Friday, August 6, 2010

A Staggering Graphic

"The world has been slow to realize that we are living this year in the shadow of one of the greatest economic catastrophes of modern history. But now that the man in the street has become aware of what is happening, he, not knowing the why and wherefore, is as full to-day of what may prove excessive fears as, previously, when the trouble was first coming on, he was lacking in what would have been a reasonable anxiety. He begins to doubt the future. Is he now awakening from a pleasant dream to face the darkness of facts? Or dropping off into a nightmare which will pass away?

He need not be doubtful. The other was not a dream. This is a nightmare, which will pass away with the morning. For the resources of nature and men's devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life—high, I mean, compared with, say, twenty years ago—and will soon learn to afford a standard higher still. We were not previously deceived. But to-day we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time—perhaps for a long time."

- John Maynard Keynes, Essays in Persuasion

The point Keynes makes is actually quite hopeful, and it puts to rest the willfully ignorant refrain that "Keynesians think downturns go on forever without the govenrment". But it's equally sad and sobering. We are not suffering because we cannot recover - we are suffering because we will not recover. The means are there - the will to put it into motion is absent either because of institutional contradictions and paradoxes, deliberate inaction, or both. That is perhaps the saddest part of the Keynesian insight. As Einstein put it (somewhat radically and combatively, but nevertheless presciently) in the late 1940s:

"Production is carried on for profit, not for use. There is no provision that all those able and willing to work will always be in a position to find employment."


  1. Richard Florida on "The Great Reset":!

  2. The barriers Keynes (and you yourself) speaks of are institutional barriers. Wage controls, to be specific. It's nothing inherent in a market economy.

  3. "There is no provision that all those able and willing to work will always be in a position to find employment."

    For good reason. The USSR had "guaranteed employment" (actually it didn't - this is why they deported and murdered so-called "marginals" and "former people" - but that is beside the point) and you see where that got them.

    Similarly during the "New Deal" the working population became rather resentful rather quickly of those with make work jobs - which is why make work jobs disappeared so quickly from the scene during FDR's first administration.

  4. I think you're misunderstanding the quote, Xenophon.

    When he says "no provision" I don't think he means no statute or official guarantee. What he means is that there is no natural tendancy to full employment.

  5. I am not misunderstanding it at all:

    From Einstein's "Why Socialism?":

    "I have now reached the point where I may indicate briefly what to me constitutes the essence of the crisis of our time. It concerns the relationship of the individual to society. The individual has become more conscious than ever of his dependence upon society. But he does not experience this dependence as a positive asset, as an organic tie, as a protective force, but rather as a threat to his natural rights, or even to his economic existence. Moreover, his position in society is 3u-ch that the egotistical drives of his make-up are constantly being accentuated, while his social drives, which are by nature weaker, progressively deteriorate. All human beings, whatever their position in society, are suffering from this process of deterioration. Unknowingly prisoners of their own egotism, they feel insecure, lonely, and deprived of the naive, simple, and unsophisticated enjoyment of life. Man can find meaning in life, short and perilous as it is, only through devoting himself to society.

    The economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil. We see before us a huge community of producers the members of which are unceasingly striving to deprive each other of the fruits of their collective labor-not by force, but on the whole in faithful compliance with legally established rules. In this respect, it is important to realize that the means of production-that is to say, the entire productive capacity that is needed for producing consumer goods as well as additional capital goods-may legally be, and for the most part are, the private property of individuals.";col1

  6. Einstein - to be blunt - sounds exactly like Marx, Lenin and Stalin.

  7. I'm not doubting you can track it down - I've posted selections from it (including this one) right here on this blog.

    I'm wondering why you're talking about the New Deal and the Soviet Union as the "good reason" why there is no natural tendency for the provision of full employment.

    How could a reactive response of two societies to the issue have anything to do with furnishing a "good reason" for what Einstein highlights?

  8. Daniel,

    Perhaps you misunderstand me ... the fact that there is no guarantee of employment is a good thing that reaps numerous benefits to the individual and by happy accident to society.

