Still thinking about unemployment

In addition, firms typically reorganize their job assignments after layoffs and discover that the same work can be performed with fewer workers and this, too, can slow the recovery period for employment relative to output. - Mark Thoma

If I'm right about productivity gains, this "typical" discovery will be more pronounced this time and unemployment very stubborn, particularly for some professions.

More on that productivity thing

The productivity figures are in line with what I suspected, that we are in the midst of seizing genuine productivity gains through forced lay-offs. But let me add another point: one of the reason that employment is sticky is agency cost. In larger concerns line-managers do not have the incentive to cut costs by firing their own people. At a minimum, somebody ends up doing more work, often the manager. It takes pressure from above or the outside to get it to happen.

Also why I see productivity gains in government as being only the result of increased work and legislature-limited resources. Huge amount of untapped IT productivity gains there.

Unpleasant economic thought

Judging from the work i actually see during my day job, I believe that the potential productivity (labor-saving) gains from IT have been understated because:

Like prices, employment is sticky. For a number of reasons, people don't usually get canned because of productivity gains, particularly in the small enterprise service sector where they are more difficult to quantify and may not represent full positions. The gains may simply mean more idle time.


But once those positions are gone due to a downturn like the current one, employers have little reason to reinstate them.

Basic Logic Lesson

A successful economy implies full employment
A successful economy implies maximum production of goods in demand

does NOT mean

Full employment implies maximum production of goods in demand

NOR does it mean

Maximum production of goods in demand implies full employment

Note: the premises were introduced as a definition implied by some current discussions, NOT because they represent the only or a complete definition.

Nasty Prediction on Employment

Most of the commentary on employment has centered around when and at what level unemployment will peak, and how many jobs will be created at what rate during the recovery. I think an even greater concern is the quality and compensation of the new jobs. When I look at (1) educational divergence, (2) skill (or credential)-based wage differentials, (3) the decline of unions, (4) globalization trends in trade, (5) the compensation in the sectors that have lost high-paying no-education-required jobs (e.g., construction and manufacturing), (6) the economic incentives to the application of productivity gains to lowering employment rather than increasing output, and (7) my estimation that any modest recovery in those sectors will be extended past the point that wages will remain sticky, it looks to me like the crisis represents another ratchet downward for the blue collars and IT-outsourceable and lower ranks of the white collar. Political solutions are either long-term and not even begun (e.g., real educational reform that MAY even need to include broadly targeting aspects of our culture and youth culture in particular) or that benefit only favored groups (sector tariffs and subsidies).

Libertarianism

While I didn't respond to a request on Angry Bear on what Libertarians really believe (because I don't do Platonic definitions and was uninterested in the prospect of the usual squabbles over doctrinal purity). it did clarify my thinking. As always, the most important question to ask about a moral system is the ground value. (The question of the genealogy of the morals is important too, of course, but necessarily ancillary). If a Libertarian believes that choice/freedom is important in itself, as a ground value constituting or compatible with a terminal value, that's an implied definition of justice . If a Libertarian believes choice is important because it leads to the greatest sum of human happiness (or some other terminal value), then their attachment is instrumental. if they believe it's both a terminal value in itself and required for some other terminal value, they're probably fooling themselves out of preference for the first.

Late edit: After recently reading a few essays on contemporary professional discussions on ethics and metaethics, I realize I could have used "deontological" and "consequentialist" above. But, ya know, while I appreciate the value of ethos credentialing, not to mention the value of taxonomies in getting papers cranked out, they really don't add anything to the analysis above. Even apart from the jargon obscuring matters for non-philosophers, it tends to drain the discussion of emotional impact and move away from practical choices. Or should that be "praxis?"

Thought on Ted Kennedy

The effusive praise comes from either people who liked his politics or politicians who admired his skill, all public posturing. If character is what you are when no-one is watching - or no-one but your cronies - it's hard to see Edward Kennedy's as anything but a void.

Celebrities. Ah, America - keep patting yourself on the back of being the land of the free and the home of the individual. It's actually true in a way, although not to say it's anything exclusive to America. And not that most American bother with freedom or individuality themselves.

Thoughts on PRC dollar reserves

One macro interpretation the US-PRC trade imbalance has been that the Chinese are simply importing demand to create employment, maintaining reserves in foreign currency/bonds to sterilize the imbalance from a domestic demand perspective. From this perspective, the Chinese might as well shred a certain percentage of their gains and effectively that's what their waiting around for the inevitable (in my view) depreciation of the dollar versus hard assets does. This is apart from the question of the dollar value versus the managed renmimbi or other currencies.

I don't buy it as a long term strategy, but it's clearly a path to short term stability and managed growth, at some opportunity cost. But why perfectly savvy economists seem to think "sunk cost" doesn't also apply to the worth of the Chinese reserves beats me. It's true they would not only be the first but also the last out the door in the event of a run on the dollar (because of their massive reserves would take a long time to unwind), but those dollars can be translated into hard assets now, on a continuing basis.

The other point is that labor-absorbing economic pyramid projects (in the Egyptian sense) are always available to a command economy if you don't care whether your investments stimulate returns (or not for a couple of thousand years). The PRC military could provide this kind of demand.