A cure of sorts, we suppose…

Tweet from Nassim Nicholas Taleb: Pomponius Atticus, severely ill, tried, the Stoic way, to take his own life. Having chosen starvation, he was cured of his illness.

From the Wiki: Atticus … committed suicide when he fell ill. Deciding to accelerate the inevitable, he abstained from ingesting any nourishment, starving himself to death, after being incurably ill for some months, dying at the fifth day of such fasting. He was also buried at the Family Tomb located at the Fifth Mile of the Appian Way.

Just wondering if Taleb believes it possible to cure Washington of its ills by the same method.

Cognitive Dissidents: Progressives are having buyer’s remorse…

But, they seem unable to figure out who sold them the bill of goods…

John Atcheson is suffering the nagging feeling that he, and progressives generally, have been had:

At the risk of being churlish, passing this health care bill was the palest of victories.

Yes, it’s better than nothing, but as the President himself has pointed out, it’s largely made up of proposals the Republicans advocated a little more than a decade ago.

So, while this is certainly a political victory, it is far from a triumph of progressive ideals. Indeed, this Legislation is a sign of how far the political center has drifted to the right in the last three decades.

He asks a question a few progressives seem willing to broach:

How did we let this happen?

A question for John Bellamy Foster: Why does Monthly Review hate working people?

As part of our series of exchanges with Michael Lebowitz, we noticed that he often writes for the magazine, Monthly Review, which touts itself as an “independent socialist magazine.” On its website, the magazine states:

Monthly Review speaks to workers, labor organizers, activists, and academics. A scholarly, accessible critique of capitalism, edited by John Bellamy Foster.

Intrigued, we investigated further, particularly interested to see their take on the current crisis, and to discover how they addressed the problem, raised by this crisis, of hours of work. We did not have to look long. The magazine highlights the crisis in an editorial note for February 2010 that delves into several aspects of the crisis, including the tepid response given by Washington to the plight of working families versus its lusty embrace of the gangsters on Wall Street.

Burn your book, Michael Lebowitz…

Michael replies:

Charley,

I don’t agree with your basic premise. I asked you for your data on necessary labour, and you replied by offering information about ‘productive’ jobs compared to ‘unproductive’ ones. By productive, you mean jobs that produce ‘real goods’ as opposed to services, which produce nothing, add no value to the economy and do nothing for the standard of living of people.

By your definition, a job producing snowmobiles is productive, presumably necessary and must be valued whereas the activity of a teacher, nurse, doctor, community worker is useless and unproductive. These are categories warped by capitalism, and we need to break out this ideological straitjacket [which they didn’t do in the USSR— and your distinction is precisely the one that was used in Soviet income accounting]. Speaking as a Marxist and socialist, we need to start from an entirely different premise than capitalism— the premise of human development, the need to create conditions by which ‘rich human beings’ and ‘rich individuality’ can be fostered. From that premise, the activity that you are assigning to the garbage can must be especially valued.

michael

Okay, Michael – we won’t call you Mr. Lebowitz. But, if you keep up this line of argument, we might also stop calling you a socialist, as well. We are trying to assign education and medical care to the garbage can? What nonsense!

Does unproductive economic growth lead to financial crises? (A curious geeky correlation)

One of the more perplexing problems that occur in an economy are the recurrent episodes of financial crises that break out unexpectedly at the end of each major period of growth. Our own Great Financial Crisis, is only the most recent example: since the end of World War II, the economy also experienced the collapse of the Bretton Woods agreement in 1968 – which led to the Nixon shock of 1971 – and Black Monday, October 19, 1987 – which led to a series of economic catastrophes, including the collapse of the savings and loan industry, the Japan Depression, and a host of subsequent national financial crises.

Another reply to Mr. Lebowitz: Job growth policies are a scam

We received this note from Michael Lebowitz, whose work we earlier criticized for his neglect of the issue of hours of work:

Hi Charley,

I understand where you are coming from but I have problems with your claim that so much of current activity is superfluous. You write: ‘At present, in the United States, only about 15 percent of the workday is devoted to necessary work – with about 85 percent devoted to purely superfluous fictitious economic activity.’

