On the Fetishization of Employment
[S]pending is good, and while productive spending is best, unproductive spending is still better than nothing. … [S]uppose that U.S. corporations, which are currently sitting on a huge hoard of cash, were somehow to become convinced that it would be a great idea to fit out all their employees as cyborgs, with Google Glass and smart wristwatches everywhere. And suppose that three years later they realized that there wasn’t really much payoff to all that spending. Nonetheless, the resulting investment boom would have given us several years of much higher employment, with no real waste, since the resources employed would otherwise have been idle.
OK, this is still mostly standard, although a lot of people hate, just hate, this kind of logic – they want economics to be a morality play, and they don’t care how many people have to suffer in the process.
It is strange that Krugman invokes the notion of a morality play because the critique seems to apply most acutely to him. He has fetishized employment beyond all else. You can only believe the above if you think there is no higher calling for an economy than full employment. That is the only way that “resources” that are “idle” can be conceived as the only type of “real waste”.
Viewing this from the business school rather than as an economist, I find this goal incredibly depressing. My goal for the economy is almost the opposite. I think the point of the economy is to get people the stuff that they need or want to do what they need or want to do. The end. And if you can do that with less employment rather than more, that would not be worse. It would be even better.
An economy where more people have the stuff they need or want is superior. It is superior even if fewer people are employed. Indeed it is all the better if fewer people are employed. Ceteris paribus, unemployed time is free time (though it might not feel that way if you don’t have all the stuff you need or want).
Employment only matters inasmuch as it produces what people need or want. If they can do that without being employed, that would be better, not worse. In Krugman’s nightmare, machines replace all of us in all our jobs so we aren’t needed. That’s my utopia (assuming the machines don’t require payment or servicing).
Addendum: You might object that people need to be employed to get paid, and non-productive labor does at least make those payments happen. That argument falls flat for two reasons. First, Krugman doesn’t say the problem is unpaid resources. He says the problem is idle resources. Second, if the concern is the workers not being paid, then the solution would be to pay them unemployment while they write books and play tennis, not to produce things of no value.
Image credit: Wikimedia Commons
I ask my business law students what “pro-employer” laws are. They have foggy ideas, usually treating the employment of more workers (at least, like themselves) as an assumed good. So I ask then if a mandatory thirty-hour maximum workweek would be a “pro-employer” or “anti-employer” policy, and inevitably they rule –with little time spent thinking about it — that this is an “anti-employer” policy. Why? I ask. Same work gets done, same cost for labor, just spread around more people. The more thoughtful among them eventually get to “soon enough, those thirty-hour employees will demand that they be paid what the current 40+ workers earn. “Oh my goodness!” I then exclaim in sarcastic horror. “We’ve reduced our country to the equivalent of that third-world hellhole, France!”Report
I am a strong proponent of 35-hour workweeks, but I’m also strongly against a workweek being a maximum of 35 hours.Report
http://www.dw.de/sp-downgrades-frances-credit-rating-angering-paris/a-17213452
While it is hardly a third world hellhole, France’s economy is seen as faltering. One of the causes has been named as the French work schedule. Between the 35-hour workweek and their businesses, for all intents and purposes, closing up for a month in August, even Hollande has been making noises about how France can’t continue as it is.
Even if it weren’t for that, I would not blame one of your students for replying “With 20% unemployment for college graduates, we have more to lose under that system than you do, professor.”Report
Well, all of my students are already employed also because of the nature of the program in which I teach, but I’ll not dispute that 20% number for traditional students.
How do you figure a currently-unemployed student comes out a loser in a regime that creates more employment vacancies, for shorter hours of work?Report
Burt,
There is little evidence that the workweek reduction created more employment:
IMFReport
I was more responding to holding up France as an ideal to strive for.
Would it create more employment vacancies? In a closed system, it would. However, off the top of my head, I would say that this conclusion doesn’t take into account:
Outsourcing: Even white-collar jobs can and are shipped overseas. Lowering the hours in a workweek will make companies look that much harder at whether a domestic employee is worth the cost.
The spread of salaried positions: Increasingly used for non-management positions. Depending on the employee’s field, a recent college graduate can easily be told “Here is what we will pay you and here is what you will work. If you don’t like it, there are others who will take it.” While more experienced job seekers have more options to refuse, recent college grads don’t have a whole lot of leeway to fall back on when negotiating how many hours they will work.
Technology: Much like outsourcing, a 30-hour workweek will have employers looking that much closer at whether there are options to produce heightened productivity, especially if those employees are also getting the same health and other benefits that the 40+-hour employees are getting.
So, in our current day and age: I am uncertain whether a 30-hour workweek would translate into more employment options for the recent college graduate. The options could stay the same or even worsen.Report
Sarcastic?Report
If people still need to exchange money of some sort for the goods and services they need and want, how can an economoy do so with less employment? We might be on an inevitable shift away from a full-employment economy but as far as I can see, we are still in an economy where people expect something, usually money, for the goods and services they are selling. Since employment is the traditional way to get money to purchase goods and services, you still need it even if the costs of good and services are lower.
I think this is the disconnect between the people who “fetishize employment” and those that do not. We employment fetishizers are not really sure how people without employment are supposed to get money for the goods and services they need, let alone anything beyond the necessities without a job. Perhaps you can enligten us because there seems to be a few steps missing.Report
See the addendum. If you want people to get money, you can just give them money. If you want them to “work” to “deserve” their money by doing the modern day equivalent of digging and refilling ditches, then you are acting out a morality play.Report
The problem as RichardS pointed out is that the political paradigm is against giving people money. At least in America we have a decent number of politicians opposed to any form of welfare state policies. Let alone, GBI.
I think we will get the worst of both worlds.Report
Krugman’s piece at no point indicates that *he* personally thinks that unproductive work is simply political cover for giving people money. He pretty clearly argues that unproductive work is good in and of itself, not just as a second-best option to direct payments. And Krugman is no stranger to making suggestions against the political paradigm. I think he would make the politically unpopular argument if he believed it.Report
I think Lee’s spot on. I also think this brings the discussion around to the writing that Kevin Drum et al have been doing about advances in automation and artificial intelligence. If we’re about to reach a technological point that renders far more human jobs obsolete, that’s a situation that in theory should be fantastic for human welfare, but given our existing political and cultural attitudes and institutions, is deeply worrying. While I might agree with you in theory, in practice we need to be willing as a society to give people that aren’t working lots of money, and I’m very skeptical that that is a real possibility.Report
I don’t know about the piece that you link, but certainly in Krugman’s broader body of work I don’t see any aversion to welfare spending, food stamps, etc. Given that he presumably thinks that an economy with tighter labor markets will find productive work for people to do and that he is generally arguing against people who deny that deficit spending will get us a free lunch, I think you’re reading is uncharitably narrow.Report
I don’t know about the piece that you link, but certainly in Krugman’s broader body of work I don’t see any aversion to welfare spending, food stamps, etc.
I do recommend the linked piece as well as the talk he links to. They are both good.
Yes, Krugman isn’t averse to “welfare spending, food stamps, etc.”, but that’s exactly the point. He is isn’t averse to arguing for those things, so if he doesn’t argue for those things here, it has to be for a reason, and I submit that that reason is that he thinks unproductive work is valuable because that’s the reason he tells us that is his reason.Report
I’m with you. It seems that a genuinely progressive society would be looking toward a zero employment rather than a full employment world (though people could do what they like, their livelihood wouldn’t be tied to work).Report
In another thread yesterday I noted that this was the Christian version of heaven.Report
I thought the Christian version of heaven was everybody sitting around praising Jesus. From Fred Clark on Slacktivist, I also learned that some of the more reactionary Chrisitan theologians taught that women who enter heaven become men.Report
Seems to me that it should be everyone’s. I mean, essentially being forced to work to survive seems like a major infringment on liberty, doesn’t it?Report
Oh, and does this mean I’m immanentizing the eschaton again?Report
Societies where food is scarce have heaven being a feast.
Societies where women are scarce have heaven being an orgy.
Our society has heaven being a vacation.Report
some of the more reactionary Christian theologians taught that women who enter heaven become men.
Let me guess: they’re also the ones most horrified by homosexuality. Not that they’re protesting too much,Report
Oh, and does this mean I’m immanentizing the eschaton again?
Dammit, Chris, if I’ve told you once, I’ve told you a million times, cut that out! And don’t tease the dog, either!Report
@mike-schilling
So either there is no sex in heaven (in which case why call it heaven?) or in heaven gay sex is ok but not on earth?Report
I’m also pretty sure that Jesus doesn’t want people to work on earth either.
Bloody hippy-Christians. Let’s hippy-punch them and watch them turn the other cheek.Report
Shaz is right. Matthew 6:26-29.
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I usually enjoy your posts, Vikram, but this one leaves me confused. Given that the current political paradigm is more or less “those who don’t work don’t eat”… how are the mass of unemployed going to buy all those goods the jobless economy produces? I suppose that we could give everyone a (tax supported) stipend, but given the current ideology that all taxation is evil and the sign of the devil… who’s going to pay for that if no one is working and corporations are paying their lawyers and bribing their pals in government to find way to avoid paying tax?
I think the whole accusation that employment is being “fetishized” comes off as dismissive. People don’t just work for the money (well, some do… they’re called the working poor), but our current economic system is set up on the barter of work for wages.
Trust me, I don’t fetishize my job.Report
>Trust me, I don’t fetishize my job.
Does your job produce anything for anyone outside of providing you a paycheck? If so, you don’t need to fetishize your job.
Given that the current political paradigm is more or less “those who don’t work don’t eat”… how are the mass of unemployed going to buy all those goods the jobless economy produces?
Remember that we’ve got two types of work here. There is productive work, which I am all for, and unproductive work, which I am totally against and Paul Krugman feels is barely distinguishable from productive work. If you want the unemployed to buy goods, you can pay them to do that. You don’t’ need to toss them in Galaxy Gear and Google Glass mines so that they can feel like they were being productive when they weren’t actually doing anything of value.
If the only value of unproductive work is the paycheck received, then you can just give people a paycheck and skip the work and be better off for the change.Report
I’m sorry but are you intentionally missing the point? We agree that it would be nice if we had a GBI and people no longer had to do unproductive work to make a living. The problem is that it is politically impossible to do this. We have an entire political party in this country that is more or less completely against any welfare state measure. A spokesman for Paul Ryan recently said that people need to be taken off of food stamps because people on food stamps can not dream. These are not politicans that are going to support a system necessary for a non-full employment economy.
The problem with your system is that unless there is a massive political change, we are going to get the worst of both worlds. A low employment or at least a non-full employment economy with a society based around the idea that “those who do not work, do not eat.”Report
Lee, I think what Vikram is getting at is that in a situation where the economy had so much capacity that everyone could be provided with the basics very easily then you’d institute some kind of negative income tax or guaranteed minimum income. Thus people who didn’t work at all would still have a floor income they’d not fall through while those who deigned to find some form of work (nonproductive or creative, the kinds of things that can’t be automated) would then earn money on top of that.
