07 December 2016

A Man of Subsistence

Since the beginning of time, well Adam Smith (the real one) at least, economics has been characterized as studying the interplay among three high level inputs to production: land, labour, and capital. Until the industrial revolution, landowners held sway. Subsequently, both capitalists and their puppet economists agreed that they were the chosen people.

So, let me start with an anecdote. Here on the hill is a sorta, kinda commune. The houses came down through the wife's family, which now consists of two sisters and a brother (who lives elsewhere), two cats, two dogs (Lhasa and Jack Russell-ish), and humble self. Recently, since both dogs are getting up there in dog years, I suggested we get a third, so that when the first of the pair succumbs to whatever ails it, the survivor will still have a companion. Made sense, to me anyway. The wife demurred, saying that two would gang up on the third; not necessarily the newcomer.

I found that amusing, since she and her sister have done that to moi. She didn't notice the irony, of course. They're BAPs, so they deserve a servant.

Which brings us to The Donald and Carrier (Pence's Indiana is actually paying for it!) and Boeing and such. It has been an article of faith, codified by that Pareto guy, that labour will always, under any economic regime, be reduced to subsistence wages in deference to the needs of landowners and capitalists. Pareto, in particular, used data going back centuries to make his point. Marx, not Groucho, demurred.

On the other hand, we have this observation, of more recent vintage (yes, it's part of the preamble to one version of these endeavors):
As mass production has to be accompanied by mass consumption; mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery.
-- Marriner Eccles (mid 1930s FDR advisor)

Take Smith and Eccles, toss in a blender, and what sort of smoothie do you get? What we get is the distribution problem writ bold: as automation decreases the number of labour hours in the production of widgets, we have a demand problem. The lunatic right wing continues to demand yet more supply side support for capital, but the fact remains true; corporations and the 1% sit on trillions of $$$ of idle cash. That cash, to the extent it is used at all, is spent chasing Treasuries down to 1.5% return and M&A and share buybacks. None of those uses has any growth, at the macro level, component. It's all just moving money from the many to the few, who just sit on it as they do today. And, if the spend it all, they still chase Treasuries being the scaredy cats they truly are.

What you get, if an improving macro-economy is the goal, is a revised definition of "subsistence". In the middle ages through the end of the 19th century, subsistence meant just the other triad of economics: food, clothing, and shelter. Labour's only purpose was to reproduce in sufficient numbers to supply effort making the stuff for the elite, whether regal or commercial. Today's lunatic right still thinks in those terms, despite the obvious fact that production today is utterly different from as late as 1900. Eccles understood that. The Donald and his entourage don't. In particular, they are wilfully ignorant of the fact that the 1% have really good healthcare because the employer paid health benefits originating during WWII (and damn gummint support for R&D) are what paid for it all. If only the 1% can pay for healthcare as just another consumer discretionary spend, in a short time even they'll have 1920s variety healthcare.
It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.
-- Mark Twain

05 December 2016

Pareto Failure, part the second

Well, well. Some, but not the true believers I'd expect, Trumpistas have discovered the issue with Pareto Optimal. Or, as I prefer, Pareto Fail. We have this article today, with some really scrumptious quotes.

Just to recap. Pareto was, sorta kinda, an economist of the Italian variety. Just as Mussolini began to drag the country into the mire. The signal example of his Optimal: given a pie and three people, where the status quo is that two divide the pie half-and-half, any attempt to re-distribute any part of the pie to the third people results in lowered utility. This assumes, of course, that the loss of utility by the pair exceeds the gain in utility by the singlet. And that assumption is based on further assumptions about utility curves and the like. Read up George Stiglitz (here's a start) for details.

So, what's the signal quote?
"Cutting taxes for shareholders will destroy more factories than whatever he saves by jawboning companies from the bully pulpit," Mr. Konczal said. And incentives like the ones Carrier received only forestall the inevitable shift by multinational giants to low-cost locales like Mexico and Asia. "They will just go later after pocketing some money," Mr. Konczal said.

As they always do. Just look at professional sports teams and their publicly paid for arenas. Welfare for billionaires.

Or this:
"The dry statistics on trade aren't working to counter Trump," Timothy A. Duy, an economics professor at the University of Oregon, said in a blog post on Sunday. "The aggregate gains are irrelevant to someone suffering a personal loss. Critics need to find an effective response to Trump. I don't think we have it yet."

