Economics and similar, for the sleep-deprived

A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?

Update: seemingly not

Update: Oh yeah!

Sunday, August 28, 2011

I'm just off to shake hands with the unemployed

Prompted by this rather good piece in Jacobin magazine (which in turn, unusually, I found because Chris Bertram forwarded it to me on Twitter, rather than through my constant and fevered vanity searches), I've been thinking a bit more about unemployment, and its productivity. By the way, Jacobin is a really great blog.

It's been on my mind a bit because I have been enjoying a short period of unemployment myself. Of the very nicest kind, I hasten to add - did you know that unemployment comes in varieties? The nice kind has the characteristics a) I chose it, rather than it being suddenly imposed on me by someone else, b) it doesn't have negative financial implications for me, and c) it has a set date when it's going to end. It's called "gardening leave", and econometricians among my readers will immediately realise that it is a "natural experiment", whereby I am able to find out whether "worklessness" really does have all the debilitating effects on moral fibre and so on which are claimed for it, when one cancels out the typically highly correlated phenomena of poverty, loss of social status, uncertainty about the future, etc.

And the results are ... maybe a little more mixed than I'd thought. It's lovely to have the summer back, see the kids, make a start on writing my terrible novel, etc etc etc. From previous episodes, I've remembered that without the discipline of having to get up in the morning, it's often quite easy to start drinking more booze than is good for you, and tried to keep an eye out for that one with reasonable success. But ... you do get antsy - this is perhaps more than normally the case for me as my job is amazingly interesting right now, and I'm cut off from the information firehose I'd been accustomed to drinking from. I'm sneaking away to read the Financial Times more than I'd care to admit. And one does miss the old "sense of achievement" thing, which can contribute to an air of listlessness and moping round the house (dealing with this gardening-leave phenomenon is basically the purpose of the terrible novel project). So I would say, within the general fact that I am fucking loving it, and that these disbenefits are very heavily outweighed by the simple joy of leisure, that it's not all bollocks, that there is something special about being employed that is good to have and bad to not have and that I'd be interested in further theories about what it is.

But the point I was meaning to make before I started rambling was that if I had, say, spent the last month updating Wikipedia and working in a community garden, rather than going on holiday and putting silly jokes on Twitter (plus writing a quarter of a ghastly novel), would this have belied my earlier assertion that unemployment is an incredibly low-productivity industry?

Yes and no. Thinking back to that joke post, I missed a trick, because of course the unemployed don't exactly produce nothing - they produce unemployment. Sitting at home and not working doesn't make you unemployed per se, any more than sitting at home and not fighting makes you part of the Territorial Army. In order to be considered "unemployed" by the relevant statistical organisations, and perhaps more importantly for the purposes of unemployment benefit you have to be actively seeking work and demonstrating willingness to accept jobs. All of which is, apparently and according to people who have experienced it, a gigantic pain in the arse.

But, sadly, it's in many ways a necessary pain in the arse. Quite surprisingly, not only is the role of the unemployed in the economy one of the very small number of things that nearly all economists agree about, it's part of the small subset of that set which is actually right. From Karl Marx to Alan Greenspan, the output of the unemployment industry is "downward pressure on wages". And from this point of view, the invention of Wikipedia, or anything else that makes unemployment less unpleasant or which encourages people into non-market productivity and out of the labour force is a productivity reducing innovation. Things that might increase the productivity of unemployment would be annoying and inconvenient job training programmes.

Arguably on this basis, I'm wrong - as Brad DeLong has repeatedly catalogued, the measured unemployment rate is massively understating true unemployment as measured by the employment-population ratio. But pressure on wages is still as great as if we had twice the number of unemployed - productivity increase!

I think that's pretty much a statistical artefact, though, quite apart from the fact that the US economy can't really go on on the basis of the Great Discouragement being permanent. The discouraged workers aren't necessarily hustling for every job out there, but they are serving as the proverbial Terrible Example.

And I think that having more non-market productivity for the unemployed, while certainly worth trying, doesn't really make things all that much better, absent massive other changes in society. The really bad thing about unemployment is uncertainty about when it's going to end; without telling tales out of school, I have mates who have tried different versions of the "natural experiment" of gardening leave, and reported that even if you've got plenty of spare cash and things to be getting on with, uncertainty about the future is a big source of stress. Or more specifically, lack of control over your own outcomes, which, as those who peeked at the last chapters of Michael Marmot's "The Status Syndrome" will know, is probably the big killer about being at the bottom end of whatever Pareto curve you happen to be on.

