Productivity and the Productivity Commission (updated)

For well over a decade, I’ve been debating the claim made by the Productivity Commission that Australia experienced a productivity surge in the 1990s. My claim has been that the apparent high rate of productivity growth in the mid-1990s was the result of measurement error, most importantly the failure to take account of the increase in the pace and intensity of work that was apparent to everyone (except PC economists) at that time. This view led me to conclude that the supposed productivity gains would dissipate as more normal labor market conditions returned, which was exactly what happened.

In most of these debates, one of my chief antagonists was Dean Parham, who worked for the PC at the time, and is now a Guest Researcher there. Today I heard that Parham had written a new paper on the weak productivity growth of the 2000s. So, I was keen to see what response he would have to my latest work and to my arguments about work intensity. The answer, quite literally is “Nothing”. I have, it appears become an un-person at the PC. Parham doesn’t cite any of my work and, more importantly, fails to mention work intensity at all.

Update The original version of the post contained a somewhat snarky suggestion that Parham had been negligent in ignoring my work. He has written to me to say that this is incorrect. The reason he doesn’t mention it is because, in his view, nothing I have written on this topic, at least since 2004, merits a response.

Further update Dean Parham writes that

the reason I did not mention your work or the work intensity thesis in my paper is that I did not consider it central to the focus of the paper (industry contributions) or even to the contextual motivation of the paper.

Since the contextual motivation of the paper is (as the title suggests) the slump in productivity, I can’t see that this differs from my summary. If Parham thinks my work merits a response, he’s welcome to provide that response here or in any other venue that suits him.

I’ve got some urgent commitments over the next few days, so I won’t be able to return to this topic until later. But in the meantime, here are some of the things I’ve written about this in the last few years. Agree or disagree, I think I’ve put forward a serious case that deserves an answer.

http://www.freepatentsonline.com/article/Australian-Bulletin-Labour/147466277.html
https://johnquiggin.com/2011/08/20/no-hard-and-fast-rule-for-/
https://johnquiggin.com/2012/03/13/enough-of-these-zombie-ideas-lets-be-bold/
http://apo.org.au/commentary/surge-we-didnt-have

Housework in Utopia

The immediate reason for this post is the Crooked Timber discussion of my previous post on world meat supplies which morphed into a (mainly First World) arguments about cooking. But my bigger concern is the need for the left to offer a feasible utopian vision as an alternative to the irrationalist tribalism of the right.

My idea of feasible utopia is prosaic compared to some of the utopias that have grabbed attention in the past, but have led either nowhere or into disaster. On the other hand, it’s positively, well, utopian, compared to what’s on offer from Obama and Romney, or their counterparts in other  countries. In essence, it’s an extrapolation of the course we seemed to be on from the end of World War II to the early 1970s, a mixture of social democracy, feminism and environmental sustainability applied to ever broader spheres of activity.

The central element of my idea of utopia is that everyone should be able to live decently, without being forced to spend a lot of time doing crappy jobs. That brings us pretty directly to housework[1], something most of us spend quite a bit of time on, and which involves a fair amount of crappy work, literally and figuratively.

If my conditions for utopia are to be feasible we need two things to be true. First, the total amount of crappy work has to be small enough that the average amount per person is not too large. Second, the work has to be organized so that no one actually has to do a lot more than their share.

Read More »

I only read it for the pictures, honestly

The Economist gets some well-deserved derision these days, but it still delivers lots of interesting data, illustrated by graphs that are usually well designed and informative. Via Kenny Easwaran I found this table (published by EconomistDailyChart, but I haven’t yet located the chart) of annual meat consumption per person by country. The data set has plenty of anomalous features, but looks accurate enough for my purposes.

I’ve previously argued that we can feed the world if we make the right choices. . More precisely, our current food system produces more per person than is needed for adequate nutrition, and can continue do so in future if the right policy choices are made. The key problem is distribution, not production.

But the meat consumption data leads me to a more surprising conclusion.  Using current technology and with no additional diversion of food grain, the world could produce enough meet to give everyone an intake comparable to that of the average person in the Netherlands[fn1].

Read More »

Classical economics and recession in many countries (wonkish)

Sharp tests of economic theories are rare and hard to find, particularly in macroeconomics. Any examination of particular episodes in economic history necessarily involves counterfactuals, and these provide room for endless dispute. As an obvious example, assessing the impact of the Obama Administration’s 2009 stimulus requires an estimate of how things would have gone without the stimulus, and that is obviously hard to do.

Similarly, arguments about unemployment in the US get bogged down in disputes over whether it is structural or demand-driven and the extent to which policies such as the extension of unemployment benefits to 99 weeks have contributed. 

