Really? Because I hear economists talk about the value of leisure time quite frequently. …IMO, most economists don’t fetishize GDP the way you suggest they do.
Both of these are contradicted by the fact that no economist, in discussion of the recent economic troubles, has suggested that letting the economy adjust to a lower level of output/work would be an acceptable solution.
Yes, they recognize that leisure is good in the abstract, but when it comes to proposals for “what to do” about the downturn, the implicit, unquestioned assumption is that we must must must get GDP to keep going up, no matter how many make-work projects or useless degrees that involves.
You seem to be denying the benefits of Keynesian stimulus in a downturn. That position is not indefensible, but you’re not defending it, you’re just claiming it.
I most certainly am defending it—by showing the errors in the classification of what counts as a benefit. If the argument is that stimulus will get GDP numbers back up, then yes, I didn’t provide counterarguments. But my point was that the effect of the stimulus is to worsen that which we really mean by a “good economy”.
The stimulus is getting people to do blow resources doing (mostly) useless things. Whether or not it’s effective at getting these numbers where they need to be, the numbers aren’t measuring what we really want to know about. Success would mean the useless, make-work jobs eventually lead to jobs satisfying real demand, yet no metric that they focus on captures this.
Downvote explanation requested. This looks like a reasoned reply to MichaelBishop’s criticism, and I’m interested in knowing how it errs and how Michael’s comment doesn’t, and how this is so obvious.
Yes, they recognize that leisure is good in the abstract, but when it comes to proposals for “what to do” about the downturn, the implicit, unquestioned assumption is that we must must must get GDP to keep going up, no matter how many make-work projects or useless degrees that involves.
[Didn’t downvote.] This is silly. The ‘leisure’ of unemployment is concentrated on a few, and comes with elevated rates of low status, depression, suicide, divorce, degradation of employability, etc.
That’s a misinterpretation of what I was suggesting as the alternative. Lower output + more leisure doesn’t mean the “leisure” is concentrated entirely in a few workers, making them full-time leisurists who starve. Rather, it means that anyone who wants to work for money would work fewer hours and have a lower level of consumption, not zero consumption.
Furthermore, the lower consumption is only consumption of goods purchased with money; with significant restructuring, labor with predictable demand (like babysitting) can be handled by cooperatives that avoid the need to pay for it out of cash reserves.
I don’t deny that make-work programs allow workers to show off and practice their skills, retaining employability. I criticize economists who miss this benefit. But if you’re going to spend money to get this benefit, you should spend it in a way that directly targets the achievement of this benefit to the workers, rather than on make-work projects that only achieve this benefit as a site effect, and which waste capital goods and distort markets in the process.
That’s a misinterpretation of what I was suggesting as the alternative. Lower output + more leisure doesn’t mean the “leisure” is concentrated entirely in a few workers, making them full-time leisurists who starve. Rather, it means that anyone who wants to work for money would work fewer hours and have a lower level of consumption, not zero consumption.
Unfortunately, in the United States, you really would end up with much more of the former and less of the latter. Europe would be better off, though, thanks to different labor laws; would you suggest that the United States adopt something like France’s maximum 35 hour workweek, or Germany’s subsidies to part-time workers?
Currently, hours worked per week is positively correlated with hourly wages; one person working 80 hours a week usually makes more money than two people who both work 40 hours a week. Also, specifically wanting to do part-time work is a bad signal to employers. It signals that you’re not committed to your job, that you’re probably lazy, and that you’re weird. So, absent government intervention, you probably won’t see people voluntarily reducing their working hours.
Both of these are contradicted by the fact that no economist, in discussion of the recent economic troubles, has suggested that letting the economy adjust to a lower level of output/work would be an acceptable solution.
This is because it isn’t. A “lower level of output/work” means that people, on average, are going to be poorer. And the way our economy is set up (in the United States at least), reducing output/work by 1% doesn’t mean that each person works 1% less, produces 1% less, and consumes 1% less, it means that 1 in 100 people lose their job, can’t find another one, and become poor, while the rest keep going on as they have been. So, when output/work falls, you don’t get more leisure, you get more poverty.
