Wednesday, May 24, 2017

Fighting Zombies with Zombies

Larry Mishel and Josh Bivens enlist zombie government policy ponies in their battle against "the zombie robot argument":
Technological change and automation absolutely can, and have, displaced particular workers in particular economic sectors. But technology and automation also create dynamics (for example, falling relative prices of goods and services produced with fewer workers) that help create jobs in other sectors. And even when automation’s job-generating and job-displacing forces don’t balance out, government policy can largely ensure that automation does not lead to rising overall unemployment.
The catch here is that the displacement of workers by technology and the investment that re-absorbs workers displaced by technology are largely, but not entirely, independent factors. "Government policy" in the quoted paragraph is just another name for investment. Hans Neisser observed in his 1942 article on technological unemployment that "it is impossible to predict the outcome of the race between the two [investment and displacement] on purely theoretical grounds."
The conclusion is inevitable: there is no mechanism within the framework of rational economic analysis that, in any situation, would secure the full absorption of displaced workers and render "permanent" technological unemployment in any sense impossible.
The "robot apocalypse" is neither impossible nor inevitable. It is probably unlikely, but unlikely things do happen, especially when people become complacent about the impossibility of unlikely things happening.

26 comments:

Jerry Brown said...

While I think it is true that government policy could ensure that unemployment would not rise because of automation (with something like an MMT Job Guarantee), I don't understand why that would be just another name for investment. I will be honest and admit that I have difficulty understanding exactly what counts as investment as used in economics. I am working off the assumption that investment is the use of real resources such as time, labor, energy, and material in the present time in order to produce and consume in the future. But then economists stick unsold inventory in with investment and I get lost as to why that would be. So I am not disagreeing with you, I just am not sure how you are using the term investment.

Sandwichman said...

I am using "investment" in the rather vague sense of putting up the money to put people to work. Presumably there is an expected good or service that results from that employment of funds. Government policy -- which perhaps should be pronounced gummint polsy -- could consist of direct investment through public works or provision of services or it could involve pushing on the string of private investment through "incentives."

I won't mention the unmentionables of reducing hours because economists -- other than Keynes and a few other cranks -- tell us that will have the opposite of the intended effect.

Jerry Brown said...

Thank you. I agree with you that a national government can use its own currency to put people to work if it wants to. I am very much an MMT guy. Since I would like for my government to do that, I am happy to call that investment because, well, investment always sounds good.

Peter T said...

Problem is, if the output cannot be monetised (as in environmental restoration, much of the WPA, much worthwhile research...) then, however useful or beautiful it is, then it can only be done at the expense of the monetised sector - the sector which upholds the elites. They will resist tooth and nail. Cf Kalecki's arguments.

Sandwichman said...

Yes, Peter T, to paraphrase Hanns Johst, when I hear 'government policy,' I release the safety on my Kalecki.

AXEC / E.K-H said...
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Sandwichman said...

Egmont: "Unfortunately, the price mechanism DESTABILIZES the economy. The sequence is as follows: productivity up - rhoF down - employment down - wage rate down - rhoF down - employment down - and so on. In other words, the market economy is inherently unstable. The core claim of equilibrium economics is provable false."

We are somewhat in agreement on this point, Egmont. You wonldn't know that because you don't read. You just assume that everybody else is wrong and you are right. The one modification I would suggest is that the price mechanism destabilizes the economy except when it stabilizes it. What is interesting about any disequilibrium theory is not that "equilibrium is false" but why stability can persist for some time in spite of the inherent instability.

rosserjb@jmu.edu said...

Egmont,

I have not made too big of a deal about this, although I have mentioned it, but in fact your claim that all those schools of economic thought accept the axioms you say are false and use equilibrium analysis is simply false. The main group that does are the neoclassical Walrasians. But many Keynesians, including most Post Keynesians, as well as probably most Marxists and most Austrians, tend to emphasize disequlibrium analysis to the extent that they use the concept of equilibrium at all and certainly do not accept the standard set of axioms involved in equilibrium economics. You have simply been dead wrong about this, and Sandwichman is just one among many who have something like his view.

Gene Coyle said...

