to the economics section of the British Association, "Hours of Labour" was subsequently published in the Economic Journal and was deemed authoritative by Marshall, Pigou, Robbins and  Hicks. 

In The Theory of Wages, Hicks devoted six pages to a summary of Chapman's theory of hours, which he described as the “classical statement of the theory of 'hours' in a free market.” Hicks was paraphrasing Chapman's analysis when he explained "why competition among firms might not induce a cut in hours and why, in the absence of statutory regulation or the activities of trade unions, employers have been 'slow' to initiate a reduction in hours." Pigou also presented an extensive summary of Chapman's theory in his Economics of Welfare, although his attribution of the theory to Chapman was somewhat less than explicit. 

Chris Nyland emphasized the importance of Chapman's theory and  its curious omission from contemporary neoclassical discourse in his chapter on the history of worktime thought in Reduced Worktime and the Management of Production (1989). Peter Groenewegen has a chapter on Chapman in The Minor Marshallians and Alfred Marshall: An Evaluation (2012). 

Chapman also collaborated with Thomas Brassey on a three-volume "continuation" of Brassey's Work and Wages. The evidence in Brassey's original Work and Wages, published in 1872, played a strategic role in the demise of classical political economy and its eventual displacement by marginalist analysis. Brassey's father was a railroad builder who employed tens of thousands of laborers throughout Europe and the British Empire. The younger Brassey relied on his father's extensive labor accounting records to show that higher wages didn't translate into higher labor costs and that long hours didn't necessarily result in more output. The prominent American economist, Francis Amasa Walker, extolled the influence of Brassey's evidence:

[B]y far the most important body of evidence on the varying efficiency of labor is contained in the treatise of Mr. Thomas Brassey, M.P., entitled Work and Wages, published in 1872. Mr. Brassey's father was perhaps the greatest "captain of industry" the world has ever seen… The chief value of Mr. Brassey, Jr.'s work is derived from his possession of the full and authentic labor-accounts of his father's transactions.... 

Subsequently, in what came to be "regarded to be the first modern economic textbook," Alfred Marshall credited Walker for "forcing constantly more and more attention to the fact that highly paid labour is generally efficient and therefore not dear labour…" Marshall judged that fact to be "more full of hope for the future of the human race than any other… [although it] will be found to exercise a very complicating influence on the theory of Distribution."  In addition to his argument that wages rates didn't predict labor costs, Brassey also affirmed that it was "equally true that the hours of work are no criterion of the amount of work performed." 

Chapman was a highly regarded Marshall protege. Thus  Work and Wages, in Continuation... completed an arc from Brassey to Walker to Marshall to Chapman and, finally, back to Brassey. In volume 3 of Chapman's "Continuation" (1914), he reprised his own theoretical analysis of the hours of labor that had been published five years earlier and which was consistent with the evidence and conclusion that Brassey had offered in his 1872 book. 

In the conclusion to your article, you mention the apparent "neglect in contemporary models of labor markets" of the variability of "the link between working hours and work effort or fatigue..." This neglect becomes more perplexing in light of the role that Brassey's contribution played in the emergence of neoclassical analysis and of the former prominent regard for Chapman's theory of the hours of labor, at least among leading British economists. I've written about Chapman's theory and its undeserved eclipse in several articles and have appended links to two of them below. 

A third piece listed below, my chapter in Toward a Good Society in the Twenty-First Century, "Time on the Ledger: Social Accounting for the Good Society," projects from Chapman's theory and from historical trends in working time what might today be an "optimal" average working year in the U.S. My projection is, necessarily, highly speculative but is intended to provoke more systematic attention to the issue addressed by Denison in the quote with which you concluded your article.

Cheers, 

Tom Walker

Missing: the strange disappearance of S. J. Chapman’s theory ofthe hours of labour 

The Hours of Labour and the Problem of Social Cost 

Time on the Ledger: Social Accounting for the Good Society

Links: Pencavel, Hours of Work and Productivity

Mr. Nasty Doubles Down With "getting in line and being dependent on government"

The steno-pool commentariat doesn't seem to have noticed yet that poor ex-Governor Bush, trying to crawl out of one embarrassment, couldn't resist taking a jab at those notorious scroungers, people who work 30 hours a week instead of 40 (or 47) and thus are consigned to "getting in line and being dependent of government."

