me: >> [a temporary work-sharing program] doesn't deal with the problem of low >> aggregate demand, though (like unemployment insurance) it may act as an >> automatic stabilizer.<<
Gene writes: > Jim, how do you know there is a problem of low aggregate demand? You see a > staggering number of people unemployed and clearly you have assumed that the > problem is low aggregate demand. On what do you base that assumption?< Gosh, all the data suggest it. Private investment fell dramatically, as did consumer spending in the US, between 2007 and 2009. Government purchases and net exports didn't rise enough to fill the gap. After that, measured demand growth has been anemic at best (so weak that most working people in the US will say that the recession isn't over). By the way, I assume that the government statisticians don't lie (i.e., deliberately make the US and world economics look worse than they really are) while I reject Say's "Law" and related conservative fairy tales of automatic recovery via market adjustment. > What if the problem suggested by the staggering number of unemployed in the > US is not low aggregate demand, but rather an excess supply of labor relative > to the appropriate aggregate demand?< By definition, too many workers available relative to the demand for them is exactly the same as too little demand for workers. But it's possible that the problem is not due to low aggregate market demand for goods and services. This alternative explanation might involve assuming that (1) resources are in fact fully in use despite all appearances (Say's Law); or that (2) the problem is that there's some supply constraint (e.g., limited numbers of capital goods and limits on how many worker-hours can be hired to work with each unit of capital goods). While the first is nonsense, the second doesn't make any sense in the current US situation, because the rate of capacity utilization is very low (so the "unemployment rate" for capital goods is very high). See, for example, the data at http://research.stlouisfed.org/fred2/series/TCU. > If you were told that that is the problem that the macro level, what would > your suggested solution be?< How about debt relief for homeowners (following the ideas of Dean Baker) and fiscal stimulus? of course, politics (of both GOPsters and the Obamen) stands in the way. Obviously, I don't have time to present a full answer. It's too bad that I can't reduce the "solution" to a single slogan. I know, however, that yelling about the need to reduce work hours over and over again doesn't solve the problem (even though cutting work hours is a good idea in general). (I guess the constant calling for reducing work hours is what Sandwichman is referring to when he says that "When the only tool you have is a hammer, every problem looks like a nail." He knows full well that my analysis is not one-dimensional, focusing on just a single number such as aggregate demand. So he can't be referring to me.) By the way, the recession helped reduce US paid work hours (helping to implement your program, no?). They fell drastically during the recession and since then (after a weak recovery starting in 2009) have stayed significantly lower than before the recession. See http://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&graph_name=CE_cesbref2. Of course, there's another possible explanation for falling paid work hours besides blaming falling and then low aggregate demand: the militant and highly-organized US working class has decided that it wants to work fewer paid hours per year and has successfully imposed its will on the US capitalist class. That seems implausible, but I'd like to be convinced that I'm wrong. But maybe there's a third explanation I haven't thought of for falling paid working hours? > And going back a step, what is the proper way to measure whether aggregate > demand is low, high, or just right? If there are unemployed people in numbers > above some conventional rule, do you conclude automatically that aggregate > demand is low, without consideration of any other thing?< In a capitalist economy such as our own, low aggregate demand corresponds to persistently high unemployment (above the usual rates), persistently low work-hours per week, and persistently high rates of unused industrial capacity. In the current situation in the US, it corresponds to a glut on the housing market, large amounts of bank funds being held rather than lent out, and large amounts of profits not being used by businesses to fund expansion. All of these can be found in the current US data. > Or should aggregate demand be compared with a measure of natural resources > and or pollution sinks?< As macroeconomists know, aggregate demand refers only to _market_ demand. While it does affect the _price_ of natural resources (as does supply), there is no market or price for pollution sinks (as far as I know), so aggregate demand is not relevant there. Are you saying that GDP is a bad measure of what's good for humanity, for nature, for our grandchildren, missing such things as the sustainability of supplies of natural resources and the pollution of our environment? I agree. Are you saying that if we actually had enough aggregate demand to allow something approaching a reasonable level of full employment of labor and capital goods, it would lead to excessive depletion of natural resources and the filling up of pollution sinks, speeding up the onset of an environmental melt-down? That sounds right. I never said that high aggregate demand and full employment were unmixed blessings. Unfortunately, we live in a market-dominated society (neoliberal capitalism) in which the system works according to what's profitable for business (not what's good for humanity or nature), so that aggregate demand for goods and services available on the market is what's relevant to such things as the demand for labor-time and the like. Because most people rely on their jobs for their livelihoods (which they can attain in sufficient quantities only through markets), such things are quite relevant, indeed decisive. To reconcile the need to provide livelihoods to working people and the need to prevent the environmental apocalypse requires not the rejection of full employment as a goal but instead serious socioeconomic reforms or even deeper changes (the creation of socialism?) That would involve more than cutting the average worker's number of hours of work per year. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
