Travel days

Posted: 22 September 2017 in Uncategorized
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Mural-1D

I’ll be traveling for the next few days. No posts then until I return. . .

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Special mention

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wage share-growth

We’ve been hearing this since the recovery from the Second Great Depression began: it’s going to be a Golden Age for workers!

The idea is that the decades of wage stagnation are finally over, as the United States enters a new period of labor shortage and workers will be able to recoup what they’ve lost.

The latest to try to tell this story is Eduardo Porter:

the wage picture is looking decidedly brighter. In 2008, in the midst of the recession, the average hourly pay of production and nonsupervisory workers tracked by the Bureau of Labor Statistics — those who toil at a cash register or on a shop floor — was 10 percent below its 1973 peak after accounting for inflation. Since then, wages have regained virtually all of that ground. Median wages for all full-time workers are rising at a pace last achieved in the dot-com boom at the end of the Clinton administration.

And with employers adding more than two million jobs a year, some economists suspect that American workers — after being pummeled by a furious mix of globalization and automation, strangled by monetary policy that has restrained economic activity in the name of low inflation, and slapped around by government hostility toward unions and labor regulations — may finally be in for a break.

The problem is that wages are still growing at a historically slow pace (the green line in the chart above), which means the wage share (the blue line in the chart) is still very low. The only sign that things might be getting better for workers is that the current wage share is slightly above the low recorded in 2013—but, at 43 percent, it remains far below its high of 51.5 percent in 1970.

That’s an awful lot of ground to make up.

productivity-wage share

The situation for American workers is even worse when we compare labor productivity and the wage share. Since 1970, labor productivity (the real output per hour workers in the nonfarm business sector, the red line in the chart above) has more than doubled, while the wage share (the blue line) has fallen precipitously.

We’re a long way from any kind of Golden Age for workers.

But, in the end, that’s not what Porter is particularly interested in. He’s more concerned about what he considers to be a labor shortage caused by a shrinking labor force.

So, what does Porter recommend to, in his words, “protect economic growth and to give American workers a shot at a new golden age of employment”? More immigration, more international trade, cuts in disability insurance, and limiting increases in the minimum wage.

Someone’s going to have to explain to me how that set of policies is going to reverse the declines of recent decades and usher in a Golden Age for American workers.

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Special mention

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Back in 2011, thousands of Chilean students participated in protests against the high cost of higher education. The most famous took place in front of La Moneda, the president’s palace, dancing to Michael Jackson’s “Thriller.”

According to the latest statistics from the OECD report, “Education at a Glance 2017,” the costs of a college education in Chile were still very high in 2015-16.

But they’re still not as high as in the United States, where it costs more to go to college than anywhere else in the world.

Of the 35 member countries in the OECD, the United States has the highest average tuition at both public and private colleges, for Bachelor’s as well as Master’s degrees.

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Average public tuition in the United States for a Bachelor’s degree is $8,202 annually, compared to Chile’s $7,654, the country with the second-highest tuition cost.

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In terms of private education, the comparison is not even close: average tuition in the United States for a Bachelor’s degree is $21,189, far higher than in Australia, where the price is $8,827.

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The United States also has the distinction of having the most expensive Master’s degree programs—again, in both public and private institutions.

It’s enough to turn U.S. college students into heavily indebted zombies.

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Special mention

KearnG20170918A_low  Jeff Sessions

political-22

To judge by Christopher Snyder’s attempt to defend contemporary economists, the answer is clear: nothing!

Yes, Snyder is right, economists have expanded their domain, to analyze such issues as art auctions and corruption. But then he goes off the rails.

That’s because the only kind of economics Snyder appear to know about and give credence to is mainstream economics—in terms of what he argues are the “core concepts” that underlie economists’ thinking.

What are those core concepts, around which all economists supposedly organize their theories and models?

For starters, Snyder thinks the most important one is “scarcity”:

Devoting resources to one project—say, preventing diabetes—means some other worthy project—curing cancer—goes unserved. So, in determining whether a choice should be undertaken, one of the functions of economics is to argue that its benefits should not be considered in isolation but weighed against its costs. Costs put a dollar value on what has to be given up when one choice is made over another.

But he never even considers the possibility that scarcity is institutionally created, not a given. And different economies are characterized by different kinds of scarcities, which are endogenously produced and reproduced. Thus, capitalism both creates and is characterized different scarcities from other economic systems, such as slavery and feudalism. Where is that in Snyder’s definition of what economists do and the core concepts they supposedly hold.

And then there’s “value,” which for Snyder “is the result of the interaction of several impersonal market forces,” illustrated in the usual fashion:

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But there’s no mention of long-run “natural” prices (of the sort classical economists such as David Ricardo or, more recently, Piero Sraffa focused on) or a class theory of value (emphasizing surplus labor, which Karl Marx developed in his critique of political economy)—or any one of a large number of other ways value can be, has been, and is being analyzed within economics.

Finally, Snyder, discusses “modern empirical research” and the attempt to uncover “true causal relationships rather than overinterpreting apparent correlations as causation.”

Uncovering causal relationships is difficult in economics. Opportunities to run experiments are limited by the expense and ethics involved in controlled interventions in markets (although these opportunities are growing, owing to an explosion of interest in laboratory and field experiments).

Once again, Snyder overlooks the many alternative approaches—concerning both “facts” and “causation”—within economics.

Sure, mainstream economists might claim they’ve finally solved the problem of “causal identification” (as they’ve claimed so many other times in the past). But they still fail to acknowledge the possibility that different economic theories produce different sets of facts. Nor do they consider the idea that economists actually use different notions of causation: some limit themselves to essentialist, one-way causation (from given causes to effects), while others, criticize essentialism and look at mutual effectivity (in which everything is seen to be both cause and effect).

The existence of different notions of scarcity, value, and causation within economics doesn’t prove that mainstream economists are wrong. It merely shows that reducing economics to a set of core concepts that pertain only to what mainstream economists do is wrong.

The problem, of course, is that’s the only set of concepts to which generations of students, who have been taught by mainstream economists, have been exposed. And Snyder just continues that tradition.

In the end, mainstream economists are good for nothing precisely because they exclude all other ways of thinking about and doing economics.