That’s a liberaltarian or far left idea and I’d agree it’s not politically feasable (possibly because it’s not economically feasable) but it’s not utterly outside the pale. Sweden is kicking the idea around of doing such a thing.Report
I’m sorry but are you intentionally missing the point?
No, it wasn’t intentional.
We agree that it would be nice if we had a GBI and people no longer had to do unproductive work to make a living. The problem is that it is politically impossible to do this.
OK. Then you agree with me, which means I think you disagree with Krugman.
Or at least what he wrote. There is the possibility that he wrote what he thought was a politically plausible argument rather than what he truly believes, but that would be pure speculation and not IMAO plausible speculation.
The problem with your system is that unless there is a massive political change, we are going to get the worst of both worlds.
I should stress that I have not suggested a system. I have merely claimed that unproductive work is bad. In fact, it should hardly be considered “work” at all.Report
North, the Swiss. Its the Swiss that are apparently about to engage in the first national experiment with GBI.
I’m not opposed to GBI, I just can’t see anyway of implementing it in America. If American society is devoted to the idea that “those who do not work, do not eat” than we need to provide employment no matter how useless and unproductive. If we can overcome this line of thought than we do not.Report
@north
What are the steps that you think it will take for the US to try this experiment with mandatory guaranteed income or a negative income tax?Report
“A spokesman for Paul Ryan recently said that people need to be taken off of food stamps because people on food stamps can not dream. ”
People like him need to be tied down and forced to work 6 months in the conditions I’ve worked. We dreamed a lot even as we were trying to make ends meet. We dream today. I dream of becoming a teacher. We both dream of one day becoming grandparents. My little girl dreams of riding ponies because that’s what 7 year old girls do. If you ask her what she wants to do when she grow up she says she wants to be a vet. We dream a lot. Constantly. We dream of a world where horrible people like Paul Ryan are shunned for being horrible people too.Report
Lee: Yes, I stand corrected it’s the Swiss.
ND: I’d say that first off the GOP needs to get over losing its mind or else lose its mind so badly that they get utterly marginalized electorally; a policy as big as GBI or NIT would require quite a significant majority.
Speaking in political philosophy terms it’s not quite so impossible. On the left the appeal of GBI or NIT is intrinsic to much of our DNA though you would have a dirty little fight to keep the nanny leftists from absolutely larding the idea up with various do that’s and don’t do that strings. On the right you’d not be selling the concept so much as a way of helping people but as a way of shrinking the government. A set GBI or NIT that replaces the previous safety net programs would result in a –massive- decrease in the amount of required bureaucracy. Knee jerk libertarians would be opposed of course but the thoughtful ones in my experience are generally amenable to the idea.
You’d probably also need either socialized medicine or for something like the ACA to be working mostly properly.
Your biggest roadblock, however, is immigration. The US is an immigrant nation and has a lot of very pro-immigration rules baked into her constitution. A GBI or NIT could become unfeasible under the current US immigration rules and you’d certainly have the right pitching a huge fit even if they weren’t insane over the idea of unlimited immigration and a GBI or NIT.
Most importantly, you need the economy to be developed to a size, strength and automation level where the resources are there to fund this thing. Are we there? It depends on what the minimum floor is we’re talking about. It also depends on how much the right is correct when they assert that people who don’t fear starving simply won’t work. The Swiss experiment should be enormously illustrative.Report
“Does your job produce anything for anyone outside of providing you a paycheck? If so, you don’t need to fetishize your job.”
I know for a fact it does… but then you’d be heard pressed to find someone who doesn’t think THEIR job isn’t in some way valuable. Deciding whose job creates “value” could be construed as an “angels dancing on the head of a pin type” of discussion… I mean really, do we need economists? 😉Report
Is it always so easy to tell the difference? I can think of a lot of jobs I’ve had that were productive in some ways and non-productive in others. And a couple of jobs approached something like “make work” jobs. One of those “couple” was very demoralizing, but it was nice to get a paycheck.
Pure make work jobs are (at least probably) the result of moralizing. But I think there are shades of gray that need to be explored.Report
@pierre-corneille ,
It may not always be easy to tell the difference. I acknowledge that as a good point. It, however, is not Krugman’s point. For reasons that elude me, people seem to think he meant to say that “not all work that looks unproductive at first ends up being unproductive” or that he said “unproductive work is useless, but we need people to do it for political reasons”, but he gives no indication of having thought either of those things. Some have suggested that these other reasons are assumed to be obvious, but the fact that he provides a *different* reason from those two seems to suggest that he wasn’t constrained by length. Why spend your opening paragraph explaining a point you don’t actually believe?Report
@vikram-bath:
Is this the only Krugman piece you’ve read? Because I’m 99% certain that the view you’re ascribing to him is not one that he holds. It may be a fair criticism of this piece that he isn’t clear enough about the fact that the only point of the unproductive work would be to provide income to the unemployed and that it could just as well be done with simple transfers, but I don’t think that criticism holds for his writings as a whole. You’re claiming that he’s making a really elementary error–the type that no economist would really make, especially not one who writes introductory econ texts for a living.Report
You’re claiming that he’s making a really elementary error–the type that no economist would really make, especially not one who writes introductory econ texts for a living.
We’re talking about his columns T-Frog. And there’s a whole cottage industry of economists out there busy on a regular basis pointing out the contradictions between his columns and his textbook and prior academic writings.
That is, there’s Krugman the economist and there’s Krugman the columnist, and those who think they’re synonymous are probably only familiar with the latter.Report
@jm3z-aitch
Eh, I guess I miss out on the impact of most of the “Krugman is being inconsistent / dissembling / illogical!” posts because from what I can see, he’s mostly writing bog standard undergrad econ stuff. Maybe I read it the same way people correct spelling errors when they’re reading quickly and miss stuff that people who are really trying to follow the stuff for the first time would stumble over. Maybe the problem is that he’s a sloppy popularizer of economics, so if you’re reading him without already knowing what he’s driving at, his background posts are confusing. I really can’t tell.
I’ll say that while I read his blog, I don’t really read his columns. Policy columns are almost always a mess because they have to be written with the assumption that their readers are third graders who were raised by martians. The blog is generally pretty straightforward econ musings banged out pretty quickly, sometimes with errors but generally assuming readers have some basic econ under their belts. Maybe the NYT columns are the real killer.Report
Is this the only Krugman piece you’ve read? Because I’m 99% certain that the view you’re ascribing to him is not one that he holds.
1. It is not the only piece I’ve read. However, I am critiquing only this piece in this (short) blog post. I don’t think it’s necessarily wrong of me to critique what a person has written for what it says.
2. I’m not critiquing Krugman. I am critiquing what he wrote in the excerpted paragraphs. My focus is on the actual words written and what they mean. You might be right that he actually holds different views that contradict what he has written, but realize that it is not *my* responsibility as a reader of his to try and ascribe beliefs to him different than those he has expressed, even if he has a vast body of work that says different things.Report
@vikram-bath
Thanks for your reply. I confess to not only not clicking on the link, but to (ahem) skimming the portions of the Krugman column you cited. As long as you’re just pointing out what Krugman said, I have no beef with what you’ve written.
And from what very little of Krugman I’ve read (and those are only his columns and not his blog or his economics), I’m not a fan of the guy.Report
You’re claiming that he’s making a really elementary error–the type that no economist would really make
Hence, the conclusion that Krugman is not an economist.
I don’t have anything of first order substance on the topic – I just don’t know enough about any of the relevant topics being discussed on this thread – but on the meta-level did think that the conclusion Vikram drew from the Krugman piece didn’t actually follow from the quoted passage – that
You can only believe the above if you think there is no higher calling for an economy than full employment.
It could be that Krugman is merely making a ceteris paribus argument here based on pretty uncontroversial assumptions: that unemployment is relatively high, that oodles of cash is sitting idle* and could be used for productive ends, so all other things being equal, using that cash to bling up workers and increase employment serves a useful end even if that bling-up doesn’t increase total productivity.
That is, he’s not making an argument based on the assumption that employment is the goal of the economy. He’s making an argument based on the recognition that too little employment given the nature of our economy is sub-optimal.
*Personally, tho, I think James’ criticism hits much closer to the real incoherence of Krugman’s piece: the idea that cash reserves sitting in banks collecting interest are “idle”. That criticism has some real sting.Report
@vikram-bath
Fair enough, but the thrust of your piece seems to be that it’s bad that Krugman didn’t explain why employment is good for the unemployed, so it’s reasonable to assume that he thinks that it’s good for its own sake. That just strikes me as an odd interpretation, given that basically no economist would say that.
If I write a blog post suggesting a way to reduce air pollution without explaining why air pollution is something we’d want to reduce, is it sensible to conclude that I’m doing it on vague moralistic or theological grounds, or does it make more sense to assume that my reasons are the same reasons most people have for reducing pollution, especially if I’m posting a few blog posts per week on the topic?Report
North, the Swiss. Its the Swiss that are apparently about to engage in the first national experiment with GBI.
Well, maybe. A coalition of village idiots got it on the ballot via the initiative process. That doesn’t mean it’s going to be approved by the voters.Report
T-Frog,
If you read the back and forth between him and other economists, he doesn’t always come out looking good.
Of course that’s not to say that the other economists necessarily come out looking good, either.Report
T-Frog,
Actually, what bothers me is that people who read only Krugman will think his interpretation of bog-standard macroeconomics is in fact perfectly bog-standard, and therefore unchallengeable. But the other economists who challenge him aren’t wackos and kooks–they’re also very highly respected folks. That includes Bob Lucas, who unlike Krugman, won his Nobel for work that actually fell within the field of macroeconomics.
That doesn’t mean Lucas is right and Krugman wrong (or vice versa). I remain fairly agnostic on macro. I think the field is still a mess, frankly, because we have multiple competing theories, none of which can be really tested. But the idea that Krugman is simply explaining some kind of common understanding of macro that is widely accepted throughout the discipline except by kooks is not precisely accurate. And while–as you know from my blog–I’m skeptical of fiscal policy, fiscal policy itself isn’t my actual target of critique; the fetishization of Paul Krugman by liberals who can’t bring themselves to read and try to understand his critics as well as him is my real target.Report
@jm3z-aitch:
I certainly wouldn’t say it’s “widely accepted” versus “kooks” in this case. I will say that what Krugman lays out really does map basically 1:1 to what you’d get in an intermediate undergrad macro textbook. That doesn’t mean it’s complete or right, but the people who want to knock it are either operating on newer/more complex models that don’t translate as easily into blog posts or they simply never studied intermediate macro and make arguments that wouldn’t make it past the first few weeks of a basic course.
I’m skeptical of a lot of macro as well, especially as more epicycles are added to models, which is why I lean toward the straightforward stylized models until something actually shows up with more predictive value. So far, most of those models don’t seem to have done much better than the first order ad hoc models they teach the kids, so I’m not jumping ship just yet.
We can all take the least informed of the people who disagree with us and make them the real target, but that’s really only useful when you’re talking to those people directly and trying to educate them. I jump into these debates because a lot of these criticisms are just silly, and I think this one qualifies. A lot of these discussions seem to go:
1) Make a silly criticism of Krugman.