Govnah Bush doesn't have to get in line. Why, his clients get in line to pay him 7.3 million dollars (in 2013) to listen to his evident wisdom.

If you're explaining, you're losing...

Washington Post: 

HUDSON, N.H. -- Jeb Bush raised eyebrows on Wednesday by suggesting that "people need to work longer hours" in order to grow the economy. 

But he later clarified the comment, moving quickly to quell a fresh assault by Democrats eager to characterize the Republican presidential front-runner as out of touch.

Not so fast, Bush told reporters as he clarified his comments after a town hall meeting at a Veterans of Foreign Wars hall here. 

"If we’re going to grow the economy people need to stop being part-time workers, they need to be having access to greater opportunities to work," he told reporters.

"You can take it out of context all you want, but high-sustained growth means that people work 40 hours rather than 30 hours and that by our success, they have money, disposable income for their families to decide how they want to spend it rather than getting in line and being dependent on government," Bush said. [Sotto voce: note the reflex kick at people working "only" 30 hours a week as scroungers "getting in line and being dependent of government."]

Bush wasn't actually explaining his earlier statement. He was reinterpreting the statement, "people need to work longer hours," to mean something entirely different than "people need to work longer hours." "Working longer hours" and "having access to greater opportunities to work" are not equivalents.

Jeb Bush "at work"

One way to increase opportunities for involuntary part-time workers to work more hours is for those who are working 47 hours a week or over 50 hours a week to be working shorter hours. Heaven forbid! According to an August 2014 Gallup Poll, full time workers in the U.S. reported working an average of 47 hours a week, with 39% of full-time workers claiming to work over 50 hours a week -- almost as many as the 42% who say they work an FLSA standard 40-hour week.

I would take those figures with a tablespoon of salt. People lie about how hard they work. They think saying they work incredibly long hours makes them appear better than everybody else. Actually, it makes them look unproductive. Nevertheless, the Gallup results have held steady for the last 14 years at close to those numbers. If people are padding their hours for the pollsters, they are at least consistent about it.

If those superfluous seven hours per week were "lumps of labor" they could readily be redistributed to involuntary part-time workers and the unemployed eliminating both unemployment and underemployment! But of course, there is not "a fixed amount of work to be done" and the mere fact of redistributing work opportunities would increase productivity and output thus exacerbating the problem of insufficient demand unless that redistribution of hours was accompanied by a substantial redistribution of income in the form of higher wages.

Well, now you see why Jeb Bush was calling for longer hours rather than shorter hours. Longer hours means less pressure for wage increases. Wouldn't want that. Heck of a job, Jebbie!

Feudal Reveries

Reading Robyn Creswell and Bernard Haykel's essay on jihadi poetry in the June 8-15 New Yorker, I was intrigued by how their description of the "culture of jihad" (cult might  have been a more apt word than culture) could easily be applied to the "culture of confederacy":

The culture of jihad is a culture of romance. It promises adventure and asserts that the codes of medieval heroism and chivalry are still relevant. Having renounced their nationalities, the militants must invent an identity of their own. They are eager to convince themselves that this identity is not really new but extremely old. The knights of jihad style themselves as the only true Muslims, and, while they may be tilting at windmills, the romance seems to be working. ISIS recruits do not imagine they are emigrating to a dusty borderland between two disintegrating states but to a caliphate with more than a millennium of history.

One might paraphrase, "The cult of confederacy is a cult of romance. It promises adventure and asserts that the codes of ante-bellum heroism and chivalry are still relevant..." Notable in these anachronistic fantasies is that the recruits imagine themselves to be medieval knights, Southern gentlemen. In other words, the transit back in time also represents a profound elevation in social class.

"Gosh, if only I had been born a thousand years ago, surely I would have been king!" Obviously the recruits to these anachronistic reenactments have a deficient understanding of probability and statistics. They wouldn't have been knights or gentlemen, they would have been peons. They wouldn't have been writing (or reading) poetry and brandishing swords. They would have been illiterate, wielding a hoe.