Lawrence Michel and Josh Bivens deserve my thanks for great work over the years. This paper is not one of their strongest.
The paper bounces between robots as a proxy for productivity gains and robots as things made of metal such as seen in a photo of the Tesla factory. Confusing and maybe confused.
But I want to make a couple of points.
1. Mishel and Bivens get causality wrong when they write

” We argue that the current excessive media attention to robots and automation destroying the jobs of the past and leaving us jobless in the future is a distraction from the main issues that need to be addressed: the poor wage growth and inequality caused by policies that have shifted economic power away from low- and moderate-wage workers.”

The policies that have shifted economic power away from low and moderate-wage workers exist because those workers are politically weak and so can’t stop them. Labor couldn’t, for example, stop NAFTA. The workers aren’t weak because somehow policies mysteriously appeared. The question is WHY are they politically weak? and the answer is that productivity gains turned them into a surplus commodity being priced in a competitive market. One of, or perhaps the last competitive markets anyone can name in a capitalist economy which now is without them.

Mishel and Bivens can’t argue that somehow, when nobody was looking, policies were just adopted.
The weakness of Labor can be traced to the Taft-Hartley Act of 1947, passed over President Truman’s veto. The Taft-Hartley Act left the labor movement with a fatal wound that didn’t cause immediate death, a wound that permitted the Red Scare to attack the writhing body and as it weakened, productivity gains made labor cheap, permitting its assailants to adopt the policies that Mishel and Bivens leave to a mysterious unnamed force.

2. Mishel and Bivens write:

"During the long period of shared wage growth from the late 1940s to the mid-1970s (shared because all workers’ wages grew at roughly the same pace), indicators of automation also increased rapidly.
This I take to be a reference to the famous pair of graphics that United for a Fair Economy published based on analysis by Lawrence Mishel and Jared Bernstein. Notice that the claim in the present paper is that “… all workers’ wages grew at roughly the same pace …” The graphics referenced showed that Real Family Income Growth by Quintile was between 99% and 116% for each of the five quintiles. So the pace was the same but the dollars were growing apart. If Bill Gates and I each find our incomes have grown 100% over some span of years, his will have grown an astonishing number of millions, while mine would still be in five figures.
So even in the period 1947 to the mid 1970s, which nostalgia now limns with a hazy glow, labor’s strength was ebbing away. Taft-Hartley, the Red Scare and Joe McCarthy did the job. The productivity gains — call it automation, robots, whatever, were at the same time returning workers to the commodity condition they had briefly escaped in the 1940s when labor unions were at peak power.

I don't see in this paper a straightforward statement of what Mishel and Bivens think is the correct policy or policies to adopt. There is no mention of cutting working hours.

AXEC / E.K-H said...
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Sandwichman said...

Have you ever had a relationship with a human being, Egmont? Just curious.

rosserjb@jmu.edu said...

Oh, Egmont, I actually read your papers on why Keynesian economics is incomplete, wrong, and so on. What a joke. All of them boil down to dragging out your three "axioms" and then declaring that others have not distinguished retained earnings from distributed ones, so therefore all previous schools of economics are wrong. But, Egmont, everybody knows of the distinction between those last two and that business capital investment comes out of retained earnings, not profits distributed as dividends. This is boring accounting.

So, folks, just to really hammer home how empty and even false Egmont's self-proclaimed correct and fundamental axioms are, here they are once again.

1) National Income (Y) - wage rate times hours worked (WL) + dividends times number of shares (DN).

2) Output (O) = Labor productivity (R) times hours worked (L).

3) Consumption (C) = Price (P) times quantity sold (X).

So, the first one is simply wrong. National income includes much more than these items including interest, royalties, land rents, and much much much more. Check out the details of Form 1040. This is an incomplete accounting identity, not even "nearly right," just plain wrong.

The second one is simply the definition of productivity of labor slightly rewritten. It should be written R = O/L, which shows that it is simply a definition. Egmont does declare that this somehow comes from a production function that is not necessarily linear in labor, but he does not present it, which would be more fundamental if still not axiomatic, and somehow he does not notice that output involves inputs besides labor. But he does provide the definition for labor productivity. This is not an axiom. It is a definition, and it explains nothing.