That's just saying "Pareto fails". It also obliquely raises the key point to all this: if moving 1,000 jobs to Mexico, or wherever, at a loss of, say, $30,000/job/annum leads to a $10/unit decline in the price of 1,000,000 unit/annum widget, what's best? With a long enough time horizon, the winners (all those buying the widget) could, through force of law, compensate the losers. The fact that the Carrier jobs weren't in support of consumer goods, but rather commercial ones, makes the compensation process either easier or harder, depending on the mechanism.

Pareto fails just because it is amoral. And it is commonly used to justify supply side voodoo economic tactics. Clowns are con men, and I hate clowns.

02 December 2016

The Scariest Sentence You'll Ever Read

Today, states containing just 17 percent of the American population, a historic low, can theoretically elect a Senate majority
-- Emily Badger/2016

Thought For The Day - 2 December 2016

Unemployment rate: 4.6% vs. 4.9% consensus, 4.9% previous.
178,000 additional jobs.


"Yo, Donald!! You'd best not fuck up an economy that's working just fine in order to make rich folks richer and poor folks sicker and poorer. You do dat, and I'll whoop your fat ass to Selma and back."


24 November 2016

Thought For The Day - 24 November 2016 (it's a Turkey) [update]

Well, it is Thanksgiving (at least, in the USofA), so there should be something to be thankful for. One would think so? Here's some musings on The Donald's announced appointments.

Atty. General, Jeff Sessions: will bring white supremacy to a head, by actually implementing voter suppression, as he did while Alabama AG.

HUD, Ben Carson: will implement a voucher-only housing support program, which will enable slum lords across this great land to be even richer; mortality and morbidity of residents will soar as maintenance of buildings will be optional under the now Rand based HUD, thus eliminating the less desirables (not to say, deplorables) from the population. One might call it the Carson Plague.

Education, Betsy DeVos: the Scamway of teaching will be the way of the future. The Bible thumping, snake handling, incestuous states will be encouraged to teach "traditional subjects" such as the earth is 6,000 years old, people froliced with dinosaurs, and the Bible is the only history book in use. Science will be deemed anti-American, and only white wives with at least three children will be certified as teachers.

UN, Nikki Haley: since she speaks in tongues, will be able to communicate with all members of the body without need of simultaneous translation.

Chief of Staff, Reince Priebus: cat's paw for Bannon (see below).

Chief Counsel, Steve Bannon: the really nice, smart guy that The Donald greatly admires. His white supremacist Breitbart doesn't really represent The Donald's view of the country. Will be in charge of building, staffing, and filling the rural re-education camps for all urbanites with IQ above 100, documented Democratic voting, multi-cultural thought patterns, and lacking family Bible handed down at least four generations.

Be thankful for a real, great America of the future.

[update 1:38 pm EST]
Just tuned into the Vikings/Lions game, and saw this ad. Cook has sent a shot across The Donald's bow. I'd bet on Tiny Tim.

21 November 2016

Thought For the Day - 21 November 2016

Those following Mr. Market have seen the argument about whether twitter's worth its share price, who might buy it, and how soon it goes the way of My Space. It occurs to me that The Donald's use of twitter as his propaganda vehicle will be its salvation. Technology to the rescue. I guess.

Red River Valley

As chronicled here for some time, well, once more. The divide here in the USofA has been urban/rural from the time of the Constitution's construction. It's only in the last few decades, from when Nixon instituted the Southern Strategy, the divide became Red State, Blue State. But that just confuses the issue. As mentioned here before, there are few, if any, homogeneous Red states; even Red states have Blue cities.

Here's a lengthy piece, with many on-point quotes, that describes the situation.
In 1920, for the first time, the Census Bureau counted more people living in urbanized America than in the countryside. This hasn't been a rural nation ever since.
and this
The Electoral College is just one example of how an increasingly urban country has inherited the political structures of a rural past. Today, states containing just 17 percent of the American population, a historic low, can theoretically elect a Senate majority.

Not to mention that the Red state whiners consistently are net moochers on the Federal purse:

Red states are twice as dependent on the Damn Gummint than the Blue States. Of course.

The only near term solution is the 270 state compact. I suspect that a Roberts' court will declare it unconstitutional, since it evades one interpretation of the state/Senate sovereignty clause. Hopefully, we get to find out.