Tag: economics

What we have here is a failure to connect the obvious dots:

 Over the next 30 years this emphasis on equalizing gender roles at home as well as at work produced a revolutionary transformation in Americans’ attitudes. It was not instant. As late as 1977, two-thirds of Americans believed that it was “much better for everyone involved if the man is the achiever outside the home and the woman takes care of the home and family.” By 1994, two-thirds of Americans rejected this notion.

But during the second half of the 1990s and first few years of the 2000s, the equality revolution seemed to stall. Between 1994 and 2004, the percentage of Americans preferring the male breadwinner/female homemaker family model actually rose to 40 percent from 34 percent. Between 1997 and 2007, the number of full-time working mothers who said they would prefer to work part time increased to 60 percent from 48 percent. In 1997, a quarter of stay-at-home mothers said full-time work would be ideal. By 2007, only 16 percent of stay-at-home mothers wanted to work full time. 

Women’s labor-force participation in the United States also leveled off in the second half of the 1990s, in contrast to its continued increase in most other countries. Gender desegregation of college majors and occupations slowed. And although single mothers continued to increase their hours of paid labor, there was a significant jump in the percentage of married women, especially married women with infants, who left the labor force. By 2004, a smaller percentage of married women with children under 3 were in the labor force than in 1993…. 

For more than two decades the demands and hours of work have been intensifying. Yet progress in adopting family-friendly work practices and social policies has proceeded at a glacial pace.

Today the main barriers to further progress toward gender equity no longer lie in people’s personal attitudes and relationships. Instead, structural impediments prevent people from acting on their egalitarian values, forcing men and women into personal accommodations and rationalizations that do not reflect their preferences. The gender revolution is not in a stall. It has hit a wall.

In today’s political climate, it’s startling to remember that 80 years ago, in 1933, the Senate overwhelmingly voted to establish a 30-hour workweek. The bill failed in the House, but five years later the Fair Labor Standards Act of 1938 gave Americans a statutory 40-hour workweek. By the 1960s, American workers spent less time on the job than their counterparts in Europe and Japan.

Between 1990 and 2000, however, average annual work hours for employed Americans increased. By 2000, the United States had outstripped Japan — the former leader of the work pack — in the hours devoted to paid work. Today, almost 40 percent of men in professional jobs work 50 or more hours a week, as do almost a quarter of men in middle-income occupations. Individuals in lower-income and less-skilled jobs work fewer hours, but they are more likely to experience frequent changes in shifts, mandatory overtime on short notice, and nonstandard hours. And many low-income workers are forced to work two jobs to get by. When we look at dual-earner couples, the workload becomes even more daunting. As of 2000, the average dual-earner couple worked a combined 82 hours a week, while almost 15 percent of married couples had a joint workweek of 100 hours or more.

The reason “gender equality” stalled is because it is an economic impossibility.  The reason the average hours worked is so much higher than in the more “sexist” 1960s is because primarily there are more women in the workforce.  While immigration too plays a role here, the only significant effect native women have when they enter the labor force in greater numbers is to depress the price of labor.  Unlike immigrants, they don’t bring in new consumption to help mitigate their wage-depressing effects; the reason real hourly wages peaked in 1973 and have been falling ever since is because that was the year that the number of men younger than 20 and older than 65 leaving the labor force was surpassed by educated, middle-class women entering it.

One-third of working class women have always worked.  The change brought by feminism is that now middle class and upper middle class married women work as well.  And the more women that work, the more women have to work and the less time women who don’t work will have with their husbands who support them, because an INCREASE in the SUPPLY of labor necessitates a DECREASE in the PRICE of labor, demand remaining constant.