And I disagree that most stimulus spending ends up being directed to “worthless” projects. Maybe they’re not the best value for money, but even completely worthless make-work projects are still effective at wealth redistribution. Furthermore, if people are willing to lend the government money for really, really low interest rates (as demonstrated by prices of U.S Treasury securities) then isn’t that a signal that it’s an unusually good time for the U.S. government to borrow and spend—that the economy wants more of what the government produces and less of what private industry produces?
This is because it isn’t. A “lower level of output/work” means that people, on average, are going to be poorer. And the way our economy is set up (in the United States at least), reducing output/work by 1% doesn’t mean that each person works 1% less, produces 1% less, and consumes 1% less,
This I think reflects a status-quo bias. When the per capita GDP was lower in 2000, or 1990, the economy managed to employ a higher percentage of people. While you’re right that current institutions, inertia, and laws prevent shorter workweeks, that is an argument for removing these barriers, not an argument for trying to game the GDP numbers in the (false) hope that this will somehow translate into sustainable employment because of the historical correlation.
And I disagree that most stimulus spending ends up being directed to “worthless” projects. Maybe they’re not the best value for money, but even completely worthless make-work projects are still effective at wealth redistribution.
Okay, but that still looks like a case of lost purposes and fake utlity functions. If you’re spending money to redistribute, then spend the money to redistribute! Don’t spend it on a project that hogs up real resources just to get a small side-effect of transferring money to people you want to help. (“What’s your real objection” and all.) If it’s important that they feel they earn the paycheck, then require that they take job training.
And the reason I call the projects worthless is this (and it doesn’t require an ideological commitment to being against government projects): people couldn’t justify asking the government to provide these things before the recession. But if the recession is a contraction of productive capacity, then the projects we commit to should also contract—it should look like an even worse deal.
The fact that the government can issue debt cheaper doesn’t change this fact. The reduced productive capacity is a real (i.e. non-nominal) phenomenon. The greater ease with which government can procure resources does not mean our aggregate ability to produce them has increased; it just means the government can more easily increase its share of the shrinking pie. That still implies that our “choice set” is being reduced, and the newer, larger wastefulness of these projects will have to show up somewhere.
If the fundamental determinant of reduced unemployment is whether the economy has entered into (as Arnold Kling says) sustainable patterns of specialization and trade, then temporary stimulus projects can’t accelerate this, because they’re by definition not sustainable: after they’re over, we’ll just have to readjust again.
I must emphasize, as I did in this blog post, that this does not mean we should give suffering families the finger because “it would be inefficient and all”—the fact that they (under a stimulus project) are working, feeling productive, and getting a paycheck is very significant, and definitely counts as a benefit. It’s just that you should help them a way that doesn’t inhibit the economy’s search for efficient use of factors of production, nor (significantly) favor these families over the ones that are going to be screwed again when the projects have to stop, and the hunt for re-coordination starts anew.
While you’re right that current institutions, inertia, and laws prevent shorter workweeks, that is an argument for removing these barriers, not an argument for trying to game the GDP numbers in the (false) hope that this will somehow translate into sustainable employment because of the historical correlation.
Oh, definitely.
Okay, but that still looks like a case of lost purposes and fake utlity functions. If you’re spending money to redistribute, then spend the money to redistribute! Don’t spend it on a project that hogs up real resources just to get a small side-effect of transferring money to people you want to help. (“What’s your real objection” and all.) If it’s important that they feel they earn the paycheck, then require that they take job training.
I basically agree with this; if you want to redistribute, then certainly it’s better to just redistribute than to “employ” people to do completely useless things. (For example, extending unemployment benefits is a form of redistribution.)
And the reason I call the projects worthless is this (and it doesn’t require an ideological commitment to being against government projects): people couldn’t justify asking the government to provide these things before the recession. But if the recession is a contraction of productive capacity, then the projects we commit to should also contract—it should look like an even worse deal.
Well, what matters is the opportunity cost. A project that wasn’t worth doing before can become worth doing if the better alternatives aren’t there anymore; a contraction of productive capacity doesn’t have to affect all sectors of the economy equally. For example, people in a country experiencing an oil shortage may find that investing in more expensive, non-oil energy sources has become worthwhile; it’s worse than what used to be possible, but it’s the best remaining alternative. Given that people are willing to lend to the federal government more cheaply now than before the recession, the new equilibrium might end up involving more “investment in government”, not because government has become more productive, but because the alternative investments have gotten worse.