2) Have people take issue with your criticism because it’s silly and off the mark.
3) Shift over to saying that you’re really just anti-Krugman-acolyte and then use (2) as evidence that it’s a serious problem, totally losing track of the fact that the original argument was silly and deserved the response.
I agree that economist groupies who’ve never studied economics are annoying and probably bad for discourse as a whole, but that doesn’t mean that we skip step 2. I mean, I’m not over at this post responding to the Krugman Defender Signal for very good reason. I’m reading that post very carefully and rereading the EK paper instead.Report
T-Frog,
I disagree with your characterization of what I’m doing.
What I do agree with is that some of his critics may be using more advanced work that isn’t in the textbooks yet. Textbooks tend to lag, and I’ve already noted that some of his critics claim Krugman is lagging. If his only purpose was to teach people basic macro, that would be one thing, but his purpose is to a) shape public policy, and b) to claim that his critics are all stupid ideologues. If we’re going to shape public policy, I’m not confident I want out of date models, no matter how textbook standard they still are (and let’s face facts, even Krugman has admitted there aren’t good historical examples for fiscal policy; he bases it on his model–so while he could be right, it’s not accurate to say his model has proven itself). And if he’s going to claim his critics are all stupid ideologues, well, as the guy arguing against the last two decades’ development in the field, the burden of proof is rather on him than them.
But as to those who stand in gob-stopped awe of Krugman, all I’m really asking is that those who haven’t read beyond his columns and blog recognize that he is not the end-all/be-all of macroeconomic theory; that while his views are certainly rather mainstream (not radical or kooky), they are not actually consensus views of the discipline; and that those who disagree are also not necessarily radical or kooky. In other words, those who don’t know the range of views in the discipline ought not be confident in their certainty about any of those views. I’m just asking people to take cognizance of the limits of their own knowledge–how you can criticize that is beyond me.Report
Looks like a good place for this.Report
Come to think of it, T-Frog, my standard complaint is just that people need to read more than just Paul Krugman and those who agree with him, and every time I make that complaint I get criticized for it.
It’s really just part of a general rule–no one person in any field should be taken as a sufficient fount of knowledge about that field. Nobody interested in evolutionary theory should read only Richard Dawkins; nobody interested in contemporary political philosophy should read only Rawls, etc. etc.
So the criticism in response to arguing that people ought to read other economists in addition to (not “in place of,” and in fact I regularly recommend Krugman’s pop econ books for those wishing to learn more about economics) just strikes me as really anti-intellectual. What, exactly, are folks afraid of? To be more pointed, is there something you’re afraid of?Report
@jm3z-aitch:
Sorry, I didn’t mean to implicate you in that the way it came out. You’ve been consistent, and you didn’t make the original silly argument, so it’s not fair to characterize you as shifting the point. I was thinking more about exchanges like this one where the point got dropped like a hot potato and shifted to something like, “You’d defend whatever he said anyway, and the fact that you’re defending him now proves the point.” And it’s hard to miss the fact that the overall discussion here has moved from whether the original critique made sense to whether Krugman should be considered God, the devil, or just the leader of a dangerous cult. That’s what I find irritating and generally unproductive.
As for textbook econ versus super modern whizbang models, I guess I just have a couple of broad thoughts:
1) It’s not like the last updates to the textbooks were 20 years ago. Mankiw puts out like 5 new editions of his book every year, so if there were major new models that really clearly invalidate the basics, we’d probably at least see some hedging in the texts.
2) There are plenty of interesting ideas out there–I’d say Sumner is probably the most likely to be right about the Fed’s capabilities, but I wouldn’t stake my life on it. But if your model predicted hyperinflation, you’re done. If your model states that we’re in a slump because unemployment benefits have gutted the labor supply, that’s not so good either.
So while we can’t empirically decide who the remaining One Model is because there are a few people who haven’t said obviously wrong things yet, we can probably discard a lot of the stuff that has been said in the past few years. Basic undergrad textbook macro has held up pretty well in that sense.Report
T-Frog,
Well, to the substance of Krugman’s position, I’m still very unpersuaded. He’s been very sharply critical of austerity, as his position requires, but from what I’m seeing of the U.S. economy since sequestration and and in Europe, I’m far from persuaded that austerity is the devil he claims it is. For Europe, see, for example, here. For the U.S., Krugman relied on an analysis by others that suggested the sequester would cost 700,000 jobs by the end of 2014 (many critics imply he came up with that number, but that’s inaccurate and perhaps dishonest). It’s impossible to state that the prediction is either right or wrong, of course, because while employment hasn’t declined, it’s theoretically possible that those 700,000 jobs are ones that don’t come into existence that otherwise would have. However the analysis does say that the unemployment rate will creep up in 2004 to 7.4%. So far, though, through 2013, the unemployment rate has declined from 7.9% to 7.2 or 7.3%. The report also predicts that in the absence of sequestration the U.S. GDP would grow at 2.6% in 2013, and with sequestration would grow at only 2%. But in the second quarter of this year the annualized rate of GDP growth, according to the BEA, was 2.5%, and in the third quarter it was 2.8%–in other words, growth with sequestration was around or above the rate they predicted without sequestration.
Is all that proof positive of anything? Not even remotely. Is it empirical evidence that helps keep me agnostic about Krugman’s position? Yes.
Which is not to say I’m confident about Sumner’s hypermonetarism. He makes some persuasive arguments, but I’m a lot more inflation shy than he is. And as you may remember, I have sympathy for Kling’s patterns of sustainable specialization and trade argument, based on the Austrian emphasis on the heterogeneity of goods, but I’m not certain that straightforward monetarism wouldn’t allow those patterns to work themselves out. Heh, I’d be delighted if any of them could positively persuade me they’ve got it right.Report
I have a comment stuck in moderation due to having two links. Could someone please do me the favor of releasing it? And may I chip in my two cents to the powers-that-be to suggest that the number of links that trigger moderation be bumped up to 3, to give commenters a little more room to provide supporting documentation for their arguments?Report
@jm3z-aitch done.Report
@jm3z-aitch , if my FB feed is to be believed (a HUGE caveat, naturally) we may be looking at an opportunity to test a great many economic theories over the next few years. Apparently China has decided they really don’t need or want any more foreign currency reserves and henceforth they are going to basically quit manipulating the value of the yuan and let ‘er float.
If true, this would have huge implications for the US economy. Start with a dropping dollar overseas and rising interest rates and work out from there. The articles I saw sort of predicted gloom and doom but I’m not convinced. What’s the opposite of a false prosperity? True prosperity, true deprivation, or false deprivation? A re-balanced trade situation leading to something more like ’45 to ’70, or a return of the stagflation of ’74 to ’82?Report
Mark–thanks.
Rod–Yes, it could be very interesting. If I understand correctly (also a bog if), China’s policy change signals an end to basing growth on exports and a growing focus on sayisfying domestic demand, which, with a market of a billion people who are becoming mors prosperous doesn’t seem unreasonable. It will also affect the U.S. trade deficit, which I don’t believe is meaningful in itself, but will make lots of folks happy. But that also means a reduction in our capital account surplus. That means we’ll have to reduce our deficits or find another revenue source to pay for them.Report
@jm3z-aitch , I’m not convinced you actually understand what “capital account surplus” actually means. From Wikipedia:
First and foremost, the Fed is a bank, as are all the other central banks. And all these central banks hold what amount to checking and savings accounts in each other’s banks. Your checking account at your bank is an asset to you but a liability to the bank. They literally owe you money. One component of our capital account surplus with China is the checking account their central bank holds at the Fed. It’s money that we owe China. The only way that ends up helping to finance our government is when China elects to use some of that money to purchase treasury notes, basically moving cash from checking to savings.
Put it another way… if you were a country, charging a purchase on your credit card would increase Visa’s capital account surplus at your “Fed.”Report
Rod,
I know all that. I’m not sure what indicated to you that I don’t.Report
@jm3z-aitch : Do you mean other than just about anything and everything you’ve ever said in reference to the trade deficit? Not much I guess. But that just leaves me even more mystified as to how you can hold the positions you do on these subjects.Report
Sorry, Rod, I have no clue at all as to what your actual critique is.Report
I’m not working poor and I work for money. I work at what I do because I’m good at it and it pays me a wage that affords me to do things I otherwise couldn’t do: traveling to places I’ve never been, eating food in those places I’ve never eaten before, and other hobbies and pasttimes. There rarely has been a position I’ve been in where I cared about the job more than what it affords me. Don’t get me wrong, I don’t hate my job, but it’s not my avocation either.Report
Ditto.Report
the resulting investment boom would have given us several years of much higher employment, with no real waste, since the resources employed would otherwise have been idle.
This seems to me to be fundamentally wrong. Let’s say I have some money to invest now, and can only find non-liquid low-return investments (non-liquid matters because if I found something better after investing I couldn’t get out of the low-return one and shift to the higher return one). So I sit on the money for a month while I keep looking, and then find a higher-return investment. That investment, despite the “idle” time before making it, returns more than the earlier low-return investment does. Had I invested earlier, there would in fact have been “waste” in the form of the higher gains foregone.
How does that not apply also to Krugman’s case?Report
“Non-liquid” is the distinguishing factor. Once a more productive job becomes available, the unproductively employed worker can quit and take that job instead.Report
You’re focusing on the jobs; I’m focusing on the investment payoff.Report
The way I read it, Krugman isn’t arguing that the payoff for this investment is (directly) better for the specific corporations. Rather, he’s arguing that it’s better for society as a whole, will result in higher economic growth, and thus in the long term will also benefit the firms indirectly. So the difference is in the impact on the wider economy; Krugman’s case assumes (hurray economists!) that the investment in question is a major economy-wide one, not a personal investment by an individual.Report
How can lower net returns result in higher economic growth?Report
Because the otherwise idle resources are now going to pay the wages of workers who otherwise wouldn’t be working, who in turn spend that money on other things that otherwise wouldn’t get bought, more goods are produced, more services are consumed, etc. It’s the standard economic stimulus story more or less. I guess obviously if you don’t buy that standard story you don’t buy this scenario either.Report
Griff,
And in my example, my money’s earning interest right away. That all misses the point. If the investment creates enough greater value later, then that more than compensates for the value not being earned earlier. E.g., yes those workers could be buying stuff now (with all the attendant good economic effects), but a better investment later could lead to them being able to buy even more (with even better attendant economic effects). And if so, then hiring them now does create waste, that waste being the difference between the greater effects of a later investment and the lesser effects of an earlier investment.
Plumping that all up to the social level doesn’t change the basic math. It’s just, I think, a nice way to fuzzy things up to obscure the basic math with a sort of magic asterisk.Report
I guess maybe I’m not totally understanding your point. I read Krugman’s scenario as: Every company with excess cash on hand buys a boatload of fancy toys for all their workers; the economy is stimulated; the companies later realize that their employees don’t really need all the fancy toys. I don’t see what the counterfactual is in his scenario where the companies then find some different thing to spend all the money on that leads to catchup growth.Report
Griff,
I’m not disputing that companies can do that and the circulation of money through the economy will have a stimulus effect. I’m asking, what if that stimulus effect is less than the stimulus effect of something the companies did later–something they could do instead, but not something they could do if they already did the other thing first? Then there would be, contra Krugman, waste–the foregone extra gains–from doing the earlier spending.Report
Speaking from personal experience as an investor, I don’t think there is a big problem of companies thinking too long term and passing up opportunities to make a quick buck today on a mediocre project in the hopes of a proposal for a high-return project falling into their laps tomorrow.
