Home > Uncategorized > Voluntary and involuntary declines in labour supplied. Or: the difference between the Great Depression and the Age of Doris Day.

Voluntary and involuntary declines in labour supplied. Or: the difference between the Great Depression and the Age of Doris Day.

February 7, 2014 Leave a comment Go to comments

In the USA a discussion going on about the pro’s and con’s and the causes and consequences of a voluntary decline of the supply of labour, caused by the introduction of Obamacare. Look here for the somewhat sceptical Tyler Cowen take and here for the more positive Paul Krugman take): should we fret over voluntary declines or over involuntary declines?

In the discussion about this I’m missing a momentous ‘real life experiment’: during the Great Depression, a 23% decline of the number of hours worked in the USA led to large-scale suffering. After WW II, however, a comparable decline did not have such dire consequences and even enabled Americans to adopt a new, more playful lifestyle: ‘The age of Doris Day’. What was the difference between these two periods? Why did an over 20% decline in one period lead to the Great Depression and a comparable decline about one decade later to iconic prosperity?

Doris Day

Source

(A) The War economy was of course very overheated, the decline of hours worked after 1944 was to an extent of course a return to normalcy (i.e. quite a number of women who left the labour force altogether to care for their families, less work on Sundays etc.).

(B) But after the war the average number of hours worked per week also declined with about 10%, compared with the thirties and even more when compared with WW II. Between 1937 and 1929, nothing of the kind happened (based upon Kendrick, Productivity trends in the United States (Princeton 1961) p. 316), who gives data for 1929, 1937 and 1948). This alone makes up for halve the decline in hours worked. Did ‘New Deal’ rules, higher wages and more Union power enable this development? Possibly.

DD2Doris Day as an angry but confident worker in ‘The Pajama game’. Did this musical capture the ‘Zeitgeist’ of this age and was this confidence caused by Union Power and the New Deal?

The point:  involuntary unemployment is assumed away by many economic models using the ‘representative agent’ (who, by design, can only rationally chose to work a little less or a little more). Look here for the New Area Wide Model of the European Union, used by the ECB. Look here for an infamous ‘soup kitchens caused the Great Depression’ article by Prescott, look here for a takedown of that idea. And the stark differences between these two periods are another reminder of the large difference between (the causes and consequences of) voluntary declines in the amount of hours and involuntary declines – i.e. unemployment. And let’s stop talking about ‘involuntary’ unemployment. Unemployment as we measure it is, by definition, involuntary.

  1. Paolo Leon
    February 8, 2014 at 7:12 am
    Reply

    There is no proof that the introduction of the national health service in the UK or in Continental Europe has increased voluntary unemployment. There is confusion between the secular reduction of working hours and the effects of Obamacare. Equilibrium and neo(pseudo)Keynesian models have in mind workers as Oblomov.
    Paolo Leon

  2. Norman L. Roth
    February 8, 2014 at 3:46 pm
    Reply

    Feb. 08, 2014

    The “Gordion Knot” paradigm that explains the root of the “confusion” in Paolo Leon’s #2 above, is the heart & soul of TELOS & TECHNOS. Please refer back to:

    {1} Krugman on Math & Models in Economics, Nov. 23, 2013, Scroll down to #2

    {2} Micro-founded DSGE, Spectacularly Useless, Dec. 21, 2013 by Lars Syll, Scroll to #3

    {3} THE KEYNES SOLUTION, by Paul Davidson, Original Header, Oct. 24, 2009, to # 12,by Norman L. Roth, Oct. 09,2013

    {4} Krugman gets it right on Sticky Wages, by Lars Syll, Oct, 14, 2013. Scroll down to #5 by Helene Clement Pitiot & #2 by Norman L. Roth

