Gar, regarding your question, here is something from my Invisible Handcuffs.
For example, based on a survey of sixty New England factories, Michael Piore found that employers instructed engineers to pursue the single-minded goal of developing methods to reduce labor inputs, without regard for the more rational criterion of overall cost minimization. He went on to say: ##Virtually without exception, the engineers distrusted hourly labor and admitted a tendency to substitute capital whenever they had the discretion to do so. As one engineer explained, "if the cost comparison favored labor but we were close, I would mechanize anyway." [Piore 1968, p. 610] Michael Perelman Economics Department California State University michael dot perelman at gmail.com Chico, CA 95929 530-898-5321 fax 530-898-5901 www.michaelperelman.wordpress.com From: [email protected] [mailto:[email protected]] On Behalf Of Gar Lipow Sent: Sunday, October 06, 2013 1:01 AM To: LBO; Progressive Economists List Subject: [Pen-l] Corporate decision making - some empirical data There has been some argument back and forth as to whether capitalists act in their narrow individual self interest, or in the narrow interests of the businesses they run rather than from class interest. (This by the way is separate from the question of whether they consciously do so. The 2nd requires the first, but the first does not automatically imply the 2nd). One of the things about the work I do on global warming, is that there is a ton of empirical data that I think sheds light on this question. For example firms pass up all sorts of profitable opportunities to save energy, often in favor of LESS profitable opportunities to save labor. Of course no manager knows for sure what an investment will yield but the point is that managers demand MUCH higher rates of return on energy savings investments than they do for savings in labor. If you look at risk-adjusted return, the discrepancy is even higher, because managers will choose much riskier opportunities to cut labor costs over safer opportunities to save labor. Incidentally I refer to energy, because that is what I focus on, and where a lot of the data is. But as far as I can tell this also applies to water and raw materials. Basically business people treat labor, differently from other flow costs. Saving labor is a "core investment". Saving energy or raw material is not. So that for energy (and all non-core flow costs) heuristics are used that are not applied to core investments. Most studies find that one of two factors overwhelmingly determine whether and energy saving investment is made: 1) Simple payback - usually of two years or less. Note that an investment with a lower simple payback but that keeps paying back costs for longer may be more profitable even when a high discount rate is used. 2) Total size of investment. Incidentally, one outlying study, but based on a really large database show that projects that are listed first in a set of proposals are 25% more likely to be approved than those listed further on. It is an outlier, not because anyone has refuted it, but because no one has made any effort to replicate the result. My amused guess is that no tries to replicate it because they fear they might get similar results rather than showing it to be an artifact or error. So class analysis of the type Wojo thinks is wrong would say that energy and raw materials and water do not go on strike, while workers sometime do. Alternatively, one could argue that this is just a cultural artifact and has nothing to do with class - that global business culture just has not caught up with the fact the direct labor is a much smaller percent of flow costs than it was up to the mid 20th century . (Capital investment and depreciation is not a flow cost in the same sense that water or energy or raw materials are.) I think that would be to overlook how strongly the culture of business is tied to control. Control over workers as a core value is not coincidental, but very much tied to class. Incidentally, though in a lot of cases, I'm sure this is reproduced without conscious consideration of class, often managers are very much aware of class issues. For example, energy intensive industries often hire energy managers. And such energy managers, knowing that a lot of opportunities to save energy with a factory are very specific to that factory, want to interview the workers who may know stuff that happens on the shop floor that operations managers don't. And sometimes that is fine, but often they get a lot of managerial resistance to doing this. "What you want advice from them monkeys on how to run the zoo?" Of course class is the beginning rather than the end of analysis. But even if it is a first step, it is not one that can be skipped. A list of sources on this follows. The "Monkey's running the zoo" quote is from personal conversations with energy managers. --------------------------------------- Jerry Jackson. 2010. "Promoting energy efficiency investments with risk management decision tools." Energy Policy 38(8):3865-73. Catherine Cooremans. 2012. "Investment in energy efficiency: do the characteristics of investments matter?" Energy Efficiency 5(4): 497-518. Surash Muthulingam, Charles J Corbett, Shlomo Benartzi, Bohdan Oppenheim 2009. Managerial Biases and Energy Savings: An Empirical Analysis of the Adoption of Process Improvement Recommendations. Los Angeles: Anderson School of Management - University of California Los Angeles. Anderson, Soren T.; Newell, Richard G. 2004. Information programs for technology adoption: the case of energy-efficiency audits. Resource and Energy Economics 26(1):27-50. Ramon Luis Maria Abadie, Arigoni Ortiz and Ibon Galarraga. 2010. The Determinants of Energy Efficiency Investments in the U.S. Bilbao,Spain:Basque Center for Climate Change. -- Facebook: Gar Lipow Twitter: GarLipow Solving the Climate Crisis web page: SolvingTheClimateCrisis.com Grist Blog: http://grist.org/author/gar-lipow/ Online technical reference: http://www.nohairshirts.com
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