And I’m not necessarily sure that absolute productive capacity went down all that much in the current recession. During the Great Depression, the factories were still there, there were people willing and able to operate the factories, and there people who wanted the goods the factories could produce, yet the factories were idle, the would-be factory workers were unemployed, and the would-be consumers didn’t have the goods they wanted. (The Keynesian position is that there was a collapse in aggregate demand, leading to a general glut, followed by a reduced output level.)
Economists who argue for stimulus spending on Keynesian grounds understand that GDP is not a perfect measure and that the value produced by stimulus projects may be less than the value produced by ordinary spending. See, for instance, this Brad DeLong post, where he estimates the net benefit of the stimulus and counts the useful stuff produced using stimulus money as being only 80% as valuable as the dollar amount would suggest. Or, as he writes:
The extra people put to work produce $110,000 of useful stuff—that’s a benefit. … However, because we are pulling forward spending from the future into the present—spending the $92,000 now rather than in the future—we are buying stuff too soon, and because the government is all thumbs we are to some degree buying less valuable stuff than we woul ordinarily by buying. Figure a 20% discount—that’s an $18,000 cost.
See, for instance, this Brad DeLong post, where he estimates the net benefit of the stimulus and counts the useful stuff produced using stimulus money as being only 80% as valuable as the dollar amount would suggest.
Both of these are contradicted by the fact that no economist, in discussion of the recent economic troubles, has suggested that letting the economy adjust to a lower level of output/work would be an acceptable solution.
Yes, they recognize that leisure is good in the abstract, but when it comes to proposals for “what to do” about the downturn, the implicit, unquestioned assumption is that we must must must get GDP to keep going up, no matter how many make-work projects or useless degrees that involves.
I most certainly am defending it—by showing the errors in the classification of what counts as a benefit. If the argument is that stimulus will get GDP numbers back up, then yes, I didn’t provide counterarguments. But my point was that the effect of the stimulus is to worsen that which we really mean by a “good economy”.
The stimulus is getting people to do blow resources doing (mostly) useless things. Whether or not it’s effective at getting these numbers where they need to be, the numbers aren’t measuring what we really want to know about. Success would mean the useless, make-work jobs eventually lead to jobs satisfying real demand, yet no metric that they focus on captures this.
Downvote explanation requested. This looks like a reasoned reply to MichaelBishop’s criticism, and I’m interested in knowing how it errs and how Michael’s comment doesn’t, and how this is so obvious.
[Didn’t downvote.] This is silly. The ‘leisure’ of unemployment is concentrated on a few, and comes with elevated rates of low status, depression, suicide, divorce, degradation of employability, etc.
That’s a misinterpretation of what I was suggesting as the alternative. Lower output + more leisure doesn’t mean the “leisure” is concentrated entirely in a few workers, making them full-time leisurists who starve. Rather, it means that anyone who wants to work for money would work fewer hours and have a lower level of consumption, not zero consumption.
Furthermore, the lower consumption is only consumption of goods purchased with money; with significant restructuring, labor with predictable demand (like babysitting) can be handled by cooperatives that avoid the need to pay for it out of cash reserves.
I don’t deny that make-work programs allow workers to show off and practice their skills, retaining employability. I criticize economists who miss this benefit. But if you’re going to spend money to get this benefit, you should spend it in a way that directly targets the achievement of this benefit to the workers, rather than on make-work projects that only achieve this benefit as a site effect, and which waste capital goods and distort markets in the process.
Unfortunately, in the United States, you really would end up with much more of the former and less of the latter. Europe would be better off, though, thanks to different labor laws; would you suggest that the United States adopt something like France’s maximum 35 hour workweek, or Germany’s subsidies to part-time workers?
Currently, hours worked per week is positively correlated with hourly wages; one person working 80 hours a week usually makes more money than two people who both work 40 hours a week. Also, specifically wanting to do part-time work is a bad signal to employers. It signals that you’re not committed to your job, that you’re probably lazy, and that you’re weird. So, absent government intervention, you probably won’t see people voluntarily reducing their working hours.