If there is a bias in the timing of investments, it is for companies to invest in available projects so that management can feel like they are Doing Something. If they have the ability to invest and are not, it is because the projects they are considering are so awful that they can’t even trick themselves into thinking they are worthwhile.Report
There’s never a need to forego potentially useful investments now in case better ones become available later. If better investments become available later, the business can borrow money to take advantage of them. If too many businesses do so the interest rate will rise. If rising interest rates choke off useful investments, it is the job of central banks to lower the interest rate.Report
“How can lower net returns result in higher economic growth?”
If your definition of “growth” weighs equality of distribution higher than absolute wealth.Report
Invest in a brewery or a brewpub. People love beer.
This is my pun on liquid assets for the day.Report
Yes, I suppose you could say that economists “fetishize” employment of resources. The assumption is that not all human needs and wants are currently met, and that economic activity tends to meet them. It’s an imperfect process, meaning that investments don’t always pay off. But the assumption is that an investment utilizing available resources has at least some change of being productive. In contrast, leaving resources idle has no chance of meeting human needs or wants.Report
The assumption is that not all human needs and wants are currently met, and that economic activity tends to meet them.
Krugman’s argument is that the activity is good even if it does not meet needs–even if you know beforehand that it will not meet needs. The good he cites is the *employment* of those individuals.
Things he does not say:
– A probabilistic argument that some employment can be productive despite what you thought when you started.
– An acknowledgement that the paychecks received are the only good that comes out of unproductive employment (contra what most of the commenters here).Report
So you’re positing an economic situation in which the only two options are:
1. Investments known to be unproductive; or
2. Transfer payments to unemployed workers.
The first is silly because there are always investments with some chance of success. The second is unrealistic because the Republicans won’t allow it.
Krugman’s thought experiment is intended to shine light on economic and political reality as it actually exists.Report
I’m not positing any situation. I’m simply making the claim that unproductive work is not a good in and of itself. As a corollary, I claim that transfer payments to unemployed workers would accomplish the same thing without making workers actually do the unproductive work.
there are always investments with some chance of success.
I don’t dispute this, but know that it is your claim and not Krugman’s. And if he had wished to make that claim, he could have made it just as easily as you did.
political reality
We differ here. I don’t see any indication in his piece that he grapples with what political reality will or won’t allow.Report
If you and I both know there are always investments with some chance of success, you may assume Krugman knows that as well. He didn’t need to state that because it is obvious. It takes a special kind of tortured misreading of his post to suppose it’s intended to address a hypothetical situation everyone knows cannot exist.Report
If it is obvious, but then why then did he take the time to provide a different reason?
We’ll have to disagree as to whether taking a person’s words as they are written as “a tortured misreading”.Report
Unsurprisingly: I agree with you and Chris but think RichardS and Leeesq throw in the cold-water
of reality.
From a utopian prospective: A non-scarcity economy where everyone got what they needed and/or wanted sounds excellent. I’d love to be able to devote my time to things that really interest me. If I were wealthy, I would choose to be “independently employed in the arts.” An undiscernable but sizable amount* of professional theatre artists are independently wealthy and therefore can work on the low wages that most theatre work pays.
From a reality prospective: Will we ever have a post-scarcity economy? Star Trek is presented as an answer but it often seems like their solution was to get rid of things like fashion. Even with upzoning more people will want to live in certain places that are allowable like SF and Brooklyn.
Also Richard and Lee are pointing out a general concept of morality. One that might be close to universal for most of human history. There is a general belief that labor is a virtuous good and not a horrible and grinding thing. Society generally seems to think that is moral good for people to work and that those that don’t work “don’t eat.” A lot of people don’t seem to like the idea of adults getting food, housing, and clothing without income. Part of the rage at “trust fund kids” is that they generally party like decadents off of money earned by their grandparents and/or parents or other ancestors. I work and make a decent income and sometimes I buy something expensive that I like and want. This is all coming from work and income. I think people begrudge this less than Richie Rich using his trust fund to purchase a Brownstone in Greenwich Village.
From a technological prospective, I think we are heading to a world where full employment is no longer necessary or achiveable for most people. From a moral prospective, we are not having conversations about what this means. We are not ready to discard the ancient lesson of those who “don’t work, don’t eat.”** A lot of people are still waiting for new technologies to create new jobs instead of wondering whether they are just going to destroy most jobs.
I think a lot of rage liberals have against the right comes from this prospective. I’m fully fine with the idea of a society that is post-full employment as long as it does not mean misery for the masses. A lot of people on the right still seem to hold the “don’t work, don’t eat” mentality. The total war against food stamps by the Republican Party is a good indicator of this disconnect. They seem to think that if you cut all benefits people would hussle and become independent yeoman. My theory is that there are not enough jobs and a lot of people would starve including children. Here is what Bishop Shirley Holloway had to say about Ryan’s plan to cut food stamps:
“Paul wants people to dream again,” Holloway said of Ryan. “You don’t dream when you’ve got food stamps.”
Fuck her. This is one of the most obtuse statements I have ever read in my life.
In short, we are dealing with a technological/moral disconnect.
*I know some people like this. They are good people and kind but live in a completely different reality than the majority of the world. One story I heard was a guy whose grandmother produced a Broadway show so he could have a Broadway directing debut.
**There is a long history in the West of the Prosperity Gospel and that material wealth or not is a sign of whether you are in God’s graces or one of the wicked. This seems to have disappeared from Europe but is going strong in the United States.Report
People who don’t have food stamps and are living hand to mouth dream of making sure their child has enough to eat. People who have food stamps dream of being able to feed their child more than beans and rice. I agree with you. Fuck Paul Ryan, fuck Holloway, fuck those heartless horrid people at the GOP.Report
I knew there was something wrong with the GOP, but could never exactly put my finger on it. Now I know. They want people that don’t work to starve to death. This clears things up a lot. Makes voting easier. Thanks.Report
Wanting people who don’t work to not eat isn’t *EXACTLY* an old concept.
It’s just whether your first thought is “executive management” when you think of people who don’t work.Report
I don’t think it can be denied, Roger, that the GOP’s current state of mind (and I’d submit it’s a near failed state) is unpleasantly close to that. This is, after all, pronouncements from their former VP nominee (and by the GOP voting logic their dauphine for the next nomination). I’d submit that this is more a result of the party suffering from a demographic and ideological crisis coupled with the insane freedom of having very power but it is pretty much the party’s current state of play.Report
ND, I’d like to suggest that the current absolutely insane state of the GOP is not necessarily reflective of overall conservative thought. I certainly don’t think the current cynical transactional centrism of the Democratic Party is reflective of the majority of liberal thought. I suspect a lot of your impression of “you don’t work you don’t eat” position is coming from the GOP’s current hysterical flailing at the moment.
Land is indeed a finite good. But people in a post scarcity environment simply wouldn’t NEED to live in such locations (especially if they don’t need to live there for work related reasons). If the greatest privation that humans suffered was a difficulty in getting into the happening zip codes that’d be an unparalleled achievement for us as a species.Report
Is it?
I think there has always been a strong faction of the GOP/American public that has opposed any kind of welfare plan. The idea that the government should help out people during recessions/depressions is fairly new. Until Kaynes, the most respected economists took boom and busts cycles as just being natural and saw depressions as necessary correctors. I still think there are good deal of people who think this way.
I’m also of the school of thought that the Tea Party is nothing new under the sun but a new iteration of various far-right movements that started with the liberty league or earlier. Potentially with the anti-Masonics and Know Nothings.
For most of human history societies have praised work as virtuous and too much idle time as leading to malice. The devil’s hands are idle playthings, etc. Can you think of a society or culture that is different? Or even a positive portrait of a work free society in fiction?
Work and Austerity are easy and filled with common sense. It teaches the government budget like a household budget. So maybe a post-work society is a high and great ideal but you need to work hard to convince people of this.Report
The Star Trek universe is post-scarcity and essentially post-work. People don’t need to work to have their basic needs met since the tech is so highly developed. People do what they want to do to become better people and follow their passions.Report
@greginak
True but it interestingly ignores several aspects of human nature or current society. Or at least sidesteps how we evolved.
Fashion and aesthetics don’t seem to be much at play in the Star Trek universe. How do we get there? Star Trek gives two easy, different, and ultimately glib answers. One is the First Contact with the Vulcans causes everyone to united and be part of something bigger. The second was a kind of messiah complex from the Deep Space Nine episode where Sisko has to take the place of the resistance/ghetto leader and his death causes the world to work on fixing social problems.
We never really see people out of uniform that often in Star Trek unless they are an alien species and then they where alien clothing. The scenes we see on earth with civilian clothing are often kind of old-fashioned and ren-faire looking like the episode with Jean-Luc going to recover by staying with his family. It looked like romanticized peasantry combined with high technology. What happened to jeans?
I am being somewhat serious because I’ve seen people try to propose a Star Trek esque system but it sort of involves a kind of tsk-tsking to get people to stop caring about things like aesthetics at the same time. I’d argue that it is human nature to care about aesthetics and we would not be human without it.Report
I think people care about aesthetics/creative pursuits or play in the ST as much as we can tell. They dress differently when off duty, Sisko’s father is fancy chef so people obviously care about quality food, people write holo-novels as art, people dance, play sport and do outdoor adventure activities. Picard’s family chooses to be wine makers because they can. People nowadays choose to live like Danial Boone in cabins, i dont’ see any reason why people in the far future wouldn’t have the desire to live close to the land.
I think productive work is a need for people. That doesn’t have to paid employment, but people need something to do that is vital and fully involves themselves in. One of the problems with work now, is people aren’t all that important, can be treated like replaceable cogs and often their work is drudgery.
Of course there is no easy way to the ST uni mostly because we don’t have cheap, safe fusion power, matter/anti-matter engines and replicator tech. The ST uni was a direct attempt at projecting a positive future. People loved it then for that and still do especially since grim, gritty and dystopia is much more fashionable.Report
For most of human history societies have praised work as virtuous and too much idle time as leading to malice… Can you think of … a positive portrait of a work free society in fiction?
Again, the Christian heaven.Report
James,
I can never find the versions of the names that you use for @ pinpointing.
I should have limited it to real world examples. Anyway as far as I can tell, a life of hard work and privation was necessary to get into Christian Heaven.Report
Anyway as far as I can tell, a life of hard work and privation was necessary to get into Christian Heaven.
T’aint what the Christian Scriptures actually says.Report
Why the hell would I work if I could just say “Replicator, replicate me a Nintendo and a pound of weed.”?
https://www.youtube.com/watch?v=4N15J4ibej8
People keep pointing towards Star Trek because Star Trek tends to handwave away a lot ….well, pretty much all of the implications of everything that it does. The day that someone builds a holodeck is the day that our birth rate hits zero because the choice between dealing with a real woman and having a holographic 80s Cindy Crawford giving out swedish oil massages is an easy choice indeed.