Where do you get this information… and based upon what assumptions? If we want to talk about ‘necessary labour’, it is presumably determined by the level of needs and the level of productivity required to satisfy those needs. I’m sure we agree that the needs considered in capitalism are only those that take a commodity-form for which we require money [‘the true need’ the system produces–Marx]. Thus, the set of needs and the time required is clearly deficient because it doesn’t include the need/time to nurture and educate children, the need/time to prepare and cook food-commodities, the need/time to travel to work, the need/time to act as citizens within a community, etc. [See my ‘Beyond CAPITAL: Marx’s Political Economy of the Working Class’ for an exploration of Marx on needs.]

When you talk about the reduction of necessary labour and the extent of superfluous labour, then, you clearly must have in mind (a) the needs for capitalistically-produced commodities and (b) the productivity involved in producing those. Presumably you argue that (a) has become increasingly ‘fictional’ and has expanded far, far beyond (c) ‘true’ needs and that productivity in the production of (c) has grown so substantially that necessary labour has fallen now to extremely low levels.

On a personal, emotional level, I can agree with you. The problem, though, is what are ‘true needs’? And, who will decide? The state? Some philosopher-kings? The mass of people currently living in capitalist societies? To what extent does your argument about necessary labour come down to a cultural critique?

michael

Our answer follows:

More stuff that never happened before…

We keep a list of things happening in this recession, which have never happened before. We have already showed you how industrial capacity dropped for the first time during the dot-com bubble collapse, and again in this recession. We also showed you that the current fall in the ability of the United States to produce goods dwarfed that previously unprecedented fall.

Now we want to show you something that is altogether unprecedented in post-war history.

Below is a chart of US annual GDP since 1947, plus imports into the United States during the period. Normally, GDP is calculated on the basis of all domestic output minus the things we import from abroad. However, in the US case – and only in the US case – we think the subtraction of imports from GDP is entirely unnecessary, because, as we showed earlier, the US alone can import without driving down the value of its currency, or suffering a collapse of domestic consumption. What occurs, instead, is the relocation of industrial capacity off-shore, as previously mentioned.

United States GDP plus imports since 1947

As you can see from the chart, there hasn’t been a year over year fall in total US GDP plus the value of its imports since 1948. (The fall in 1948 is too small to be seen on this chart.) You will also notice that by this measure, the US economy (including both domestic output and all imports) topped out at almost $20 trillion in 2008, before falling for essentially the first time in post-war history.

Below we show a year over year change in GDP plus imports:

GDP plus imports, year over year change

What this means is that there has always been a shadow GDP in the US economy that is not caught by conventional statistics. American companies can, for instance, relocate their operations offshore and import back into the United States as long as the US is owner of the world reserve currency – these imports are the unpaid labor of the trade surplus countries captured by the United States Dollar Empire. It also means that periodic recessions, as we have experienced since 1948, never resulted in a contraction of the US economy when the value of imports are added to that which is domestically produced. The recessions likely were engineered solely to keep wages stagnant.

This “recession” marks a change: the combined value of GDP plus imports has fallen for the first time in post-war history and by nearly 7 percent.

Mark Thoma goes biblical on jobs…

Mark Thoma brings us the updated version of the injunction, “Let him who has TWO coats give to him who has none”, in a post titled, Government Can and Should Create Jobs . Luke manages to make this point in 12 words, but since Thoma is an economist, he seems to require more than one hundred times that many words to get to the point.

In a town in a country suffering through a recession, a wealthy person just happens to live next door to an unemployed worker. The worker has experience in a variety of trades, and is quite competent, but despite his skill and reputation, there are no jobs to be found. And it isn’t for lack of trying.