And to make matters worse, demand does not remain constant, but actually declines, because a woman who works is statistically much less likely to eventually become a wife and mother, and even when she does, she becomes one several years later and has fewer children.  This means that feminism is a structural economic failure as it creates a downward-spiraling vicious circle of three easily identifiable revolutions:

1. The increase in the supply of labor causes wages to go down.  This is indisputable in either logical or empirical terms.
2. Female hypergamy, female independence, and opportunity cost reduces the marriage rate and the average birth rate, while increased male work hours and work-related romantic opportunities increases the divorce rate.  These connections are all logically sound and readily observable.
3. The reduced birth rate has a negative effect on consumption, and therefore the demand for labor, 20 years before the consequent negative effects on the supply of labor can help balance it out, putting further negative pressure on wage rates.  This is also indisputable, both logically and empirically.

While this didn’t have to be the case, feminism has also played a role in the debt crisis of the United States, as the Social Security system, Medicare, and Medicaid were set up structurally to be dependent upon the male breadwinner/female homemaker family model and a birthrate higher than the replacement level.  Funding for those systems was doomed post-1973, necessitating either their complete restructuring or funding them through debt; obviously the latter path was the one taken, much to the detriment of those who are now on the hook for it.

The complete systematic failure of feminism as well as every society which incorporates the concept of sexual equality is no less predictable than the complete systematic failure of socialism.  Ludwig von Mises correctly predicted the failure of socialist societies in his “Economic Calculation in the Socialist Commonwealth”, published only three years after the October Revolution, on the basis of socialism’s intrinsic inability to establish a pricing mechanism.

The economic flaws of feminism are no less obvious, no less fundamental and no more avoidable than the economic flaws of socialism.  Feminism’s structural inability to sustain wage rates and birth rates spells the inevitable doom of every feminist society, as surely as the inability to calculate prices spells the doom of every socialist society.  “Gender equality” hasn’t stalled because it isn’t being sufficiently enforced by the government, it has stalled because it is in the process of collapsing along with the society it has infested.

The impossibility of sexual equalitarian societies has nothing to do with fairness, traditional religious beliefs, human rights, or how intensely one feels that women are equal to men in every way.  It is a straightforward and unavoidable consequence of the law of supply and demand, and as such, is far more reliable than the Malthusian equation of the geometric increase of population outstripping the arithmetic increase of the food supply.

It is not looking good for Q1-2013:

Wal-Mart Stores Inc. had the worst sales start to a month
in seven years as payroll-tax increases hit shoppers already battling a
slow economy, according to internal e-mails obtained by Bloomberg News.

“In
case you haven’t seen a sales report these days, February MTD sales are
a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance
and logistics, said in a Feb. 12 e-mail to other executives, referring
to month-to-date sales. “The worst start to a month I have seen in my ~7
years with the company.”

“Have you ever had one of those weeks where your best- prepared plans
weren’t good enough to accomplish everything you set out to do?” Geiger
asked in a Feb. 1 e-mail to executives. “Well, we just had one of those
weeks here at Walmart U.S. Where are all the customers? And where’s
their money?”

It sounds as if an awful lot of people just got the harsh wakeup of the Christmas-related credit bills combined with their tax and insurance hikes.  The “substitution” effect can only work so long before the consumer can’t even afford Wal-Mart.  The problem with kicking the credit can instead of addressing the problem is that the can keeps getting bigger every time it is kicked down the road.

Iceland has already shown the way out.  Default.  The fact that the politicians and bankers so vigorously prefer attempting to inflate their way out demonstrates that they don’t give a damn about the economy or the people, and that inflation in a sufficiently orderly manner is not always possible.

Sure, the government could borrow and spend $100 trillion tomorrow.  But the effect of that would be even worse than default.  So the Federal Reserve finds itself in between the Scylla of hyperinflation and the Charybdis of default, without an Odysseus at the helm.

“There is no means of avoiding the final collapse of a boom brought
about by credit expansion. The alternative is only whether the crisis
should come sooner as a result of a voluntary abandonment of further
credit expansion, or later as a final and total catastrophe of the
currency system involved.” 
– Ludwig von Mises

I had already read a considerable amount of Milton Friedman, declared my Economics major, and had two years of university classes under my belt when I first read Joseph Schumpeter’s History of Economic Analysis.  That book, more than any other, changed my perspective on not only economics, but how I regarded the world.  It was the first time in my life that I ever felt overwhelmed concerning a subject in which I was genuinely interested and believed I had a reasonable grasp of the issues concerned.