There is, though, one way in which the current Great Recession/Lesser Depression provides a sharp test of a critical proposition in economics. All forms of classical economics involve, in one form or another, the claim that the causes of unemployment are to be found in labour markets, and not in  macroeconomic variables such as the level of aggregate demand. That’s equally true of the Say’s Law version of classical economics criticized by Keynes, the New Classical macroeconomics of Robert Lucas and the attempts by Real Business Cycle theorists like Kydland and Prescott to explain cyclical fluctuations in terms of labor market shocks.

The crucial problem for all these theories is that labor markets and the associated institutions operate mainly at the national level. Even within the EU, different countries have very different labor markets. So, it is essentially impossible for labor markets in many different countries to move together, except as the result of macroeconomic influences operating at an international level[1]. That means that the occurrence of a sharp and sustained increase in unemployment, taking place in many countries at once, is inconsistent with classical economics.

This point seems trivially obvious, but as far as I can tell hasn’t been made, or at least not clearly. Once it’s conceded, it seems impossible to avoid a view of the world that is basically Keynesian in its analysis of the macroeconomy.  It is possible to hold such a view and reject Keynesian policies on pragmatic grounds, as in Friedman’s critique of ‘fine-tuning’. But the longer and deeper the recession the harder it is to sustain this view.

This seems like a good time to plug the fact that a paperback edition of Zombie Economics will be out soon (May 6) with a brand-new chapter on Austerity, bits of which have been seen here. On 9 May, I’ll be launching an Australian edition, where the added material is a chapter on Economic Rationalism. And a week or two ago, I received some copies of the Italian edition

http://www.stampa.unibocconi.it/articolo.php?ida=9724&idr=6

 

 

 

 

 

 

 

 

 

fn1. Of course, you can cheat and label these macro influences “technology shocks”, then assume them to be internationally correlated. But in the ordinary meaning of technology, there is no plausible way in which economies as disparate as, say, the US and Greece can experience a common technology shock.

Posted via email from John’s posterous

“Future generations” are already here

The Journal of Public Economic Theory has a special issue on Managing Climate Change, to which they are providing free access (hopefully, this link will work). I’m mentioning it partly because I have an article which I think is really important, even though the point it makes is a simple one, and partly because any initiative to make important information more freely available (even a limite special case like this one) deserves some applause.

My paper is a bit wonkish, but the basic point is simple, and, I think provides a knockdown argument against any form of utilitarianism that discounts future utility (including those misleadingly referred to as future generations.

Read More »

The coming boom in inherited wealth

As everyone who has been paying attention knows, the news on inequality is nearly all bad. Not only has inequality increased dramatically in the US, but intergenerational economic mobility is declining[1]. And, where the US leads, the rest of the world looks likely to follow. The top 1 per cent lost more than most during the crisis of 2008-09 but, as Stephen Rattner reports here (drawing on work by Piketty and Saez), that was just a blip. A stunning 93 percent of the additional income created in the US in 2010, compared to 2009, went to the top 1 per cent, and there’s no reason to think things were much better in 2011 – average real earnings have fallen yet again, and employment growth, though positive, was still modest. Wealth inequality is also high, though it has not increased as much as income inequality.

The one bright spot mentioned by Rattner is that ” those at the top were more likely to earn than inherit their riches”. Since I’m already noticing that point popping up in the places you might expect to see it (can’t find a link right now), let me point out that Rattner’s explanation, that “the rapid growth of new American industries — from technology to financial services — has increased the need for highly educated and skilled workers” is wrong, and that there is every reason to expect a boom in inherited wealth.

Read More »

Republican conservatism (rewritten)

In the light of comments, mostly at Crooked Timber, I’ve rewritten this completely, trying to be as clear as possible about how I read Mooney and what I think myself.

Chris Mooney has a great talent for knowing just when to push the envelope. Back in 2005, when CT held a book event on The Republican War on Science, the idea that Republicans as a group were hostile to science and scientists was somewhere between controversial and unthinkable, as far as mainstream Sensible opinion was concerned. Now, it’s a truth universally recognised – even the professional Repub defense team doesn’t deny it, preferring the (demonstrably false) line that Dems are just as bad.

Now, with The Republican Brain Chris pushes the argument a step further with the question: why are Republicans  the way they are, and what, if anything, can be done about if? 

Before we start, I’ll observe that the set of “conservative Republicans” has changed over time, as have the specific set of policies associated with these terms and the general temperament that goes with this. On the first point, we’ve seen the disappearance of Eisenhower Republicans, the Southern realignment and the rise of the religious right, all of which have increased the concentration of dogmatic authoritarians in the Repub party. On the second, the emergence of environmentalism as a major political line of division is probably the most important development. The fact that Republicans/conservative are increasingly anti-science reflects both of these trends.