Seeing this, and having a kind heart, the wealthier of the two — much, much wealthier — decides his neighbor needs a job, so he sets about creating one. The first option he considers is just to find something for him to do, it doesn’t much matter what, digging holes and then filling them up, whatever. He decides that if he goes this route he will ask his neighbor — wink wink — to watch his grass grow. Both of them know this is a ruse, a made up job to justify the payment, but somehow having the ruse in place allows the unemployed neighbor to keep his dignity in a way a direct cash payment would not. It’s a job not a hand out — he does have to look out his window a few times a day to make sure it the grass is growing like it’s supposed to. But practically it’s a means of support for the neighbor and his family that allows him to continue his diligent search for a job.

Saint Paul’s complaint…

He’s phoning it in now.

If it were not previously obvious that Paul Krugman has simply decided to cease evolving, and fully intends to ride his Nobel Prize into a grassy, well-shaded, spot overlooking the American economist version of an intellectual Forest Lawn, his most recent response to an imagined slight by the WSJ should put all doubts to rest.

The Journal apparently accused Saint Paul of duplicity for his claim in the popular press that unemployment compensation does not reduce labor force participation, while maintaining just the opposite view in his textbooks:

I hear through the grapevine that the usual suspects at the WSJ have put out something along the lines of “Krugman says that unemployment benefits won’t raise unemployment, but in his textbook he says they will, neener neener.” Are they really that stupid? Probably not — but they […] think that you, the reader, are that stupid.

Since you are not stupid, Saint Paul proceeds with his argument that,

Everyone agrees that really generous unemployment benefits, by reducing the incentive to seek jobs, can raise the NAIRU; that is, set limits to how far down you can push unemployment without running into inflation problems.

While unemployment compensation will not necessarily encourage the unemployed to avoid work, really generous unemployment compensation will. Everyone, Saint Paul swears, agrees with this. If you pay people enough to not work, it will begin to affect how much they have to be paid to seek work – leading to inflation. If we make it too comfortable for people who cannot find jobs, we will pay for it in higher prices. So we need to carefully calibrate exactly how much the unemployed receive for having been laid off – too little and they starve, too much and Lloyd Blankfein won’t be able to afford that diamond studded, solid gold, Rolls Royce he has his eye on – the one with seats covered in the most exquisite gossamer of fairy wings.

(And, if we provide decent shelters for battered women, we will only encourage the collapse of marriage. It is typical of Saint Paul that he protests the most squalid assertions of his field only to incorporate the logic of those assertions into his argument.)

However true the reasoning that forcing companies to pay full compensation to those who have been thrown into the streets might lead to the loss of such fear of starvation that workers might even prefer not to work – and, therefore, adopt the attitude of such notables as Paris Hilton, who seems to survive quite nicely without the burden of the daily commute – nevertheless, Saint Paul assures us that we are far from encouraging these sorts of pretensions among the filthy poor:

But in case you haven’t noticed, that’s not the problem constraining job growth in America right now. Wage growth is declining, not rising, and so is overall inflation. A wage-price spiral looks like a distant dream.

Not only are we able to keep the unemployed in such a state of anxiety about their mere survival, with incremental extensions of the unemployment compensation – subject to the periodic political infighting in Washington – there are so many of them that their sheer number threatens to starve even those who remain at work by depressing wages.  The problem we face instead is precisely the opposite: who is going to consume all the crap we’re producing in China, now?

What’s limiting employment now is lack of demand for the things workers produce. Their incentives to seek work are, for now, irrelevant.

Thus, Saint Paul cuts through the knot: we are suffering such unemployment, because we have no cash, because we are unemployed!

Well, at least we are getting somewhere: If there is a lack of demand for the things we already produce, then there must also be a lack of demand for productive investment to hire the unemployed to produce more of it. A situation which Saint Paul’s intellectual godfather, Lord John Maynard Keynes, put this way: “investment demand is so far saturated that it cannot be brought up to the indicated level of savings without embarking upon wasteful and unnecessary enterprises.”

And, what was his solution, Paul? Was it to maintain the threat of starvation over the heads of 20 percent of the labor force indefinitely?

Or was it to reduce hours of work?

Brad DeLong doesn’t get it (And, probably never will)

Brad DeLong admitting he does not know why Karl Marx would have opposed stimulative monetary policy in a depression:

Why he is opposed is really not clear to me…

Yes, Brad. We already figured this out. 🙂