I understood, and shared, Schumpeter’s contempt for Ricardo and Keynes.  I was hardly surprised by his respect for Mises.  But I was shocked, in a way that I am very seldom shocked, by what almost appeared to be disdain for Adam Smith, the man I had always considered, and been taught to consider, the grand pinnacle of homo economicus.  And in Smith’s stead, Schumpeter praised, indeed, almost seemed to revere, a French nobody named Turgot, a man of whom I had literally never heard, not in any book, paper, or class lecture.

With Richard Cantillon, Anne-Robert-Jacques Turgot, Baron de Laune, should arguably be considered one of the finest and most brilliant economic thinkers in human history.  It borders on criminal that he is, even today, dismissed as a mere physiocrat and royal minister, it is an injustice that his name is not mentioned as one of the Great Economists while lesser minds such as Ricardo, Smith, and Keynes are celebrated and provide the theoretical source of present economic policies.

Turgot was not infallible.  Of him, it is written: “Turgot believed in
progress and in the perfectibility of man. The human mind, including
the exercise of reason and volition, has the potential for
progression. He predicted the future of reason and the inevitable
advancement of the human mind.”

And yet, Turgot’s own example, and the way in which knowledge of the law of diminishing returns was lost for over a century,  ironically demonstrates his misplaced faith in progress and human perfectibility.

One of Turgot’s most remarkable contributions to economics, the significance of which was lost until the twentieth century, was his brilliant and almost off-hand development of the law of diminishing returns, or, as it might be described, the law of variable proportions. This gem arose out of a contest which he had inspired to be held by the Royal Agricultural Society of Limoges, for prize-winning essays on indirect taxation. Unhappiness with the winning physiocratic essay by Guérineau de Saint-Péravy led him to develop his own views in ‘Observations on a Paper by Saint-Péravy’ (1767). Here Turgot went to the heart of the physiocratic error, in the Tableau, of assuming a fixed proportion of the various expenditures of different classes of people. But, Turgot pointed out, these proportions are variable, as are the proportions of physical factors in production. There are no constant proportions of factors in agriculture, for example, since the proportions vary according to the knowledge of the farmers, the value of the soil, the techniques used in production, and the nature of the soil and the climatic conditions.

Developing this theme further, Turgot declared that ‘even if applied to the same field it [the product] is not proportional [to advances to the factors], and it can never be assumed that double the advances will yield double the product’. Not only are the proportions of factors to product variable, but also after a point, ‘all further expenditures would be useless, and that such increases could even become detrimental. In this case, the advances would be increased without increasing the product. There is therefore a maximum point of production which it is impossible to pass…’. Furthermore, after the maximum point is passed, it is ‘more than likely that as the advances are increased gradually past this point up to the point where they return nothing, each increase would be less and less productive’. On the other hand, if the farmer reduces the factors from the point of maximum production, the same changes in proportion would be found.

In short, Turgot had worked out, in fully developed form, an analysis of the law of diminishing returns which would not be surpassed, or possibly equalled, until the twentieth century.  (According to Schumpeter, not until a journal article by Edgeworth in 1911!)

The Mises Institute has a collection of the works of Turgot, which at 525 pages, are barely more than half the length of my most recent novel.  To return to the earlier topic of the fear of failure, it is deeply humbling to read the man’s writings and realized that even now, more than 230 years after his death, this is an individual who has been widely ignored and dismissed as a failure, when there may not have been 500 men of his intellectual accomplishment in the entire history of the species.  If that is failure, who needs success?

Apparently no one has alerted the government of Zimbabwe about the magic of the printing press:

Zimbabwe’s finance minister has taken a hard look at the cash strapped country’s bank accounts – and discovered it only has £138 and 34 pence left. Tendai Biti made the announcement at press conference yesterday declaring: ‘Last week when we paid civil servants there was $217 in government coffers.  Mr Biti went on to tell the shocked news reporters that they were individually likely to have healthier bank balances than the state’s.