    The New Deal and the Soviet Union illustrates what happens when that lesson is forgot.

  9. "Einstein - to be blunt - sounds exactly like Marx, Lenin and Stalin."

    Did the title to the piece tip you off on that one at all?????

    Actually I think he's far more reasonable than them - but quite socialist nonetheless. All the elements are there (and much more clearly than in Marx) so that if he put more effort into it I think we could have made him a solid Keynesian. Same with Bertrand Russell - he comes across as quite the socialist but there is enough underlying discrimination that given a little more training in economics he could probably be a Keynesian.

  10. Maybe I misunderstand you, but I think its more likely that you're simply wrong.

    How do ham-fisted attempts to force full employment tell us anything about what emergent full employment would be like if it were possible?

    Are you honestly saying that if the simple, classical picture of a fully employed economy were possible you don't think that wouldn't be a good thing?

    That is an interesting (if fallacious) angle of attack: (1.) criticize the prospect of the natural occurance of something by citing artificial attempts at duplicating it, and thereby (2.) reject the natural emergence of that thing as bad because of we've had failed attempts at it.

    Unless, as you say, I'm misunderstanding you.

  11. "How do ham-fisted attempts to force full employment tell us anything about what emergent full employment would be like if it were possible?"

    The point is that "full employment" isn't in any way desirous or useful. The second point is that Einstein favored centrally planned full employment.

  12. If that is the point then I'm still waiting for you to make it.

    I'm not denying your second point.

  13. I'm clearly missing something because I know you're not this illogical.

    Am I to understand that "full employment" is not desirous or useful because the Soviet Union and Roosevelt tried to pursue it unsuccessfully?

    I completely fail to see how the former follows from the latter. Or is your argument something else?

    Roosevelt tried unsuccessfully to beat polio too (well, I suppose he beat it in the sense that he survived) - I don't think it follows that eradicating polio was a bad thing.

  14. "I'm clearly missing something because I know you're not this illogical."

    playing on your vanity ;-)

  15. I'm suggesting that "full employment" or the "natural rate employment" are not worthy goals and that the pursuit of such tends to lead to some fairly nasty outcomes - some really bad (Stalin's Russia) and some less bad (the make work projects of FDR that cause so much resentment amongst the general population as to lead to social strife).

    Not quite sure why that is so hard to grasp or why that is "illogical."

  16. Now which is it Xenophon - at 4:18 I'm told that full employment is not desirous or useful, and at 4:36 I'm told that the pursuit of full employment leads to nasty outcomes.

    Will you be back on the point that full employment itself is not desirous or useful by 4:54?

    We can and have argue out the prospect of achieving full employment. I'm aware of your position on that. What I was refering to as illogical was your 4:18 position.

  17. 4:18 and 4:36 mean the same thing to me.

  18. And if you are going to change your position again, I'm leaving by 5:00 EST, so make sure you do it punctually.

  19. Then I think we have more fundamental issues to work out besides economics.

  20. Mean the same thing or are both opinions held by you?

    Because I simply cannot understand how they mean the same thing. Presumably one could quite easily hold 4:36 but not 4:18.

  21. Also, I doubt you could have moderated Einstein's position towards Keynesian socialism. After all, Einstein in his own field of expertise pounded his head into a brick wall for the last couple decades of his life.

  22. Keynesians socialism?

    Nevermind - I'm not opening that can of worms today.

  23. "The point is that "full employment" isn't in any way desirous or useful."

    Meaning in the first instance it leads to bad outcomes when pursued. The useful part is probably redundant and can be ignored.

    And this links up with 4:36.

  24. OK, but what if its not "pursued". Naturally emergent full employment would be bad too?

  25. Keynesian socialism in the sense that Keynesianism leads most likely to socialism. Not an artfully constructed sentence certainly.

    "Naturally emergent full employment would be bad too?"

    I'd argue that such a thing doesn't exist, any more than there is a "natural level" of the number of doctors or engineers in a polity.