Hell, with replicators, they don’t even need resources which makes the whole space exploration theme largely meaningless. Yeah, there will be a few who want to journey off into space but not enough will be willing to risk Klingons/Borg/Odd Deities ripping our their spleen to value exploration over replicators and the holodeck.
But you’ll never see a Star Trek show/movie discuss things like that. Instead, all of the implications are handwaved away which leads to people saying “Star Trek is the ideal vision of the future”.Report
“as far as I can tell, a life of hard work and privation was necessary to get into Christian Heaven.”
The point of that parable was that you cannot buy your way in, not that “hard work and privation” were the coin to use.Report
If you think making people do unproductive work that has no benefit is a *political* necessity to make payments to them palatable, then I won’t disagree with you. But recognize that your point has almost nothing to do with Paul Krugman’s point. I’d encourage you to read the whole piece. This is not a piece in which he acknowledges political realities. It is a high-level Davos-style piece. The need to placate Republicans never enters this piece, and I doubt it entered his mind.Report
It’s also an effective way to prevent living on the dole from becoming preferable to working, even for people with high preference for leisure. If we just give people money, some who could be doing productive work will just take the free money instead. If you have to do just as much work to receive government money but get less money than you would at a real job, nobody who actually has the option of getting a real job is going to take the government option.Report
Preserving the motivation to get a job and do productive work is something we should seek to maintain. But the motivation to do or pay for knowingly unproductive like digging and refilling ditches is silly.Report
From a reality prospective: Will we ever have a post-scarcity economy? Star Trek is presented as an answer but it often seems like their solution was to get rid of things like fashion.
I’ll forgive you since I assume you’re a relatively casual watcher of Trek and not particularly tech minded. First, Starfleet is a military organization and very few episodes even attempted to portray much in the way of civilian life. It’s like complaining that a war movie has all these people running around wearing the same thing.
But in any case, the post-scarcity of Star Trek is based on technological advance, resource abundance due to access to extraterrestrial sources, and most critically, cheap and abundant energy.Report
http://warmsouthernbreeze.wordpress.com/2013/04/21/alabama-republican-introduces-bill-to-eliminate-overtime-pay/Report
I think it’s a mistake to view it through the prism of productive and non-productive work. There is non-productive work, to be sure, but I think there will always be enough work to be productive at some level. There will always, I’m pretty sure, be cans to pick up off the side of the road. Buildings that could use a security guy, etc.
To me, the pertinent question is not non-productive work, but insufficiently productive work. Which is to say that while it might be productive to have a doorman and security guard at the local Quickymart, it is not sufficiently productive to pay them a living wage, a minimum wage, or a wage at which people are willing to do it. The value-added of doing so may only warrant a willingness to pay $1… but it’s still adds value. Or, having recently been to the Second Kingdom of Jersey, paying people to pump your gas may not be economically viable without laws requiring it, but there would still be a market for it – and people willing to pay for it – if we only paid the person doing it $1/hr.
Which all goes towards one of the two reasons for my rejection of the premise that even in a post-employment economy that we shouldn’t continue to look at work as a metric of social utility. If we enter the “post-employment economy” (really the “post-self-sustaining-employment economy” or something equally clunky but more accurate, but I’ll just go with PEE), I’d prefer a model that says “Yes, your value-added for pumping gas may only be $3 an hour and you can’t possibly live off that, but so long as you are doing it or something for thirty hours a week, we’ll cover the gap. Keep up the hard work!”
I say this as someone who is unemployed, staying home and taking care of the daughter. In the interest of self-interest, I should mention that in a PEE future, child-rearing can maybe be sufficient in certain circumstances. I think there’d also be room for art as a mechanism of work in certain circumstances as well.
In a PEE world, I don’t fully know whether I should be considered a right-winger or left-winger. Possibly the latter because I would become a hardcore redistributionist. I’d insist that the gains from increased capital-based production be passed on to the populace. On the other hand, I do have the work-fetish, so possibly the former.Report
On the other hand, something as simple as a guaranteed income regardless of work could actually spur things to work themselves out. People may want to work if only to live in the same neighborhood as other people who work. The marginal difference of $3/hr pumping gas could, in a more equal society, make a very significant difference in things affected by relative wealth.Report
If it’s simply a matter of people who want to supplement their GBI with $1/hour work, because they freely choose to trade their time for money, I agree. If you suggest, however, that it’s desirable to combine the “work at sub-subsistence wages and we’ll make up the difference” with the “those who don’t work don’t eat” then I think we have a serious disagreement.Report
I am amenable to the very basics being covered. Very basics. I’d at least give a workless society a chance to work, or not, before applying any sort of pressure to work. If it goes as I would expect it to, though, only the very basics would be covered. Not working would be… uncomfortable (albeit livable and keeping actual economic stress to a minimum). Which probably means disagreement here.
What I mean by uncomfortable is, if we were going by amenities available today but with a lot more wealth, you might get a mobile phone but you wouldn’t get a smartphone. You might get a bus pass but not a car and it might or might not be an unlimited bus pass. Your supplied internet connection may have a speed-throttle. These are just ideas. In a PEE future, our technology would be better so that all of these things would be ridiculously easy to provide and so the limitations would lie elsewhere. But hopefully you get the idea.
All of the above assumes the ability to work.Report
I think I get what you suggest, but I’m still interested in WHY. By “goes as I would expect it to”, what do you consider the expected failure state for the workless economy?Report
Some people think that the social dysfunction of the unemployed is what causes their unemployment. Others believe that the economic insecurity of unemployment causes the dysfunction. Most, I would expect believe that both factors are at play. I think both are factors, but that there is an entirely different factor: the external imposition of structure and responsibility is a social good. Not everyone needs it, not by a long shot, but a whole lot of people do. This is largely – though not solely – based on anecdata, which is why I say that I am willing to see it play out. I have my marker laid on how it will.
As for the specifics of what I would be concerned about, it would be substance addiction, too many kids or too few (I mean that on a society-wide basis, not too many over here and too few other there), anti-social behavior. And on a broader scale, and substantial class resentment that would probably make the situation untenable past the short term. Even if there is very little or no actual system resource strain, I’d expect to see downward resentment. Even if basic needs were being met (a more robust GBI), I’d expect to see upward resentment and a lot of spare time for it to foment.Report
@will-truman, while I partially agree, I also think that the mode of intelligence that helps one thrive over time has shifted. Things that, even 50 years ago, were beneficial skills are now often socially inappropriate; ADHD, for instance. Or the more social end of the autism represented by aspergers syndrome.Report
I’ll try to be charitable here, but there seems to be an undercurrent of something I don’t merely disagree with but find crypto-authoritarian and anathema.
The solution to upward resentment is not, to your mind, increased engagement or equality, but to attempt to pressure the those at the bottom into a more desirable means of living. You’re arguing, it seems, that the underclass must be controlled (albeit by relatively soft economic pressure) for the good of social stability. Not an uncommon sentiment, historically, but is that where you want to put yourself?
In order to prevent lower class resentment, as discussed above, you’d require that the lower class labor.
In order to prevent upper class resentment, you’d require…that the lower class labor.
Charitably, you believe this is true for all people. If you really believe it to be true, it doesn’t tie into the original idea that “there will always be enough work to be productive at some level”. If the externally imposed structure is the point, then the productivity is, at best, a side benefit.
So if it’s actually about that, it’s not about some idea of “fair share”. It shouldn’t be tied to redistribution. It applies to trust fund babies as much as anyone, even if we’re redistributing wealth away from them. More, actually. There’s an actual reason why the poor might want to trade time for additional income, but those living on the (increasing) proceeds of capital have no reason to.
So, is that your real objection to a robust GBI?
This is more of an aside compared to my more trenchant disagreements above, but the work-fetishizing current culture seems to have done a pretty good job at creating a ubiquitous caffeine addiction.Report
The more society and the economy has progressed, the less that would be required to favor those who work over those who don’t work. I mention “cell phone but no smartphone” as a contemporary example. Except that smartphones and mobile data will probably be virtually free in this future, so I’d imagine that the differentiation wouldn’t be on that basis. The “uncomfortable” I refer to would actually, probably, be more comfortable than middle class lives (the go back to the smartphone example, it would be like telephone service is now: a very basic necessity).
But there will always be more and there will always be less. My mind can’t quite get beyond the notion that there will be some goods that are finite (real estate being a huge example) and there will be newer technology and older technology and that it will still take time for the former to reach the masses.
My goal would be for it to reach the masses who work as soon as possible, and the masses who don’t some time later (when it becomes ubiquitously available, and/or practically free. Basically, instead of the chasm being between those who work Important Jobs and those who work busing tables, I want the chasm to be between those busing tables and those not working (who can). Which will require, I continue to suspect, significant amount of taxes.
And to some extent, in this future of idle time and idle minds, there may be a separate argument for substantial taxes that is similar to what I wrote above about non-workers: It may be required for the sake of social stability. The real estate issue likely is not going away (there may not be raw scarcity, but there would be proximity constraints). Again, I’m not opposed to seeing how the idle public works out before intervening, though I have my suspicions.
Also, as I said in my initial followup, there is a chance that the combination of the increased importance of marginal work income combined with the real estate constraints, could mean that it works itself out entirely. People work because that $1 an hour actually affords them the ability to move in and around other people who make $1 an hour, which is much more pleasant than living in places where the non-working live. Which keeps people working, or at the least, allows people who are willing to work the ability to escape the places of concern I have in mind.Report
“But there will always be more and there will always be less. ”
Healthcare (and, as technology progresses, life extension) is going to be where that ends up.
Maybe rich people can afford stem-cell treatments to regrow ear cilia, regenerate collagen fiber; they can afford additive-manufactured bone replacements that are identical to the originals; they can afford cognitive-based neurological therapy that counteracts the sclerotic effects of aging.
The rest of us get old and die; but hospice care is free at the government facility.Report
Perhaps you could call it a Preferring Industry for Subsidized Support economy.Report
I really wish these acronyms were not under a post with the term “fetishization” in it.
Not that there’s anything wrong with that. I mean, if that’s your thing, it’s all good. Even golden.Report
Fnord,
I am assuming very high tax rates on the wealthy and just about everybody that makes any significant amount of money. That’s the only way I can see this really working. Which is why I don’t feel all that bad putting very minimal terms and conditions on what is required to be a recipient of that money. If you can work, you work. For which, you will be hansomely rewarded above and beyond your actual contribution to the economy.
I believe that social stability is incredibly, incredibly important. Social stability is the foremost reason why I care about economic inequality. Why I have even been mentally exploring redistributionism to begin with. So while I do have expectations of the poor with regard to addressing the inequality, it’s in response to my expectations of the wealthy.
I do think the children of the wealthy (and the wealthy) should work or find something productive to do with their lives*. As a practical matter, other than taxation, there is little means through which to do so. The aforementioned taxes I refer to do involve estate taxes, though to be fair there are limits to the degree I would actually expect success.
