Michael, can we have a "no filibustering while trying to think of an answer rule"?
Gene On Oct 6, 2011, at 8:37 AM, Jim Devine wrote: > 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 _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