Ah, my mistake.  It appears they do have a central bank and a printing press; this is merely a currency translation problem.  The government has ZWD 46.6 quantillion in the bank, which is the equivalent of $217 at the official exchange rate.

Although I do have a vision of the Dollarific Duo, Ben Bernanke and Paul Krugman, two econoheroes helicoptering into countries with contracting economies and rescuing them before riding off into the sunset on their tandem Neo-Keynesian cycle.

Not that the BEA figures actually matter any more than any other fiction being published these days, but now that Obama has been safely re-elected, the economic bad news can be released again:

A stunner out of the BEA which just reported a Q4 GDP of -0.1% that
was leaps and bounds below the 1.1% estimate, and a plunge from Q3’s
3.1%. The factors: Private Inventories, Exports and Government
Expenditures all of which contracted, by -1.27%, -0.81%, and -1.33%. The
silver lining was in Personal Consumption Expenditures which added
1.52% to the negative print, most of it however driven by a surge in
spending ahead of the fiscal cliff. Ironically, this was the biggest
government-driven detraction from growth since Q1 2011, when GDP led to a
-1.49% cut in the GDP, same in Q4 when government spending on defense
fell the most since 1972. The solution is simple: print moar drones. Enter Mali. And since everything is now AMZN-ing, we can’t wait for the spin that the GDP’s margins were actually better than expected, leading to a 200 point surge in the DJIA.

How many recessionary dips will it take before the mainstream financial media admits that we’ve been in a depression since 2008?  My guess is five.

Forget the “double-dip”.  Now we’re expected to believe that a “triple-dip” recession is nigh:

Economists believe the chances of such a scenario are high, given
that there has been no let up in the pressure on consumers and
businesses and snow disruption threatens to cost the economy an
estimated £500 million a day.

There is no official definition of a
triple dip, but it is widely accepted to mean that the economy has
fallen into recession three times without returning to a period of
robust growth in between. The UK plunged into a double dip
recession last year, contracting for three quarters in a row before
bouncing back with growth of 0.9% in the three months to September.

According
to the Office for National Statistics, there has not been a triple dip
recession since its records began in 1955, with Britain last suffering
such economic gloom in the Great Depression. 

There is no triple-dip recession.  There was no double-dip recession.  This is, as I have been saying since 2008, the Great Depression 2.0.  It is larger in scope than its predecessor and it is gradually revealing the concrete shortcomings of the reported economics statistics.

It is also interesting how we don’t hear much about the ongoing “economic recovery” in the USA anymore even though the GDP numbers are still nominally positive.

Karl Popper summarizes an amended Marxian theory of the trade cycle in The Open Society and Its Enemies:

“The amended theory of surplus population and of the trade cycle may be outlined as follows. The accumulation of capital means that the capitalist spends part of his profits on new machinery; this may also be expressed by saying that only a part of his real profits consists in goods for consumption, while part of it consists in machines. These machines, in turn, may be intended either for the expansion of industry, for new factories, etc., or they may be intended for intensifying production by increasing the productivity of labour in the existing industries. The former kind of machinery makes possible an increase of employment, the latter kind has the effect of making workers superfluous, of ‘setting the workers at liberty’ as this process was called in Marx’s day. (Nowadays it is sometimes called ‘technological unemployment’.)

Now the mechanism of capitalist production, as envisaged by the amended Marxist theory of the trade cycle, works roughly like this. If we assume, to start with, that for some reason or other there is a general expansion of industry, then a part of the industrial reserve army will be absorbed, the pressure upon the labour market will be relieved, and wages will show a tendency to rise. A period of prosperity begins. But the moment wages rise, certain mechanical improvements which intensify production and which were previously unprofitable because of the low wages may become profitable (even though the cost of such machinery will begin to rise). Thus more machinery will be produced of the kind that ‘sets the workers at liberty’.