The third one may be the worst of all and is simply dead wrong as written. The problem is that the X or "quantity sold" is completely meaningless. It is an aggregation that makes aggregating capital look like child's play. He has somehow added cars and hot dogs and books and toys into an aggregate X, but what are the units of this aggregate X? They do not exist. It is a nonentity, to use another of Egmont's favorite words. The correct way to write this attempt at an accounting identity would be as a sum over the prices and quantities of all the n consumption goods in the economy. So, Egmont, you need a big sigma in front there along with a bunch of i o subscripts on all the little p's and x's, so that then your utterly empty and useless accounting identity would actually be meaningful if vacuous and not something that the nearest junior consulting accountant would buckle up with laughter over.

Over and out for now.

AXEC / E.K-H said...
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AXEC / E.K-H said...
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Sandwichman said...

Egmont,

My axiom is: if you know what you're talking about, you don't need to use all the gratuitous insults.

rosserjb@jmu.edu said...

Egmont,

It is true that Einstein liked simple axioms, but only on the condition that they remain true. You profoundly violate that second condition.

AXEC / E.K-H said...
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AXEC / E.K-H said...
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Sandwichman said...

"Your comments are another instance of brain-dead blather and utter scientific incompetence."

How to win friends and influence people, by Egmont Kakarot-Handtke

rosserjb@jmu.edu said...

Egmont,

Wow, you have added another fundamental axiom you do not mention in a bunch of the (mostly justifiably unpublished) papers by you that you cite, this A0, which appears to be incomplete anyway. This is the one that posits that you are dealing with the world economy as a bunch of households dealing with a single business firm, which elsewhere you have said also produces a single homogeneous product.

All this does is make you even more in trouble with Einstein. It is not now and never has been ever and never will be true that the world economy operates or has operated via a single business enterprise with no government, not now, not ever. Your fundamental model is a total fantasyland that makes the Walrasian axiom set look like the height of reasonable reality.

Calgacus said...

An MMT JG / WPA should only be expected to come at the expense of the political dominance of the monetized, capitalist sector not its prosperity - which was more Kalecki's point. Though they hated it, businessmen made lots of $ off the WPA, which stimulated private investment, far more than "relief" did and does. Sure it would be fought by the poor widdle capitalists. They failed in the 30s and they should fail now, for it looks like an idea which has been and is being satisfactorily formulated, one whose time has come.

AXEC / E.K-H said...
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Magpie said...

One of the things I find deeply irritating about arguments like the one Larry Mishel and Josh Bivens make is that there's plenty talk about "jobs". It's "jobs" created this, "jobs" lost that. By reading arguments like those, the impression one gets is that all "jobs" were the same.

But not all "jobs" were created equal. I'm sure neither of them would be happy if they lost their "jobs" and the only "jobs" they managed to find were part-time, casual, making minimum wage, cleaning toilets.

rosserjb@jmu.edu said...

Sigh... This is getting tiresome.

Egmont,

There most certainly are objects in constant motion, e.g. the earth going around the sun. Granted it is slowing down very very slowly, but it is close enough to constant for all practical purposes. Also, while the only perfectly pure triangle is an ideal one, with current tech we can draw triangles that are pretty darned close to the ideal.

OTOH, the economy is not an idea. It is a very real thing. Theories and models of the economy are ideal, but the ultimate test of them is their empirical validity. Sorry, being wildly unrealistic as your axioms are (when they are not simply vacuous) is not helpful, with simplicity not coverin for that.

Which of course raises the problem of hypocrisy for you, which you are massively guilty of. You constantly list this silly list of suppposed five axioms you have cribbed from Weintraub that supposedly all schools of economic thought believe in. You dismiss them for being contradictory and unrealistic. Sorry, but they are not contradictory, and, frankly they are far closer to being empirically true than your silly set. As usual in the end your ultimate bottom line is that these axioms have an incorrect idea of profit, but in fact none of these five supposed "axioms" say anything about profit. They have no theory of profit, and so therefore they do not have an incorrect one. But, frankly, we have seen too much of this already by now. Repeat repeat repeat, with worse and worse hypocrisies piled on top of each other.

Sandwichman said...

Sorry, Barkley, for leaving your responses to Egmont up in the air but his rude, obnoxious, insistent, irrelevant bullshit became intolerable. I made the mistake of indulging him for a few comments that were less loathsome than usual but he took that as a welcome mat to trumpet his crack-pottery.

Go away, Egmont, you are NOT welcome here.

rosserjb@jmu.edu said...

It's OK, S-man. This round has run itself out. If he posts anything further, I shall not respond. He mostly just repeats himself anyway with minor variations. We really have seen it all, too many times.