The redistribution is in response to the PEE. The terms and conditions (and restrictions) on the redistribution are more about the other thing.
* – I’ve mentioned this before, I think, but I find it really kind of funny that people who say “Dont work for your money, make your money work for you” are almost always right-leaners to right-wingers. Because it is one of the most stinging indictments of the capitalist model I have ever heard. Made all the moreso because it’s uttered as advice by its supporters.Report
This may be the root of our disagreement. Because here I must disagree with you, violently. Not because social stability isn’t important for a society. It’s vital, a prerequisite for society to accomplish anything else.
But it’s like the bottom level of Maslow’s hierarchy of needs. To suppose that social stability ought to be the overriding goal of society is an error analogous to (and no less dire than) supposing that food ought to be the overriding goal of personal existence.Report
Just a note: if productivity rates were sufficiently high, you wouldn’t even necessarily need high taxes for redistribution, because everything would be incredibly cheap.
Of course, if productive rates got even higher still, you might not need any redistribution because everything would be cheap enough that producers would be content to give away what they make.
—
Forgive me, but I’ll take the “problems” of too-high productivity any day.Report
Exactly. In the ideal case, NEITHER extremely high marginal tax rates NOR conditions on receiving welfare are required.Report
the second reading this past Sunday:
2 Thes 3:7-12
Brothers and sisters:
You know how one must imitate us.
For we did not act in a disorderly way among you,
nor did we eat food received free from anyone.
On the contrary, in toil and drudgery, night and day
we worked, so as not to burden any of you.
Not that we do not have the right.
Rather, we wanted to present ourselves as a model for you,
so that you might imitate us.
In fact, when we were with you,
we instructed you that if anyone was unwilling to work,
neither should that one eat.
We hear that some are conducting themselves among you in a
disorderly way,
by not keeping busy but minding the business of others.
Such people we instruct and urge in the Lord Jesus Christ to work quietly
and to eat their own food.Report
I was tring to think of how I could write a post about the virtue of industry when I remembered this passage. Vikram’s lack of recogntion of the value of work makes this article 180 degrees wrong.Report
I would submit this edit:
Vikram’s lack of recogntion of the value of unproductive workReport
You said, “employment only matters inasmuch as it produces what people need or want. If they can do that without being employed, that would be better, not worse.” Is that not a lack of recognition of the value of work? If it isn’t, I have no idea of what point you’re trying to make.Report
@pinky ,
Actually, now that you quote that back to me, I guess you’re right. I don’t see the point of work in and of itself. I only think work is a good thing when it produces good things. Otherwise, it is hardly work.Report
@leeesq , @richards , @clawback ,
It occurred to me that a problem with the Krugman-is-adapting-his-argument-to-political-reality argument is that this simply transfers blame for the fetishization from Krugman himself to the American public.
What that would mean is that the American public is the one who is fetishizing employment whether it is productive or not, and Krugman is just going along for the ride and afraid to say so. Either way, it is still is a confusion of means for goals.Report
That much is true enough. A glance at American culture and mythos shows we have a very, very, very deep belief that the poor are poor through indolence, laziness, and lack of motivation.
Not bad luck, not lack of employment options — they simply choose to be poor out of the sin of sloth. (You can see this spelled out rather explicitly in numerous statements about unemployment benefits — the Great Recession had a wealth of such quotes from prominent figures).
Conversely, wealth is the result of hard work. The rich *deserve* to be there, because they worked hard. Even if by “hard work” it was “Daddy’s friends got me a job”, somehow they’re still superior, hard-working beings who deserve every penny of their wealth.
Just look at various statements about welfare — the slurs and attacks on unemployment benefits, food stamps, even tax credits for kids — “welfare queens with Cadillac pumping out babies”. Or Romney’s infamous “Takers and makers” speech.
Always the subtext is “hard work is all you need, and the lazy should suffer”.
America is simply not culturally capable, at this moment, of accepting anything like — say — a basic income or things like that. We equate poverty with sin, not circumstance — and wealth with virtue, all of it undergirded with “work is a virtue”.Report
But they don’t really value hard work. Not mine, not my husband’s. Not the hard work of anyone who’s trying hard to make ends meet and are poor thanks to the backstabbings done by the rich.
4th tryReport
That’s some crazy black-and-white thinking. You should recognize that most people support a safety net.Report
@pinky
Most people support a safety net for people like them. their is a fairly large group of americans who hate the safety net for others but get all het up when you remind them that their food stamps, medicare, and SS are also gov benefits. “Keep your gov hands off my medicare” is not just an incoherent rallying cry, it’s also how those people see the world.
In other words it’s only a hated program or benefit when it benefits someone not of your race, class, or education level.Report
@morat20 ,
numerous statements about unemployment benefits — the Great Recession had a wealth of such quotes from prominent figures
The Great Recession? You mean the period during which we nearly institutionalized a 50% increase in the length of unemployment benefits?
“Takers and makers” speech.
It’s also worth noting that “you didn’t build that” beat “takers and makers” pretty handily (and even if it hadn’t, the fact that there was a competition means that we are not a nation of 330 million puritanical workaholics.Report
Most people support a safety net that they believe is needed.
Of course people can empathize with others who are facing the same problems they are, so it’s easier to accept that similars are in need (if they truly are). People also support a safety net for those who they believe won’t survive without one, the physically or mentally impaired. And people largely support a quick hand for those who lost a job, were hit by a hurricane, or other emergency situation that wasn’t their fault.
Most people don’t trust that most people need aid.Report
The Great Recession? You mean the period during which we nearly institutionalized a 50% increase in the length of unemployment benefits?
Yes. That one. I’m SURE you heard prominent Republicans agitating against them, voting against them, generally with statements along the lines of “They’re too lazy to work” and “There’s jobs, they’re just not willing to do them” and various versions of “It’s just enabling lazy bums”.Report
“you didn’t build that” beat “takers and makers” pretty handily
How does “Get over yourselves” beat “They’re all lazy bums”?Report
Vikram, I am pretty sure that Krugman would be absolutely thrilled to have a GBI in the United States and that he doesn’t fetishize work. Otherwise, what Morat20 said. American society has long possessed a Calvinistic fetishization of work, where work was a good in and of itself. Concern about the undeserving poor living luxuriously off the dole has plagued certain segments of American society since practically forever. Even before welfare, during the Panic of 1893, more than a few charities were very closed-fisted with the aid the gave out because of these concerns.Report
I am pretty sure that Krugman would be absolutely thrilled to have a GBI
Agreed. I also predict he would be thrilled.Report
Vikram,
The “resources” left idle are dollars and cents, as referred to in the above points. The extra employment is incidental and a bonus.
When Krugman says “Idle Resources” he means gold, silver, and a lot of other commodities that basically sit around doing nothing useful.Report
Well said Vikram. The worst of it is that Krugman should know better.Report
if households aren’t spending, it’s because people see more benefit to either saving or paying down their existing debts as opposed to buying more things. The Krugman perspective seems to be to treat this people as irrational actors
Well said.Report
if households aren’t spending, it’s because people see more benefit to either saving or paying down their existing debts as opposed to buying more things. The Krugman perspective seems to be to treat this people as irrational actors
Couldn’t be more wrong. The Keynesian perspective is that while this behavior is entirely rational, and expected, when great numbers of actors pursue this strategy simultaneously the combined effect exacerbates the economic slowdown, leading more people to effect the strategy in a downward spiral. Even an Austrian should be able to understand that much.
What almost everyone gets wrong is how to respond. The monetarists have the right response but lack the proper tools. What’s really needed is for the government to spend new money into the economy. Fiscal stimulus with “quantitative easing” money — no new debt.Report
Right, Keynesian theories about the collapse of aggregate demand is another version of the tyranny of small decisions, where a logical choice for one person can have extremely negative consequences if too many people make it.Report
True, good point that Krugman doesn’t say the individual decisions are irrational.
What he draws from all of that, though, remains debatable and debated.Report
Do you really believe that? That I could not be more wrong? I can immediately think of ten different ways that I could be more wrong.
Here, though, is where I’ve made a mistake: I started off talking about using economic terms precisely and then I used the phrase irrational actor in an imprecise way. My bad.
I understand the Keynesian perspective. I just don’t buy it, or at least this particular aspect of it. Economic downturns feed into themselves and can become prolonged recessions and the government does have a role in making up for lost output. However, the idea that the nature of government spending doesn’t matter and that the only thing that matter is spending money and employing resources (even to the point of digging and refilling ditches) is pure theory with no real empirical proof.
And again, the idea that monetary policy can’t boost demand is even more absurd. In 2013, the U.S. government is absolutely running a tight fiscal policy. Public sector spending as a percentage of GDP is down. The sequester enforced a 5 percent across the board cut in federal government spending. The federal government even shut down for two weeks. And yet, GDP growth in 2013 is outpacing growth in 2012 and the economy has added jobs at a faster rate than in either 2012 or 2011. According to the Keynesian model, we should be seeing a real sector contraction. Why not? Quantitative easing perhaps. So, it seems that monetary policy can be effective at the zero bound.Report
orthodox economics says that someone ought to do something to get those resources back to work. And the the Krugman/Keynesian position is that someone is the government and that something is spend more money.
I will note that in the excerpt I pulled out, he is actually talking about private investment, not the government. (Certainly in other places, he strongly argues for the government to take the lead.)
The notorious problem with Krugman is that he engages in these exercises in circular logic that attempt to portray anyone who doesn’t agree with him as a knave or a fool.
I cannot disagree. He is a brilliant man who nevertheless sometimes willfully misunderstands people he disagrees with. I do feel that the field of economics lost more than public discourse gained when he decided to take a job with the Times.
That said, the piece I linked to *is* good aside from what I complained about.Report
The idea is that private sector spending consumption dries up, so the government ought to step in and pick up the slack. Here is the expenditure method for GDP:
Y = C + G + I + NX,
where C is private consumption, I is private investment, and G is government spending. When C and I drop, the economy contracts and output, Y, falls. The basic Keynesian idea is that the government ought expand fiscal policy in these situations, either by cutting taxes to give households more money to spend or by directly spending into the economy in order to boost output. This gives birth to the idea of the fiscal multiplier, or the coefficient that ought to go in front of the G. A fiscal mulitplier of 1.5 would mean that output goes up by $1.50 for every $1 in government spending or tax cuts. On a common sense level, this is all fine. Most economists agree that governments ought not tighten fiscal policies during recessions. However, there are a couple of major problems that come up when you get into the details.
The first problem is that this is all theory, so no one knows what the fiscal multiplier is. Generally speaking, people posit a multiplier that aligns with their politics. Progressives like government spending, so they say that multiplier on spending is large and positive and that the multiplier on tax cuts is zero or negative. Conservatives claim the exact opposite.