People should be careful what they wish for. Especially when it's nostalgia.

Jens Weidmann on Central Banks as Lenders of Last Resort (Not)

I don’t think we should let this pass.  Jens Weidmann, Germany’s representative on the governing council of the ECB and considered by most Germans (and their media) as a paragon of economic and financial wisdom, is quoted as saying, “Central banks, although they have the means, have no mandate, in my view, to safeguard the solvency of banks and governments.”  Note that he refers to central banks in general and not only the ECB.

Frankly, I think Weidmann should sue the reporter who put these words into his mouth—obviously a crude attempt to make him sound like a yahoo who doesn’t know the first thing about his line of work.

#OXIdizeExxon

Guardian: Exxon knew of climate change in 1981, email says – but it funded deniers for 27 more years

Story from Union of Concerned Scientists report.

Jeb Bush: "People need to work longer hours."

Dubya's dumber brother.

"My aspiration for the country and I believe we can achieve it, is 4 percent growth as far as the eye can see. Which means we have to be a lot more productive, workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours and, through their productivity, gain more income for their families. That's the only way we're going to get out of this rut that we're in."

How many more hours? Let's put this in perspective.

The Jeb Bush household's declared income in 2013 was $7.3 million.

The median U.S. household income in 2013 was $52,250.

The median hourly wage for May 2013 was estimated by the BLS at $16.87 and hour.

If the median income household earned a median hourly wage, they would need to work a total of 2942 hours a year, assuming 155 hours a year (5%) vacation and holiday pay.

The Bush household had 140 times as much income in 2013 as the median U.S. household.

To earn as much income as the Bush household, the median household would have to work an additional 8,600 hours -- night and day for a whole year -- each week.

I Said, THE FUNDAMENTALS ARE SOUND!

Isn't anyone listening?

The CSI300 index slumped more than 7% at the open and was down 4.8% at 3,739.18 points by 2.08am GMT. 

The Shanghai Composite Index dropped 8% and was down 4.7% at 3,551.13 points by mid-morning. 

China stock futures pointed to further losses. 

Losses on the mainland also weighed heavily on Hong Kong shares, with the Hang Seng Index down 3.3% and shares of Chinese companies listed in the city falling 4.2%. 

As the markets opened, only 11% of companies on the two key mainland markets were still trading. 

Christopher Balding, a professor of economics at Peking University said that while it was not possible to know exactly why so many companies had suspended trading, a large number were doing so because they had used their own stock as collateral for loans and they want to “lock in the value for the collateral”. 

“Today is all about China, with Greece in the background now that it’s been given a new deadline,” said Ayako Sera, a senior market economist at Sumitomo Mitsui Trust Bank in Tokyo. 

“Shanghai’s early losses were like a cliff-dive, which had a huge impact on investor sentiment.”

What fundamentals?

Imperial Panorama: A Tour of German Inflation

Walter Benjamin (1925-6):

“1. In the stock of phraseology that lays bare the amalgam of stupidity and cowardice constituting the mode of life of the German bourgeois, the locution referring to the impending catastrophe — that “things can’t go on like this” — is particularly noteworthy. The helpless fixation on notions of security and property deriving from past decades keeps the average citizen from perceiving the quite remarkable stabilities of an entirely new kind that underlie the present situation….”

“14. The earliest customs of peoples seem to send us a warning that in accepting what we receive so abundantly from nature we should guard against a gesture of avarice. For we are able to make Mother Earth no gift of our own. It is therefore fitting to show respect in taking, by returning a part of all we receive before laying hands on our share. This respect is expressed in the ancient custom of the libation. Indeed, it is perhaps this immemorial practice that has survived, transformed, in the prohibition on gathering forgotten ears of corn or fallen grapes, these reverting to the soil or to the ancestral dispensers of blessings. An Athenian custom forbade the picking up of crumbs at the table, since they belonged to the heroes. If society has so degenerated through necessity and greed that it can now receive the gifts of nature only rapaciously, that it snatches the fruit unripe from the trees in order to sell it most profitably, and is compelled to empty each dish in its determination to have enough, the earth will be impoverished and the land yield bad harvests”