This is because it isn’t. A “lower level of output/work” means that people, on average, are going to be poorer. And the way our economy is set up (in the United States at least), reducing output/work by 1% doesn’t mean that each person works 1% less, produces 1% less, and consumes 1% less, it means that 1 in 100 people lose their job, can’t find another one, and become poor, while the rest keep going on as they have been. So, when output/work falls, you don’t get more leisure, you get more poverty.
And I disagree that most stimulus spending ends up being directed to “worthless” projects. Maybe they’re not the best value for money, but even completely worthless make-work projects are still effective at wealth redistribution. Furthermore, if people are willing to lend the government money for really, really low interest rates (as demonstrated by prices of U.S Treasury securities) then isn’t that a signal that it’s an unusually good time for the U.S. government to borrow and spend—that the economy wants more of what the government produces and less of what private industry produces?
This I think reflects a status-quo bias. When the per capita GDP was lower in 2000, or 1990, the economy managed to employ a higher percentage of people. While you’re right that current institutions, inertia, and laws prevent shorter workweeks, that is an argument for removing these barriers, not an argument for trying to game the GDP numbers in the (false) hope that this will somehow translate into sustainable employment because of the historical correlation.
Okay, but that still looks like a case of lost purposes and fake utlity functions. If you’re spending money to redistribute, then spend the money to redistribute! Don’t spend it on a project that hogs up real resources just to get a small side-effect of transferring money to people you want to help. (“What’s your real objection” and all.) If it’s important that they feel they earn the paycheck, then require that they take job training.
And the reason I call the projects worthless is this (and it doesn’t require an ideological commitment to being against government projects): people couldn’t justify asking the government to provide these things before the recession. But if the recession is a contraction of productive capacity, then the projects we commit to should also contract—it should look like an even worse deal.
The fact that the government can issue debt cheaper doesn’t change this fact. The reduced productive capacity is a real (i.e. non-nominal) phenomenon. The greater ease with which government can procure resources does not mean our aggregate ability to produce them has increased; it just means the government can more easily increase its share of the shrinking pie. That still implies that our “choice set” is being reduced, and the newer, larger wastefulness of these projects will have to show up somewhere.
If the fundamental determinant of reduced unemployment is whether the economy has entered into (as Arnold Kling says) sustainable patterns of specialization and trade, then temporary stimulus projects can’t accelerate this, because they’re by definition not sustainable: after they’re over, we’ll just have to readjust again.
I must emphasize, as I did in this blog post, that this does not mean we should give suffering families the finger because “it would be inefficient and all”—the fact that they (under a stimulus project) are working, feeling productive, and getting a paycheck is very significant, and definitely counts as a benefit. It’s just that you should help them a way that doesn’t inhibit the economy’s search for efficient use of factors of production, nor (significantly) favor these families over the ones that are going to be screwed again when the projects have to stop, and the hunt for re-coordination starts anew.
Oh, definitely.
I basically agree with this; if you want to redistribute, then certainly it’s better to just redistribute than to “employ” people to do completely useless things. (For example, extending unemployment benefits is a form of redistribution.)
Well, what matters is the opportunity cost. A project that wasn’t worth doing before can become worth doing if the better alternatives aren’t there anymore; a contraction of productive capacity doesn’t have to affect all sectors of the economy equally. For example, people in a country experiencing an oil shortage may find that investing in more expensive, non-oil energy sources has become worthwhile; it’s worse than what used to be possible, but it’s the best remaining alternative. Given that people are willing to lend to the federal government more cheaply now than before the recession, the new equilibrium might end up involving more “investment in government”, not because government has become more productive, but because the alternative investments have gotten worse.
And I’m not necessarily sure that absolute productive capacity went down all that much in the current recession. During the Great Depression, the factories were still there, there were people willing and able to operate the factories, and there people who wanted the goods the factories could produce, yet the factories were idle, the would-be factory workers were unemployed, and the would-be consumers didn’t have the goods they wanted. (The Keynesian position is that there was a collapse in aggregate demand, leading to a general glut, followed by a reduced output level.)
Economists who argue for stimulus spending on Keynesian grounds understand that GDP is not a perfect measure and that the value produced by stimulus projects may be less than the value produced by ordinary spending. See, for instance, this Brad DeLong post, where he estimates the net benefit of the stimulus and counts the useful stuff produced using stimulus money as being only 80% as valuable as the dollar amount would suggest. Or, as he writes:
Well, at least that is 20% closer to the mark!