The truth is most likely that the multiplier for different fiscal actions is probably different. The type of spending matters. And how you pay for the spending matters as well (debt vs. money created by the central bank). If the government issues debt to pay people to dig ditches, the act of paying people is expansionary but the act of raising debt is contractionary (it creates future tax liabilities that have to be incorporated into the household budget function (known as Ricardian Equivalence) and can also affect the private sector’s ability to borrow money(the crowding out effect)). Ideally, the government is pursuing counter-cyclical fiscal policy, which means that it is saving during the boom years so that it can spend during recessions withou just perpetually taking on more debt. Unfortunately, that doesn’t happen very often.
The other problem is that the act of digging ditches itself has an effect on the economy. I’m not an Austrian (I don’t like the reliance on tautological axioms and deductive reasoning), but Austrian business cycle theory contains a few key concepts, most notably the idea of recalculation. Counter-cyclical fiscal is based on the idea that there is something called an output gap, where actual GDP is different from longrun potential GDP. When the ouput gap is positive, the economy is in a boom; when it is negative, it’s in a recession. According to Keynesian theory, the difference between the two is due to cyclical factors; structural changes are not that important in the short-run.
Like I said above, counter-cyclical fiscal policy makes sense, but it shouldn’t ignore structural issues all together. Here’s what I mean. When the economy is booming, output reaches its potential and then keeps growing. The economy fully employs all of its resources and then people make investments to create new resources which is what keeps longrun growth on an upward trajectory. The problem is that some of that investment has nothing to do with creating new resources and instead is speculative. We can see this in what happened in housing. Prices go up, people invest more in housing, which helps meet the future demand for housing. However, at a certain point all this new activity in the housing markets is just people buying to flip and make a quick profit (the same thing happened with the mortgages that financed these purchases). Eventually that bubble bursts and prices collapse.
When bubbles burst, we don’t really know where the new equilibrium price is going to be, because we won’t know how much of the old price was based on actual demand and how much was based on speculation. This is what Austrians refer to as the recalculation problem. The economy needs to be able to figure out what goods and services it needs to meet demand and at what price and quantity. When the government goes around investing in random projects, it is artificially creating demand at random places and stopping the economy from efficiently recalculating.
In the ditch digging example, the act of setting up this huge project has reverberations. The project needs shovels and trucks to haul dirt, so companies produce more shovels and trucks. Private businesses will set up to provide services to the ditch diggers. You get the idea. Now you have all this new economic activity oriented around a temporary artificial demand for ditch-digging. And as soon as the government pulls its support, it all collapses, because no one wants random holes being dug in the earth.
TL:DR version: The type of spending does matter. Better the government give money directly to citizens during a recession in the form of unemployment benefits or re-training allowances or something like that. There may be a role for the government to step in and provide funding for viable infrastructure projects where the private sector funding has dried up, but it really ought to be a commercially viable project. Otherwise, its just going to die once the government pulls its support in the future.Report
Awesome comment, j r.Report
Non-productive spending (so-called) increases expectations of profits by sellers, which in turn leads to more spending, which leads to more selling, i.e. growth. (You can try to disagree with this, but that is all Krugman is saying.)
Ordinarily, this spending boom could cause inflation and crowding out, but we are in a liquidity trap, so it won’t. Moreover, we are at the zero lower bound, so we can’t use monetary policy alone to get us out of the stagnation, so we need the increased spending to get us out, or suffer for years (decades maybe) before we are out.
I can imagine a system of helicopter money spending that would get us out of the trap, too, but that ain’t happening. And the helicopter money might be labelled “unproductive” spending too.
I see no reason to say Krugman is fetishizing employment. Nor does he seem to be saying he wouldn’t favor a system with less employment and a UBI as a more just system for human beings. Indeed, If you ask him, I bet he would agree that is a good thing in the log term, but the R’s will block it.
Rather, he is saying that more employment and spending is necessary to get out of the current crisis in the absence of other forms of spending, like helicopter money, which could also be labelled as “unproductive.”Report
Non-productive spending (so-called) increases expectations of profits by sellers, which in turn leads to more spending, which leads to more selling, i.e. growth. (You can try to disagree with this, but that is all Krugman is saying.)
Ordinarily, this spending boom could cause inflation and crowding out, but we are in a liquidity trap, so it won’t.
Eh, you just argued that fiscal policy will not work when we’re in a liquidity trap, which is not what Krugman says most days.
Moreover, we are at the zero lower bound, so we can’t use monetary policy alone to get us out of the stagnation, so we need the increased spending to get us out, or suffer for years (decades maybe) before we are out.
Now that is something Krugman does say, at least most days, or at least most days lately. The problem is, he also says something quite different:
You can find him saying that here.
And here he puzzles over why Japan insists on fiscal stimulus instead of monetary policy.
Which Krugman do you prefer? The one who argues that monetary policy is useless at the zero lower bound, or the one who argues that a permanent monetary expansion works at the zero lower bound?Report
I thought I argued that it will work and won’t cause crowding out and inflation.
Though government stimulus would cause inflation and crowding out if it was done during a boom (or not during a bust, anyway).
—
I don’t see the contradiction.
He says,
“Now you could argue that the experience of the Depression and after provides just such evidence. Many economists thought that with the end of World War II spending the United States would revert to Depression-type conditions; a whole school of thought, the “secular stagnation” hypothesis, was built around that idea. In fact, once jolted out of depression, the U.S. did not fall back; one explanation is a story something like that in Figure 2.
But it is quite a stretch to argue that Japan in the 90s is a parallel case. It might be; but an at least equally, if not more, plausible story is that Japan has a structural excess of saving over investment, even at a zero interest rate; in that case a temporary fiscal stimulus will produce only temporary results. ”
I think he is saying Japan needs a solution that deploys fiscal stimulus AND a change in the structural excess of saving over investment, which will require monetary policy (causing inflation and lowering interest rates to make savings less palatable, I suppose), but that wasn’t the case in post war economies like the U.S.
So, monetary and fiscal policy are both necessary and jointly sufficient, in Japan’s case, but neither is sufficient on its own in Japan’s case.
In this way, Japan is disanalogous from the current U.S. case, according to Krugman, I suppose.
I’m no expert though, and all of this is irrelevant to Vikram’s post, which uncharitably states that Krugman fetishizes full employment, when Krugman does not say this explicitly, and explicitly denies it elsewhere.Report
I thought I argued that it will work and won’t cause crowding out and inflation.
No, you said,
we are in a liquidity trap, so it won’t.
But fiscal policy is supposed to work in a liquidity trap. I don’t think you understand this.Report
I’ll throw this out there about Krugman, too. In the column quoted by Vikram, Krugman says there’s no waste in unproductive spending.
But when talking about the sequester and the defense budget, he said the opposite:
Now I’m being a bit uncharitable to him. No doubt he’d agree that there are aspects of the defense budget that are “waste” in the sense that there’s more productive ways to spend that money–like aid to the neediest. But, wait, is he arguing that welfare spending has a higher multiplier effect than defense spending? (Maybe it does, but I’m not sure he’s ever said so, given that his approach normally depends on assuming little to no heterogeneity in multiplier effects.) So if he’s claiming now that unproductive spending has “no real waste,” then that “waste” in the defense budget can’t really be “waste.” At the least, I’d expect him to be arguing that it’s better than nothing.Report
Unfortunately, Krugman is more pundit than economists these days. It’s a shame because work in international trade was outstanding; that’s what got him the Nobel (though I’m sure the NYTimes column didn’t hurt).
The joke about Krugman is that one best trade economists of the 1990s has become one of the worst macroeconomists of the 1930s.Report
The joke about Krugman is that one best trade economists of the 1990s has become one of the worst macroeconomists of the 1930s.
I think few of his non-economist followers recognize that Krugman did not make his name on macroeconomics, but on trade theory. Some of his critics have argued that he’s twenty years behind the field on macro. Krugman’s response to that is that the field forgot some of the classic lessons from before that time. That’s possible, but if we extract ourselves from the particular field and think in general about a scholar who’s got an interest in field X but has been not following it intensively for a couple decades while doing groundbreaking research in field Y, wouldn’t we be a bit skeptical when s/he starts lecturing the folks who have been doing all their work in field X? It’s not impossible the person is wrong, but taking any randomly selected such case the odds are that the person will be wrong.
Most of Krugman’s non-economist supporters probably also don’t realize the extent to which Krugman is in fact a deeply committed monetarist. I’m always amused by the extent to which I learned monetary theory from reading Krugman’s pop econ books. His classic example (taken from Joan and Richard Sweeney and used in two of his books) is of a baby-sitting coop that has a recession and solves it by adding more baby-sitting coupons to their market–a monetary solution. And the quotes I used above show his monetarist side.
Krugman in fact thinks the great majority of recessions can be solved through purely monetary means, and it’s only really unusual ones that need something else. Of course he thinks our recent/current (depending on how you want to define things) is one of the unusual ones. But for all his followers–and critics–who have come to the conclusion that he’s a Keynesian first and a monetarist second, they’ve got it exactly backward.
I think they also don’t recognize that despite his Keynesianism Krugman has tradtionally eenReport
@jm3z-aitch:
I’d be stunned if you could find a respectable economist anywhere who believes that fiscal policy works but rejects monetary policy in most or all circumstances. If that’s the picture anybody has painted of any prominent economist, I guess they deserve to be surprised and confused.Report
T-Frog,
I think many people do interpret Krugman that way. Or if not as actually rejecting monetary policy, as seeing it as distinctly second-fiddle to monetary policy not just in unusual cases but in most cases. Perhaps they hear the term “New Keynesian” and assume from the terminology that it necessarily implies traditional Keynesian fiscal policy, when in fact it–as I understand it, which admittedly is not in-depth–incorporates both fiscal and monetary solutions to low aggregate demand.
And in my personal conversations with non-economists who read only Krugman columns, the terms “zero lower bound” and “liquidity trap” have become a kind of mantra. There’s an assumption that there is real disciplinary consensus on what happens in these cases, and yet even Krugman only says that normal monetary policy doesn’t work here, and agrees that extraordinary measures of monetary expansion–effectively, simply creating negative real interest rates and extensive fear of of inflation–can have positive effects. As far as I can figure out, it’s really not so much that Krugman thinks “only” fiscal policy can work in these cases, but that he’s arguing against the strict-monetarists (and Austrians) that it “can” work, and–I think–he sees it as a better policy in these cases.Report
You can’t possibly read Krugman and come away without understanding he thinks monetary policy is the correct tool to use absent the zero lower bound. It’s an ongoing theme in his blog posts and columns.
But then the internet is clogged full of grotesque misreadings like “Krugman thinks war is good” and so on, so I have no doubt plenty such misunderstandings abound.Report
The “it won’t” means “it won’t cause inflation and crowding out” not “it won’t work to solve the crisis.” I clearly mean fiscal policy will work to solve the crisis.
Please read more charitably.Report
James,
I am aware Krugman’s most influential work is in trade. But he is a respected macroeconomist too. To say otherwise is to parrot the Austrians and Reason magazine types who are trying to ad hominem him.
He cowrote a textbook in economics and has written peer-reviewed articles on macroeconomic subjects. For example:
2012) ‘Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach’ The Quarterly Journal of Economics 127 (3), pp. 1469–1513.
He has lots of respect from a variety of economists.
Stop ad hominiming.Report
Stop ad hominiming.