It’s also important to observe that Republican/conservative alignment can’t be explained simply in terms of class, geography and education though all these factors play a role. With a few exceptions (notably including blacks and scientists) a substantial portion of nearly every demographic group votes Republican and self-describes as conservative. So, explanations solely based on (for example) class interests, can’t explain voting behavior without a lot of (self?)deception, and that raises the question of why some people are more easily deceived.

Some people may regard themselves as Republican/conservative simply because they have adopted, without thinking too much about it, the political positions that are regarded as normal by their family, social circle and so on. Lots of people simply aren’t interested enough in either politics or science to devote a lot of thought to these issues. Typically, such people will hold a range of views that aren’t particularly consistent either internally or with any standard ideological line.

An obvious inference is that, if people could be given better information they would change their views. But, as Mooney shows, and has become steadily more evident thanks to the Internet, better educated and informed Republicans are more likely to hold crazy views consistently and less likely to change them in response to new information.

That leads to Mooney’s primary conclusion, that Republicans/conservatives don’t simply have different beliefs from liberals/Democrats (or, for that matter, leftists), or even different values. They have (bear in mind that this a statement about population averages) different psychological characteristics, summarised as high authoritarianism and low openness to ideas different from their own.

I find this pretty convincing. It seems to me that there is an authoritarian type of personality which, in the specific circumstances of the US right now, and for non-poor whites, produces a predisposition to Republican voting and “conservative” political attitudes. In particular this type of personality is (more) strongly associated with confirmation bias. That is, not only do they ignore evidence contrary to their initial position, they tend to reinforce their commitment as a result. The creation of an alternate universe in which this bias can be repeatedly amplified (Fox News, rightwing think tanks and so on) both reinforces this kind of thinking and encourages self-selection.

I don’t think there is the symmetry here that some of the commenters are suggesting. Looking at the standard examples of nuclear power and GM foods, it seems to me that, on the whole people on the left have been more open to evidence than in the corresponding cases on the right. In the case of nuclear power, it seemed for a while (say, from the mid-90s until a few years ago) as if the safety problems might be soluble at a reasonable cost in which case an expansion of nuclear power would be preferable to more coal-fired power stations. While the evidence pointed that way, opposition to nuclear power was muted. As it turned out, the problems couldn’t be solved, at least not at a reasonable cost, and Fukushima was the last straw.

In the case of GM foods, the evidence has mostly supported the position that the use of GM technology per se doesn’t create significant health risks, and AFAICT that has been fairly widely accepted on the left (Greenpeace is a notable exception, but I don’t think their position is representative of the left as a whole). That doesn’t rule out opposition to GM on ethical or aesthetic grounds, or opposition to the whole structure of the food industry – the whole point is that you can have preferences and beliefs without assuming that the facts will always be those most convenient to you.

Similar points may be made about “alternative” medicine, particularly opposition to vaccination. It’s primarily, though not exclusively (consider Michelle Bachmann), associated with liberals and leftists in the same way as creationism is primarily, though not exclusively, associated with evangelical conservatives. But, faced with scientific criticism, there hasn’t been anything like the political pushback and doubling down we’ve seen with creationism. The Huffington Post, which was a big outlet for anti-vaxers has started publishing one of their most vigorous critics, Seth Mnookin.

This brings us finally to the question that set off all the fireworks in the original post. To what extent are authoritarian personalities the product of environment, genes or some combination of the two. Again, it’s worth pointing out that, even if there is a genetic role in personality, there’s no such thing as a genetic predisposition to be a conservative/Republican. The content of these terms isn’t fixed, and the implications are very different depending on social circumstances. To take the most obvious case from comments: Republican policies and rhetoric appeal strongly to (US) white tribal/ethnic loyalty. So, US whites who respond well to in-group appeals are likely to vote Republican and call themselves conservatives. US blacks with similar predispositions obviously won’t vote Republican and are unlikely to call themselves conservatives.

To take another example from Mooney’s book, authoritarian attitudes in the US are typically associated with support for free-market/pro-business economic policies and virulent hostility to “socialism”. By contrast, in the former Soviet Bloc, the same attitudes are associated with support for the old order and positive feelings about “socialism” (I’m using the scare quotes to indicate that, in both cases, the term is something of a blank canvas, onto which all sorts of things can be projected). And indeed, in this context, the term “conservative” is commonly applied to hardline members of the surviving Communist parties.

Following up on a comment, this way of looking at things has a lot of similarities with Corey Robin, and The Reactionary Mind. The difference between Robin’s choice of Mind and Mooney’s choice of Brain is significant. As I argued when I looked at his book, I think Robin doesn’t take enough account of personality/temperament. While most soi-disant “conservatives” are authoritarian reactionaries, there is a genuinely conservative temperament which will tend to align with political conservatism in periods when the general tendency of politics is towards the left.