I think this might be a part of what Juliet Schor's Plenitude (which I have not read, or really heard of outside the Jacobin summary) is on about, in as much as it represents an attempt to declare independence from the market economy. I'm rather pessimistic though. All these schemes seem to me to still be basically not quite self-sufficient, in that they still depend on either on state benefits or on substantial free-lance income. Although these schemes are all very worth doing for some people, for some time, and certainly look better than just being miserable, the very lack of longevity makes me suspicious. So I'm still with Keynes on this one; for the time being, we are not in a future of plenty, and for the time being, despite everything, the best way to provide income security and a basis for long-term planning for nearly everyone is the full-time wage contract, and so the goal f policy should be getting one for as many people as can handle it. I'm worried that a lot of localist and/or environmental schemes are terribly susceptible to being suborned by "Big Society" types (who have already got their hands on "happiness economics", note), who see them as displacement activity for the "discouraged workers" - the reserve army for the reserve army of labour. We could be building the foundations of a movement that will help to sweep away globalised neoliberal financial capitalism, and replace it with something nastier.

Edit Synchronicity, I see - Alex is on the trail of a company that sounds as if it might be "helping people find jobs. But of course, what it's doing is forcing unemployed people into more-or-less pointless (because unemployment is a macroeconomic problem, and a quick look at the unemployment/vacancy ratio tells you there's no current micro solution) "job-related activity". This has the effect of making unemployment more unpleasant to those who have it, while constantly sticking it under the noses of employers, and contributing to a general air of uncertainty and fear. In other words, raising the productivity of unemployment, at the expense of increasing the (psychological) environmental pollution of the unemployment industry. Lovely people I'm sure.

Double edit I've just been made aware, by comments, that Jacobin is not actually just a blog but an actual magazine! I have accordingly subscribed (to the pdf edition, in the vague hope of a Kindle version to come) and encourage my readers to do so as well. Also, Left Business Observer, another ace newsletter!
50 comments this item posted by the management 8/28/2011 06:37:00 AM

Thursday, August 04, 2011

And another thing ...

Just to be clear on this, as I think some people are confused.

The bad thing about cutting the federal deficit is not that it might affect Social Security or Medicare. Even if these were totally ringfenced it would be a bad idea.

The bad thing about cutting the federal deficit is not that some other virtuous program might be defunded. Even if all the savings came from military procurement it would be a bad idea.

The bad thing about cutting the federal deficit is not that it "shrinks the state". Even if all the deficit cuts were obtained by tax rises it would still be a bad idea.

The bad thing about cutting the federal deficit is not that the burden falls disproportionately on the poor. Even if the deficit were reduced specifically by taxes which only fell on the top 1% of the income distribution it would still be a bad idea.

The bad thing about cutting the federal deficit is that unemployment is very high and interest rates are very low. Given that, taxing productive activity to pay down debt is really obviously the wrong thing to do, and borrowing money to employ currently unemployed resources is really obviously the right thing to do.

It would not need to be spent on "shovel-ready" projects. By definition, for purposes of expansionary fiscal policy, anything you can spend money on is shovel readly.

It doesn't have to be spent on vital infrastructure. Even completely pointless activity would be better than nothing. In some cases, even actually destructive activity, like war, has had a stimulative effect on the domestic economy.

The basic issue, and the one which ought to have people running around like their hair is on fire, is the unemployment rate. That, combined with the interest rate, shows you that deficit reduction is the stupidest possible policy at the current time. This is a very important issue, and the current President of the USA is on the wrong side of it.
37 comments this item posted by the management 8/04/2011 01:35:00 AM
Thort For The Day

I am still irked by this "family budget analogy" that is out there doing so much damage in the world. Here's another go:

Let us assume for the sake of argument (even though it isn't really true) that when poor, working-class families experience hard times, they have to "tighten their belts", reduce their consumption and concentrate on reducing their debt levels.

Even given that, we must also be aware that rich families, with large amounts of assets, don't have anything like the same constraint. Does Warren Buffet reduce his lifestyle and look at his outgoings when his share price falls? Does he hell. Even much further down the chain, if a senior executive is made redundant he won't immediately take the kids out of private education or sell his car. In many cases, professional people going through redundancy might even be sensibly encouraged to go back into further education or invest in retraining for a different career, taking on more debt to do so.

Are the USA and UK, if we are to analogise them to families at all, more like the working poor, or more like the very richest families in existence? Particularly in the case of the USA, it kind of answers itself, doesn't it?

What really irritates me is that you know that a sizeable majority of these tools going on about austerity and managing household finances have never seen a credit card bill they couldn't pay in their fucking life. And a majority of the rest are actually the kind of people who run up a million dollar bill at a jeweller's just because they can.
8 comments this item posted by the management 8/04/2011 01:28:00 AM

Monday, August 01, 2011


I just realised that plenty of mainstream US Democrats, having spent the last however long castigating people to the left of them for perceiving some progressive tendencies in the government of Fidel Castro, are now reduced to supporting the re-election of a President who imprisons people without human rights in Cuba, but who has made excellent advances in the field of bringing healthcare to the poor.

Update Furthermore, can anyone tell me why the millionaire author Barack Obama seems to keen to extend tax cuts which benefit millionaires?
15 comments this item posted by the management 8/01/2011 02:12:00 AM

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