New meme: “Stop ad Aitch-ing”? No?
(I actually agree with James on most of this stuff, so no disrespect intended.)Report
Or if not as actually rejecting monetary policy, as seeing it as distinctly second-fiddle to monetary policy not just in unusual cases but in most cases.
Economics is confusing!Report
“And in my personal conversations with non-economists who read only Krugman columns,”
Apparently that is us, huh. Otherwise, why would you mention it?
I end my conversation with you, seeing how uncharitable you are on this topic.Report
Mike,
Indeed it is, which is why people should do considerably more reading than just Krugman’s NYT columns if they want to pretend to talk knowledgeably about it.Report
@Shazbot,
“And in my personal conversations with non-economists who read only Krugman columns,”
Apparently that is us, huh. Otherwise, why would you mention it?
Actually, no. I was thinking about specific meat-world friends of mine, including colleagues whose only exposure to the writings of economists is via Krugman. It didn’t reference anybody on this blog at all. I can see how it could be taken that way, but given that you’re beefing about uncharitable readings, well, I’m a bit amused that you jumped to that conclusion.
He has lots of respect from a variety of economists.
I never claimed differently. I only said that there are those who claim he’s decades out of date on macro.
You’re doing a whole series of uncharitable readings now, which is causing me quite a bit of amusement considering you’re upset about my misreading of you.
I recognized and confessed my error; will you?Report
To say otherwise is to parrot the Austrians and Reason magazine types who are trying to ad hominem him. …
Stop ad hominiming.
Amusing. You misuse ad hominem while engaging in an ad hominem.Report
I love grits, so I add hominy to a lot of things.Report
Shazbot,
OK, I can see where I misread you. Wasn’t trying to be uncharitable, just misread and accept the correction.
As to the ad homining, you’re just plain wrong about that, but in a most ironic way. As you misuse the term ad hominem in reference to me, you accuse all his critics of being just Austrians and Reason folks and reject any criticism just on that basis, which in fact is an ad hominem. What a hoot.
And it’s also factually incorrect to paint all his critics as Austrians and Reason folks. Monetarists like Scott Sumner don’t exactly fit that simple stereotype.
I do apologize for misreading you, but please don’t go off into sillyland.Report
You should’ve done research. Krugman believes that we will need a low employment society with a UBI in the future as mechanization makes human labor less and less necessary to produce more and more goods.
http://www.nytimes.com/2013/06/14/opinion/krugman-sympathy-for-the-luddites.html
“So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income. “
So he wants, in the long run, a system that taxes investment and guarantees a middle class UBI which will reduce unproductive employment for sure.
He just wants to use spending and increased employment to get us out of the current crisis.
No fetishizing, just using employment as a Keynesian tool.Report
“unproductive spending is still better than nothing.”
And thus is justified 15,000 US boots on the ground in Afghanistan indefinitely.Report
It’s interesting to me that one of the arguments deployed by conservative critics of FDR is that it was WWII rather than anything FDR did that pulled us out of the Great Depression. They say this, of course, not grasping that the war was the mother of all make-work projects, economically speaking. We spent the modern equivalent of trillions of dollars building stuff that filled no civilian needs and ultimately just got blown up. Digging holes and filling them back up again.Report
And in fact they’re empirically wrong about WWII pulling us out of the Depression.Report
“The common view among economic historians is that the Great Depression ended with the advent of World War II. Many economists believe that government spending on the war caused or at least accelerated recovery from the Great Depression, though some consider that it did not play a very large role in the recovery. It did help in reducing unemployment.[9][54][55]
The rearmament policies leading up to World War II helped stimulate the economies of Europe in 1937–39. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilisation of manpower following the outbreak of war in 1939 ended unemployment.[56]
The US’ entry into the war in 1941 finally eliminated the last effects from the Great Depression and brought the U.S. unemployment rate down below 10%.[57] In the U.S., massive war spending doubled economic growth rates, either masking the effects of the Depression or essentially ending the Depression. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts.”
That’s Wikipedia, for what it is worth.
I think the dissenters are the Austrians and the Reason magazine types, in general. But there is a lot of dispute, IIRC, about the mechanisms by means of which and to what extent WWII caused the recovery.
Delong and Romer and Bernanke all seem to think WWII played a role. Romer argues that it was ultimately monetary policy changes caused by the war and war-related fiscal spending that did the trick, but not fiscal spending directly.
http://elsa.berkeley.edu/~cromer/What%20Ended%20the%20Great%20Depression.pdf
I really like this overview:
http://delong.typepad.com/sdj/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html
Delong concludes that: “The conclusions? The direct-spending-by-the-government route appears to work. Ideally, you would like to spend on something other than weapons. The implicitly-tax-safe-assets-by-creating-some-expectations-of-inflation route works. That’s what we know about the Great Depression. The keep-the-money-stock-growing route appears to work much less well: that’s what we know about today.”
So yes, the high school version is overly simple, but there is a strong case for the stimulative value of fiscal spending especially now.Report
Shazbot,
Krugman himself doubts the story. 😉
But look, the 1940s was not a normal economy; it was a command economy. We effectively took 10 million unemployed people and put them to work shooting enemies, and we co-opted our factories to produce things we quickly destroyed or abandoned. Consumer goods were sharply rationed. Not that it didn’t all need to be done, but that’s not bringing a country out of depression back into a normal economy.
The real story is what happened after WWII, and simply having built a bunch of stuff and blown it up doesn’t explain sustained growth in the ’50s. But we were fortunately untouched while Europe was devastated, so we got to be the producers for Europe’s rebuilding. But we also slowed the transition of the soldiers back into the market through the GI bill, effectively hiding the real unemployment rate temporarily, and obscuring the fact that in a sense it wasn’t as full a recovery as it appears facially. Of course that had the benefit of building human capital, with longer-term positive economic effects, and I’m not criticizing it.
The WWII brought us out of the depression argument is a simple post hoc argument. Dismissing critics as “Austrians” and “Reason mag types,” is overly convenient–it’s a way of avoiding the question rather than addressing it.
Now if you want to say, but all these things were consequences of WWII, yes, that’s true. But that’s not at all the same as the basic storyline that it was the government spending of WWII that ended the Depression. Between 1942 and 1945 we were neither in Depression nor recovery, but in something completely different from either of those things.Report
The wikipedia description is true. Most economists believe that WWII was a major causal factor in ending the great depression.
The question is what was the mechanism by means of which it ended the war. And on that question, there is a lot of doubt and dispute about fiscal vs. monetary effects playing the main role.Report
And in my example, my money’s earning interest right away. That all misses the point. If the investment creates enough greater value later, then that more than compensates for the value not being earned earlier. E.g., yes those workers could be buying stuff now (with all the attendant good economic effects), but a better investment later could lead to them being able to buy even more (with even better attendant economic effects). And if so, then hiring them now does create waste, that waste being the difference between the greater effects of a later investment and the lesser effects of an earlier investment.
1) The better, later investment is a hypothetical even in the case where the lesser, earlier one becomes a fact
2) It doesn’t lessen the value of the later investment that it happens later, but there is waste: the unemployment of the people who would otherwise be employed. Socially (as long as we’re not committing to a robust basic income, and even if we are), there is a cost to ending unemployment later – resume gaps look worse than they otherwise would, and skills atrophy more. Even if those same people become unemployed after the investment runs its course, they are at that time more employable than they were before the earlier investment took place. A large part of the point here is exactly that the placement of the spending in time has real social consequences. If you can move some investment forward, you’ve lessened the degree to which one particular cohort of workers has been hit particularly hard and carries a hit to their earning power throughout their lives.
Yes, this is all within an assumption that we continue have a system where people need to work in order to be minimally comfortable and secure. That is an assumption that it is, frankly, I think ridiculous to build blog post out of Paul Krugman’s having used as the basis for an argument about what would and wouldn’t promote employment. Maybe he’d like to see what I laid out yesterday become the system, or maybe he places a higher value of people working for money in order to have direction and dignity, but it’s completely irrelevant when dealing with the world in anything less than the very long term. This whole post by Vikram should just be a set of brackets. it’s cheap point-scoring being cheered on by a crowd of people who lust don’t like the guy. Rah-rah, sis-boom-bah!Report
Actually a better example of a science fiction world where work is not necessary is the City and the Stars by Arthur C Clarke. In this novel set a billion years from now machines provide all the necessities of life, and provide humans with virtual reality games to occupy their time. (the city had been in essentially a static state for the billion years).Report
Would there still be humans in a billion years? Evolution is a slow process but there should have been some fairly radical evolutionary changes in a billion years.Report
Also, work might be something that ought to be fetishized, especially meaningful work, especially if we use less dysphemistic word than “fetishize,” maybe “value as intrinsically good.” I think this is controversial at any rate. A post scarcity (or whatever) economy where few people need to work to be comfortable and have goods and housing and medical care at a level conducive to happiness might be one where people are unhappy because of lack of productive and meaningful work.
This idea that work is valuable for itself, especially work that is meaningful, is an old one and one that flowers in different places. Marx, Calvinism, even Existentialism.
Maybe the claim is that if people didn’t have to be employed, they would be more likely to engage in meaningful work and be more likely to be happy.
Well, that would be an empirical claim and I am really unsure if it is true.
Certainly, being unemployed and having your parents or the state take care of your needs doesn’t seem to lead to a happy life or meaningful work in the aggregate from my POV. (Or do the stats show that rich unemployed scions and the poor do work that they don’t get paid for that they find meaningful?)
In the post scarcity economy, education will have to take up the role of incentivizing people to do meaningful work. Scarcity won’t provide the motivation of “work to earn rewards and avoid suffering.” Perhaps this is a role humanities education will play in the future.
Be careful not to generalize from the fact that you are happier and do meaningful work on your own when not employed (if your financial situation is cared for) to generalizing to others or to how it would be for you over years to live this way.Report
I can’t say I have ever witnessed the phenomenon of people preferring idleness to industriousness, even when it was possible.
I recall seeing an interview with Mike Rowe, who does that show Dirty Jobs, and he remarked how the men he interviewed took a surprisingly high level of pride and sense of accomplishment in work that was seen as awful and meaningless- cleaning out muck, etc.
I also think of billionaires who nevertheless fill their days with “work”, even when it can’t possibly make any difference in their experienced level of wealth.Report
I have to second what LWA is saying with an added caveat.
“Meaningful” work is kind of a fuzzy definition. Certainly there are the “hard” definitions which can be distinguished as “What keeps society fed, clothed, and sheltered?” but, after that, it starts getting fuzzy.
Burt Likko and I (Up until the end of last September, I did accounting and my father was a lawyer.) have something in common in that, within our respective professions of lawyer and accountant, we are the beneficiaries of a system that previous lawyers and accountants manipulated to create a need in society for more lawyers and accountants. Many of the functions of our profession are seen in current society as being meaningful and necessary but, in truth, there is a lot of room for simplification and streamlining.
http://dilbert.com/strips/comic/2002-12-18/
So, if you go beyond the essentials of food, clothing, and shelter, the definition of what society finds meaningful will start to get both increasingly fuzzy and hard to incentivize through education.Report