    The whole point of Chapter 4 of TELOS & TECHNOS ? “Full employment” is just one of many outcome states [most not even known by kind]: Which are episodic, utopian & quixotic at the best of times, in a modern, complex inter-active quasi-organic economy. Indeed, the very roots of uncertainty lie in the inherent complexity of the authentically dynamic & myriad interactions of the Current Conception of the Standard of Life with Technological TIME.
    From which is derived the concept of the “Natural Participation Rate”. Without which we cannot even begin to grasp how any economy works, much less “control” it by “models” or even the most esoteric manipulations of Money supply, interest rates, and confiscatory tax structures. Unless we accept the imposition of totalitarian “planning” diktats, Wherein economic life is treated as a closed loop control technology which can be controlled like a navigational system : And the desired outcomes are likewise dictated by characters out of George Orwell.
    This is the basic trade-off & dilemma of reasonably free [not laissez-faire-utopian] economic life. It’s best expressed by paraphrasing Will & Ariel Durant, 1944.
    “When [the abuse of] freedom destroys order, then [the hunger for] order destroys freedom”. Thank you one & all for your patience.
    Norman L. Roth, Toronto, Canada

    Please GOOGLE: [1] Economics of Technos, Norman Roth {2} Norman Roth, Economics of Technology [3] Origins of Markets, Norman Roth [4] Norman Roth, A New Economic Paradigm

  3. Wendy Olsen (@Sandhyamma)
    January 1, 2015 at 12:01 pm
    Reply

    Hi thanks, but it’s not so simple to say that all unempoyment is involuntary. Of course as you havemeasured it, that is true. But think about it as a realist would think about it. Unemployment is a real condition of not wanting to be labour-market inactive. Many poeple are in this condition but do not register as unemployed. Your measure is therefore underestaimting the real thing. Please consider this and then rewrite the whole essay. It’s not that unemployment is unmeasurable, or unobservable, but the error of our measures may vary over time and by groups in ways we need to know about.

    That is why economists need to do more qualitative resaerch and read more sociology.

    There is plenty of survey data about women wanting more working hours when they are inactive. There is also data showing both men and women, who work fulltime, wanting fewer hours. Therefore you could explore your topic empirically. I’m working on it too.

    Wendy Olsen

    • Paolo Leon
      January 2, 2015 at 3:01 pm
      Reply

      so, unemployment may not even exist and involuntary unemployment may be voluntary. A crisis is a boom, for someone, and viceversa in a boom. Nice help for policy makers.
      Paolo Leon

      • davetaylor1
        January 3, 2015 at 10:44 am

        You don’t need policy makers if everything is cut and dried; all you need is a computer program. That is too easy both for idle economists and bent politicians. What Wendy is saying as a realist is quite right, but the moral is that policy should not be made but advised and policy advisors should “do more qualitiative research” in order to be able to advise on each type of case on its merits, i.e. in context.

  4. Norman L. Roth
    January 2, 2015 at 3:42 pm
    Reply

    Jan. 02, 2015,

    Dear Mme. Olsen,
    Thank you for your interest in my article of Feb. 08, 2014. In order to introduce you and your organization to this key problem, that mixes so much human agony with an equal amount of perplexity & cul-de-sac speculation, I highly recommend the following:
    {1} The Keynes Solution in RWER. Scroll down to August 09 2013, by Norman L. Roth

    {2} MIT TECHNOLOGY REVIEW, August 2013, Volume 116, No. 4. Page 28, “How Technology is Destroying Jobs.” This well researched article is not a neo-Luddite rant. Nor an example of open ended social indignation.

    {3} TELOS & TECHNOS, The Teleology of Economic Activity and the Origins of Markets by Norman L. Roth. Especially Chapters three and four.

    I recall attending a lecture by Ivan Illitch [A key mentor of your organization ? ] circa 1972, when I worked for the City of Toronto Planning Board. He seemed very articulate & urbane, [in a “continental” way] at that time. And receptive to his audience. But after so many years I don’t recall his message. TELOS & TECHNOS requires a full course of lectures & additional updated material . I also have a number of copies available to send out to interested parties as preparation for understanding the “paradigm that dare not speak its name”.
    Happy New Year, for 2015.
    Norman L. Roth, Toronto, Canada

    Please GOOGLE: {1} Economics of Technos , Roth

    {2} Norman Roth, Origins of Markets {3} telos & technos [4] Norman L. Roth, RWER

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