  26. "I'd argue that such a thing doesn't exist, any more than there is a "natural level" of the number of doctors or engineers in a polity."

    Well good! Then you, Einstein and I are in agreement.

    But a bad thing? A thing that would not be desirous or useful?

    Think of it this way - there is no guarantee that full employment will naturally emerge, but there's no reason to think that it couldn't at certain times. You wouldn't say it was a bad thing if it did naturally emerge, right?

    Try to understand why this has been going around in circles... earlier you did say that full employment is not desirous or useful.

  27. In the context of government policies to create such, yes. And that is what Einstein is driving at - we need to create policies that will foster employment for all that want it. And that is what I attacked.

  28. Do you simply not have an opinion on full employment outside of the context of government policies to create it? You're being bizarrely evasive on this.

    We agreed back at 4:40 that in the context of policies to create it you think it is not desirous. That's clearly apparent. We've none that forever.

    What about outside of the context of policies designed to bring it about? Your 4:18 comment was completely unqualified - and I've pressed you on this now several times and you're still evasive.

    Do you just not know what your opinion is in that case?

  29. I don't think I'm being evasive - the government pursuit of full employment is a bad idea. Full stop.

    See, I agree with you, Einstein does lament the lack of "natural full employment," and he has an agenda to address that.

  30. There will always be full employment in the absence of government. Unemployment will then be voluntary unemployment.

  31. Weird. It used a different name.

  32. Mattheus,

    It? Wow.

    Anyway, no, I didn't use a different name.

  33. No haha, I mean that Daniel's blogspot Google service used a different name for me. My first post was under Mvonguttenberg.

  34. Oh, my apologies then. The "M" should have clued me in. *hits head soundly*

  35. Xenophon - once again you have not answered whether you think full employment outside of governmnet pursuit of full employment is "desirous or useful".

    This is what you're being evasive about.

    Do you or not?

    4:18 suggested you do not. I'm trying to clarify.

  36. I'm not being remotely evasive.

    Let me repeat ... "I don't think I'm being evasive - the government pursuit of full employment is a bad idea. Full stop."

    A very bad, soul crushing idea.

  37. Xenophon - that position of yours has been established for months.

    The implications that answer has for your reading comprehension, however, are not good. It's not the question I asked.

    You can say "I'm not really sure", you know.

  38. I don't think anyone would venture to say that full employment in and of itself is undesirable, no more than they would say ANY exchange in and of itself is undesirable.

    His position is that government-sponsored attempts at full employment are undesirable. On this account I fully agree with Xenophon.

  39. Mattheus -
    Anything that you wouldn't think anyone would venture to say, Xenophon will be likely to at least try saying.

    The question is, will he continue to proclaim it (like the point earlier about artistic or cultural critiques), or will he try to evade it once he realizes how crazy it actually is.

    He did indeed say that attempts at full employment are undesirable. I would respond "well, it depends on what kind of attempt we're talking about". Anyway, that's obvious and it was always clear that Xenophon thinks that.

    What he said earlier was that all full employment is undesirable, and he's repeatedly refused to clarify.

    Don't underestimate Xenophon - he likes to be a contrarian for the sake of being a contrarian.

  40. "What he said earlier was that all full employment is undesirable, and he's repeatedly refused to clarify."

    My point is entirely clear in light of the context of what I was talking about.

    Anyway, I've clarified twice (though I did not need to).

  41. You haven't clarified twice. You've repeated the same answer twice, as you say, "in light of the context of what I was talking about".

    You've still failed to answer what I was asking you. Now I'm simply curious why (in addition, of course, to being curious about your answer).

    We all know the answer in the context of what you were talking about. That wasn't the question, though. Repeating he same answer to that different question again doesn't really "clarify" anything. You don't need to clarify what is already clear. I know you do not think the government-led pursuit of full employment is desirable. That is not the question I am asking you and it is not the question I've ever asked you in this thread.

  42. Dude, I have no idea what you are on about at this point. You keep tilting at this windmill.


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