Friday, September 28, 2012

Quiggin on "Economic Possibilities for Our Grandchildren"

Posted by dkuehn at 2:31 PM
Here. (HT - Brian Leiter [who my brother told me the other day he thought he saw driving by in a minivan])

I have not had a chance to read it yet.

7 comments:

  1. MinSeptember 28, 2012 at 4:49 PM

    Interestingly, Keynes's idea of a 15 hour work week is in line with the level of work in the hunter/gatherer societies encountered by Europeans in the modern era. With mechanization, computerization, and robotization, such a work week should be attainable again. The problems are social and political. Hierarchy has been the norm since the agricultural revolution.

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    Replies
    1. CurrentSeptember 28, 2012 at 5:51 PM

      How would solving "social and political" problems enable a 15 hour week?

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    2. MinSeptember 28, 2012 at 8:05 PM

      We have done it before, we can do it again. :) If stone age people can live on 15 hours a week, we can, too. And we can live much better. Much, much better.

      We have long talked of labor saving devices. IMX, their effect upon me has typically been increased productivity. But we really could use them as labor and time saving devices.

      The 60 hour work week is long gone in the developed world. Child labor is gone. Slavery is gone. The Germans and French have shorter work weeks than the US, with comparable standards of living. With the productivity gains we have had in the US since 1970, we could have a comparable standard of living with a 20 - 25 hour work week. Most of us would hardly notice the difference in the standard of living.

      OC, a sudden social change that would make that possible is not going to happen. But the vision shared by Keynes and Benjamin Franklin is achievable, if that is what we want. It would mean that we would have to change course, I think. Currently it appears that we are heading towards a plutocracy with landed gentry, servants, and debt peons.

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    3. CurrentSeptember 28, 2012 at 8:43 PM

      > If stone age people can live on 15 hours a week, we can, too.

      Far fewer people lived on earth in the stone age, it's a false comparison.

      > The Germans and French have shorter work weeks than the US, with comparable standards of living.

      Not really, the US still has a significantly higher standard of living, though more inequality.

      > With the productivity gains we have had in the US since 1970, we could
      > have a comparable standard of living with a 20 - 25 hour work week.

      Back that up with facts. How is this possible? Of course I agree that in the long run economic growth could make this possible. But I get the impression that's not what you're talking about.

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    4. MinSeptember 28, 2012 at 11:53 PM

      "> With the productivity gains we have had in the US since 1970, we could
      > have a comparable standard of living with a 20 - 25 hour work week.

      "Back that up with facts. How is this possible?"

      It is well known that if US wages had kept up with productivity, they would have increased considerably. Taking the increase in real terms and dividing by the increase in population between 1970 and 2000 gives a proportion of 1.8 - 1.9. It is also considered that the standard of living for most people has remained about the same as it was in the 1970s. So suppose that instead of opting for higher wages and a higher standard of living, people had opted for shorter work weeks and the same standard of living. That would yield a work week of about 21 hours.

      So it was possible. However, it did not happen, and it was extremely unlikely, anyway, for social, political, and economic reasons. But it was possible.

      Is it desirable? Frankly, in the US culture, I doubt it. I do suspect that people might prefer a work week reduction of, say, 10% if it would mean full employment. I doubt if that could happen until we have a Lost Decade or two.

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    5. CurrentSeptember 29, 2012 at 8:29 PM

      The idea that the standard of living for most people has remained the same since the 70s is bunk. There's no point me debunking it any more, it's been done so many times before. The BLS have even stopped publishing the data-series that were commonly used to make this argument because they recognize how many problems these series have.

      Besides, the maintenance of productivity gains requires investment, it isn't a force of nature. That requires a proportion of income not to be spent. This applies in the long run regardless of what determines the behaviour of the near-term savings-investment market. So, to preserve growth as income is redistributed investment must not fall. The same is true as hours are reduced.

      It's easier to demonstrate the point with income redistribution than with cuts in hours worked. See the following table: ftp://ftp.bls.gov/pub/special.requests/ce/standard/2011/income.txt

      We have a group of rich Americans who earn more than $70k per year, there are ~39 million of these households. Let's suppose that all households with an income great than that threshold are to be taxed so that their income is the same as the next group. If the state were to simply take the difference in income and redistribute it? No, not without affecting investment spending. Let's suppose that the state wish to keep investment spending the same in order to keep growth rates the same. It's unlikely of course that taxing all gains >$70k would keep growth rates the same. If you look at the table you'll see that that group spend much less of their income than others. What the state can really take isn't their extra income but rather their extra consumption expenditure. So, let's suppose that the state sets up taxes so that the top group spend the same on consumption as the next group, so investment remains the same. In that case there would be about $1.2T to redistribute, or about $10K per household. Not bad I suppose but not that great either. If I were to take into account the disincentive to work realistically it would be much worse.

      The same sort of thing applies at any time you choose, and it applies to hours worked in a similar way to redistribution. That is, if hours worked are simply reduced then investment will fall and with it long-run growth. So, what must happen is that hours spent on producing consumption goods must fall without hours spent on investment goods changing. Of course not all investment causes growth, but good luck separating the part that doesn't from the part that does.

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  2. Blue AuroraSeptember 28, 2012 at 5:06 PM

    It's a well-written essay. The trouble is though, I can't see the role of economists in a post-scarcity society that Keynes envisions - somehow, I don't think they would be like dentists, they would be out of business!

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