Home > Uncategorized > Timo Boppart and Per Krusell are wrong: involuntary unemployment exists and does matter

Timo Boppart and Per Krusell are wrong: involuntary unemployment exists and does matter

New Deal
Timo Boppart and Per Krusell have written an interesting but flawed article about the long run decline in the average hours worked. As they do not account for changes in involuntary unemployment and do not even seem to know the concept they are led to an understanding of their (interesting!) data which is at odds with reality (look here for my proposal to incorporate flow data on unemployment into the operationalisation of the concept). In many countries the long run decline in average hours worked is not just due to voluntary decisions about labour supply by households but also by, compared with the period up to 1973, large and lasting increases in the level of (involuntary) unemployment. In many countries this level went up from, say, 2% in the sixties to levels of 8, 10, 15, 20 and 25% and over today, not even counting ‘broad’ unemployment. I’ve published some data here. Large voluntary declines of unemployment exist. But large involuntary declines also exist. It is totally ridiculous to state that the decline in average hours worked in the USA in the thirties (their graph 4 above) was a technology induced voluntary choice for leisure. See my article ‘neoclassical modelling as a strategy to unsee involuntary unemployment‘. And about the unfounded nonsense Robert Lucas states about ‘involuntary unemployment’ my ‘models and measurement in economics‘.  It is also quite unsettling that they do not seem to understand that the decline of average hours in Germany after 1990 was due to Über-unemployment in East-Germany and not to any kind of voluntary decline while they also miss out on the recent increase in average hours worked (below, their graph 3a). And fail to mention the effect of French ‘shorter workweek’ government policies on average hours in France – same development in average hours but with a totally different cause and totally different consequences for prosperity and family life. Which means that their conclusions (average hours worked will fall in the future, too, because of choices made by households which will increase prosperity) might as well be flawed. We might wel need a New New Deal to enable this. At this moment, however, government policies are only aimed at increasing hours, especially for the 60+ generations.
Germany

 

  1. May 22, 2016 at 10:45 pm

    Also, they leave out the problem of involuntary unemployment due to the fact that some people don’t want to work certain jobs. (In my area where there is alot unemployment when the government and devlopers come in to say we will create you jobs—eg minimum wage at Walmart retail stores, or selling beer and popcorn at a new foootball stadium—people say they’d rather stay unemployed and or in the undegropund economy. Also even if people can get a well paid job in a field they studied for, sometiems they dont want or take it because it is for some corporation doing work in fianance (eg predatory lending or tax offshoring) , fossil fules or mining in wilderness areas, reactionary media, or other area they disagree with.

    The usual view is people who dont take jobs they are offered or are avalable )including military service) are lazy or irresponsbile but also they can at times be viewed as work resistors. In this society, typically, people who do get a job which is in accord with their skill set, of interest, and compatible with their values often have to spend time working jobs which aren’t. I’ve known people involved in creating suburban sprawl and gentrification (ie making inner cities nice places to live but unaffordable for the people who they evicted from property they aquired) who went on to fund affordable housing using some of their money. H Paulson (some presidential appointee possibly in some economics position) made 4 billion $ on wall street, and says he”s gradually donating all of it to environmental causes.

    The ‘work ethic’ is very much promoted, and not uncommonly to a fairly good life even in some job which may not be well paid or prestigious. Happy cab drivers and waiters exist.
    Some people don’t care who they work for or what they do (some poor people in my area will happily evict their neighbors for the landlord who employs them). Others do care—often ‘straving artist or inellctual types, or political activists. Also, they in a sense do not see themselves as unemployed — just unpaid. The author of Harry potter was unemplyed when she wrote that book, and sold it so she became a millionaire. Some people create art, science, or do activism when unpaid, and these later turn out to be very valuable and productive uses of time in retrospect which prove profitable for others. While this unpaid work or ‘labir of love’ is being done, people doing it often are viewed as social problems mentally ill, and trouble makers. (People doing ‘real hard work’ like , say, George Bush, or some tight weing talk show host, are seen as admirable , responsible and productive.)