So, does the genetic part of the story matter. As (I think) Andrew Gelman has observed, in this context and many others, it’s just code for things we can’t change. As long as authoritarian personalities are stable over the adult lifetime of those concerned, it doesn’t matter much whether they are determined by genes, by toilet training (as in the caricature version of Freudian psychology I learned in my youth) or by some much more complex process. That said, I think the evidence that heredity (and therefore genes) plays at least some role in the determination of personality is pretty convincing.

The political implication, which has drawn some flak in the comments, but which I think is correct is that there is no point in political engagement with authoritarian conservatives. In a political environment where they are concentrated in one party,politics is going to be a matter the only strategy open to liberals is to outnumber and outvote them by peeling off as many peripheral groups (for example, those who deviate from the approved cultural identity in some way) as possible. Obviously, that’s an unpalatable conclusion in all sorts of ways, but I think it’s a valid one.

Austerity and academia

Austerity is hitting lots of people, across pretty much all social classes, except for the top 1 per cent, who are rapidly recouping their losses in the GFC and will soon be pulling even further away from the 99. Just at the moment, academics seem to be in the crosshairs, from Washington to Sydney and beyond. Here’s a post on the subject from my friend and former colleague Rohan Pitchford. To forestall a possible line of criticism, let me observe now that, while academics have it better than plenty of others under attack from austerity policies, anyone who plays on this kind of division is a tool of the 1 per cent, and will be treated as such by me.

Sackings Hit Economics School Hard (Guest post from Rohan Pitchford)

I was surprised and dismayed to hear that that several of my former colleagues at the School of Economics at the University of Sydney have been told to leave their jobs by July. A remarkable aspect is that the sackings happened by edict, several layers of administration above the School level. How is it possible for such a removed group to know the details of people’s work life, their roles and the reasons behind their roles without any form of consultation? (ANU also faces budget cuts, but is taking the enlightened bottom-up approach.)

I know all of those concerned personally, and the group includes both talented researchers, teachers and administrators. They were apparently selected using retrospective publication criteria. We all know that most people experience a ‘bare patch’ in their publications during the life course, whether it be because of a new child, a death in the family, illness (admin duties!) etc. Knowing the people involved, the criteria seem to me unfair and random.

Perhaps the most astounding fact in all of this is that Sydney Economics has been perennially understaffed– as a Professor there, I estimated that they were some 10 academics short of what is required to deliver requisite courses: The average class size is 110, I conjecture larger than any other department. There are not enough staff to cover all the classes taught, let alone to reduce class sizes to educationally appropriate levels. Sydney typically has had to hire part-timers to fill the gap. The department generates some 20 million dollars per year in revenue from its teaching program. I cannot imagine that this will do anything but hurt this important revenue base.

A big question is this: Are the sackings due to productivity, or are they in response to an administration that has grossly over-spent on buildings? I have heard rumours of expenditure of 100m on a new medical centre, and 360m on a new obesity centre preceded these sackings.

Solutions? I discuss a possible way forward for Australia here:

In touch with the Zeitgeist?

At around 35k into the cycle leg of today’s Mooloolaba triathlon, with a strong headwind[1] and the seat feeling very hard, I was wondering “why am I doing this”. At the time, the question was more like “why did I get out of bed this morning”, but there’s also a question as to why a middle-aged academic like myself is doing something like this at all.

My own causal account is pretty simple. I gave up my old sport, karate, for a variety of reasons, then started “boot camp” style training (minus silly uniforms and other pseudo-military stuff). to keep fit. As a consequence, I found that, whereas the distance I could comfortably run had been measured in 100s of metres, it was now measured in kilometers. But I still wasn’t particularly fast and my reasoning (captured by a T-shirt I saw today) was, “why suck at one sport when you can suck at three”. And indeed, so it has turned out, but I still enjoy it and keep trying.

So, that’s the purposive agent account. But (while I was not consciously aware of this at the time) triathlons are booming and not just in Australia. So, it seems, there is some general zeitgeist which I (and thousands of others) have somehow been driven by. This is not a unique occurrence

Read More »

No Ordinary Deal

Max Weber once described politics as the slow boring of hard boards, and this is an apt description of the continuing efforts of the advocates of a globalised capitalism to grind down all the obstacles that might be posed by democratic government.

The dominance of global capital has been greatly enhanced by trade agreements such as those establishing the World Trade Organization. But, over time, the WTO has been less and less able to avoid public scrutiny and popular resistance. Moreover, it has an unfortunate tendency to stick to the rules even when US business doesn’t like the outcome. So, we’ve seen a steady shift to bilateral deals, in which the US can dictate the terms.

Read More »