As long as these machines are only in the process of being produced, prosperity continues, or increases. But once the new machines are themselves beginning to produce, the picture changes. Workers will be ‘set at liberty’, i.e. condemned to starvation. But the disappearance of many consumers must lead to a collapse of the home market. In consequence, great numbers of machines in the expanded factories become idle (the less efficient machinery first), and this leads to a further increase of unemployment and a further collapse of the market.

The fact that much machinery now lies idle means that much capital has become worthless, that many capitalists cannot fulfill their obligations; thus a financial crisis develops, leading to complete stagnation in the production of capital goods, etc. But while the depression (or, as Marx calls it, the ‘crisis’) takes its course, the conditions are ripening for a recovery. These conditions mainly consist in the growth of the industrial reserve army and the consequent readiness of the workers to accept starvation wages.

At very low wages production becomes profitable even at the low prices of a depressed market; and once production starts, the capitalist begins again to accumulate, to buy machinery. Since wages are very low, he will find that it is not yet profitable to use new machinery (perhaps invented in the meanwhile) of the type which sets the workers at liberty. At first he will rather buy machinery with the plan of extending production. This leads slowly to an extension of employment and to a recovery of the home market. Prosperity is coming once again. Thus we are back at our starting point. The cycle is closed, and the process can start once more.

This is the amended Marxist theory of unemployment and of the trade cycle. As I have promised, I am not going to criticize it. The theory of trade cycles is a very difficult affair, and we certainly do not yet know enough about it (at least I don’t). It is very likely that the theory outlined is incomplete, and, especially, that such aspects as the existence of a monetary system based partly upon credit creation, and the effects of hoarding, are not sufficiently taken into account. But however this may be, the trade cycle is a fact which cannot easily be argued away, and it is one of the greatest of Marx’s merits to have emphasized its significance as a social problem.”

What particularly struck me in reading the section leading up to this passage was a) the way that immigration is now utilized to supply the ranks of “the industrial reserve army” and b) the fact that even back in 1962, despite his apparent unfamiliarity with the Austrian School, Karl Popper was aware that “a monetary system based partly upon credit creation” was likely to have some significance on unemployment and the trade cycle.

The Marxian system is incomplete and outdated.  As Popper shows, some of its basic assumptions were incorrect and logically flawed from the start.  But the structural similarities between the domestic industrial exploitations of the 19th century and the international financial exploitations of the 21st century become increasingly apparent when one considers them from the perspective of both Marxian and Misean theories.

It is not clear to me that these apparent polar opposites can genuinely be synthesized in any useful manner; the Hegelian irony of an attempt to do so is not lost on me.  And yet, I suspect there may be something there.

Paul Krugman seems to think that if he keeps rewriting economic history, he’ll somehow retroactively change what actually took place:

It’s that time again: the annual meeting of the American Economic Association and affiliates, a sort of medieval fair that serves as a marketplace for bodies (newly minted Ph.D.’s in search of jobs), books and ideas. And this year, as in past meetings, there is one theme dominating discussion: the ongoing economic crisis.

This isn’t how things were supposed to be. If you had polled the economists attending this meeting three years ago, most of them would surely have predicted that by now we’d be talking about how the great slump ended, not why it still continues.

So what went wrong? The answer, mainly, is the triumph of bad ideas.

It’s tempting to argue that the economic failures of recent years prove that economists don’t have the answers. But the truth is actually worse: in reality, standard economics offered good answers, but political leaders — and all too many economists — chose to forget or ignore what they should have known.

Three years ago.  That would have been 2010… which was several months after I published The Return of the Great Depression, which explained that the issue was credit inflation, not insufficient demand.  Unlike all those economists, I also declared that we would be in the middle of an economic depression now, which is the case, even though few seem to consciously be aware of it due to the various statistical shenanigans.

And three years later, after Obama passed a BIGGER stimulus plan than the one for which Paul Krugman himself called for, Krugman is still trying to claim that the mainstream economists were not incorrect, while repeating his previous and incorrect diagnosis.