  2. Norman L. Roth
    May 23, 2016 at 12:38 am

    May 22, 2016

    I don’t understand how anybody can possibly believe in the falsehood that “large voluntary declines in employment” are on a par with the more than 200 year historical record of mass cyclical involuntary declines in employment. It’s a classic example of academic dancing around the pin of a needle. It has a curios resemblance to Milton Friedman’s curious idea of “the natural rate of unemployment”. For a thumbnail sketch of a falsifiable paradigm that puts such nonsense in its place, Please reference:

    THE KEYNES SOLUTION, Oct. 24, 2009

    Scroll down to {1}July 23, 2013 and {2} August 09, 2013, by Norman L. Roth

  3. May 23, 2016 at 3:07 am

    The idea is that by strictly keeping work and pleasure apart, both ranges of activity will benefit: no instinctual aberrations will interfere with seriousness of rational behavior, no signs of
    seriousness and responsibility will cast their shadow over the fun. Obviously this advice is somehow derived from social organization which affects the individual in as much as his life
    falls into two sections, one where he functions as a producer and one where he functions as a consumer. It is as though the basic dichotomy of the economic life process of society were projected upon the individual. Psychologically, the compulsive connotations based on a puritan outlook can hardly be overlooked: not only with regard to the bi-phasic pattern of life as a whole but also to notions such as cleanliness: neither of the two spheres must be contaminated by the other. While the advice may offer advantages in terms of economic rationalization, its intrinsic merits are of a dubious nature. Work completely severed from the element of playfulness becomes drab and monotonous, a tendency which is consummated by the complete quantification of industrial work. Pleasure when equally isolated from the “serious” content of life, becomes silly, meaningless and sheer “entertainment” and ultimately it is a mere means of reproducing one’s working capacity, whereas the real substance of any non-utilitarian activity lies in the way it faces and sublimates reality problems: res severa verum gaudium.

    The complete severance of work and play as an attitudinal pattern of the total personality may justly be called a process of disintegration strangely concomitant with the integration of
    utilitarian operations for the sake of which this dichotomy has been introduced.
    ~~Theodor Adorno, “Work and Pleasure”

    Or if you’re not a long-winded but brilliant German philosopher the message is work and play are interrelated and there must be balance between them. One of the main negative results of capitalism is the destruction of this balance.

  4. Norman L. Roth
    May 23, 2016 at 4:27 pm

    May 23, 2016

    For more clarification on this issue, along the same “vector” as Mme. Merign Knibbe’s well thought out article, I suggest the following references within RWER:

    Go to VOLUNTARY and INVOLUNTARY DECLINES in LABOUR SUPPLIED: Or the difference between the Great Depression and the age of Doris Day.. Also by Mme. Knibbe,
    Feb. 07, 2014. Scroll down to Feb. 08, 2014 by Norman L. Roth.

    Also reference Jan. 02, 2015 as well.

    Norman L. Roth, Toronto, Canada

  5. May 24, 2016 at 8:44 am

    Voluntary versus involuntary unemployment is a false dichotomy. The implication is that if “involuntary employment” is zero, then the state has nothing more to add and we should let the free market deal with things.

    If a semiconductor engineer loses his job and becomes a waiter for a while, then from an ivory tower perspective, he’s employed. From a real world perspective, he is far closer to unemployed than employed. Similarly, two employees could have similar skill sets in a high tech firm, but one could have an advantage gleaned somewhere that the other lacks. Whatever can be done to make the second employee more efficient, whether it is a better college education, close access to a related industry that was brought in via industrial policy, etc., will necessarily improve employment, and a big factor that often gets left out of the mix is simply ensuring that a balanced level of spending dollars are available to create demand for the best producers. Think of the waiter who could handle 20 tables in an evening but only gets 5.

    The critical measurement is, “How close are we to the production possibilities frontier?”, not “Is some arbitrary division between effectiveness and ineffectiveness close to 4%?”. The further right your society leans, the further the society is from the possibilities curve. In one of the most spectacular examples of proof by assumption, the neoliberal community seems to have started with the assumption that we live on the production possibilities frontier and then, dozens of scrawled equations later, they have “proven” that inequality (the biggest reason for falling short of the production frontier) doesn’t matter for overall growth rate and economic health. Then they make the faux rational choice apology (because man isn’t quite rational, we don’t know exactly *which* spot on the production possibilities frontier we will end up on.)

    The article above makes some great criticisms of the neoliberal understanding, but if the economic community merely tries to capture the additional possible production capability of the bottom 10% of workers by decreasing unemployment, then it attempts far too little. The primary driver of growth lies in the efficiency of the *top* 10% of workers, which in turn depends far more on the consumption capabilities of the bottom 10% then on the bottom 10%’s production capabilities. The correct measure of production efficiency will be an inner product rather than a simple cutoff like is used today. At best unemployment is a marker, and it’s a poor one at that. We need to challenge the neoliberal argument, not just in the facts and examples they choose, but also in the very ground they choose to settle on to square off with their arguments.

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