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Friday, January 16, 2015
Mike Whitney — 40 Years of Economic Policy in One Chart
The chart shows average worker productivity accross the population.
It includes of course rentiers like Warren Buffet, but also Surgeons and Physicians, Mark Zuckerburg type capitalists, Government employees and other highly productive people.
The average hourly worker is the other line shown on the chart, it doesn't include the people listed above. The remainder doesn't produce much, their productivity didn't increase. They clip your hair. They mow your lawn. They wipe your ass when you get old. They teach your kids from a scripted curriculum. They pick your organic tomatoes, They operate the cash register and make your cup of coffee. They sell you your house and make loans to you. They stamp documents with "Professional Engineer" and the like. They do these things not because they aren't capable of producing more but because those are the types of jobs in the country and available.
If they don't want to serve you, they need to pull themselves up by their bootstraps and do something innovative and productive. They could move themselves to cities where productive things happen. As an alternative they could go to school and learn how to serve you in a way that adds more value.
But there is moral hazard here, and voters hate moral hazard. They want strong incentives to promote prosocial behavior and discourage free riding.
" The remainder doesn't produce much, their productivity didn't increase.
Thats simply ridiculous
"They mow your lawn."
Because 48 inch zero-turn mowers and modern line trimmers and blowers dont allow crews to do twice as many lawns in a day, this just shows your ideological bias and ignorance of the field.
"They teach your kids from a scripted curriculum."
Right, because the information in the textbooks and the way digital material is used to supplement learning havent improved education at all in America. All our bad education numbers come from poor areas where they dont have these benefits. Education is much better off today than 40 years ago simply because we know more.
The bootstrap comment is so stupid. By definition everyone cant be better than average. It doesnt mean that the below average people should suffer in poverty or that helping people at the bottom is a moral hazard. Thats just the conservative sickness in you.
-Union membership has dropped dramatically in the 40 year span.
-Open border, Chamber of Commerce driven immigration policy, allowing for tens of millions of low skilled workers to flood the country, has certainly driven down labors share of productivity gains. This goes hand in hand with the demise of unions.
-Globalization's so called free trade miracle has American workers competing with workers who get pennies on the dollar.
Absent a strong labor movement I fail to see how labors share in productivity gains can be realized. Contrary to what some might think, running large deficits certainly won't do the trick.
The bootstrap comment is so stupid. By definition everyone cant be better than average. It doesn't mean that the below average people should suffer in poverty or that helping people at the bottom is a moral hazard.
What is so difficult to understand about this? Half the population is going to be "below average" as a logical/mathematical necessity.
Economic liberalism is geared to over-compensate the top "as an incentive" that "lifts all boats." This is the essence of trickle down.
The logic is to establish flow upward so there will be at least some flow downwards. So the society is geared institutionally to direct flow upward.
But without institutional provision, experience shows that markets do not themselves direct flow downward and many people get left out of "progress" measured statistically when distribution is ignored, as it is in neoclassical economics and neoliberal politics.
This falsifies the logic of the argument and turns it into rhetoric promoting the interests of the ruling cohorts.
I should qualify the above with the observation that the "middle class" is comprises the three middle quintiles. Those in the upper of the three are upper middle class and those in the lower of the three are lower middle class. Those in the upper quintile are the rich. Those in the lower quintile are the poor.
The paramount social and political issue concerns the poor, since they as a group have "special needs." This is a knotty issue that can't be addressed by throwing money at it. Many of these people are in families that are stuck at the bottom inter-generationally. Others have mental or physical issues, including substance abuse. It's easy to blame them for their predicament at the micro level, but that doesn’t solve the macro issue.
Some of the issues involving the middle can be addressed through education, but probably improving labor share, for example, through labor bargaining power, is the faster way to approach it.
The important divides in the country are socio-economic divides and not philosophical dispositions. Threatening the framing and rhetoric of partisans who try to divide based on conservative, liberal human dispositions or their preference for liberty vs authority is key to destroying the political system that oppresses the poor. The sense of entitlement that people feel they have in the system from their wealth and education melt away when you show no regard for their framing and ideology.
The bottom line message, that people need to understand is that, we want your money and your power and we don't care about your ideas or what you think about us. It's chilling and should be frightening for those in political parties as they exist today.
50% of the population is above and below the median. 50% of the population is not above and below the average because income distribution isn't normal. The average is skewed toward the top with very few, very rich that are "productive" beyond any reason, in the top and the vast, vast majority below the average. In other words the median productivity of workers is far lower than average productivity. If Economic models were to be believed the marginal productivity gain of adding a CEO to a S&P 500 company is thousands of times greater than non-executive employees. Good CEOs are a dime a dozen. China and Europe have them in spades for fractions of the cost, we can import as many as we need.
The only way "it" can be fixed is through "unfair" wages where professionals and the rich are put at a disadvantage. There is no reason a doctor or corporate lawyer, CEO, Washington bureaucrat or sports star on average need to earn 100x-1000x as much as a clerk at Kroger or Walmart or Safeway. The reason it happens has nothing to do with market forces but with ideology, beliefs and regulatory monopolies from capture of government. I say purge the ideology and belief systems and free yourself from the shackles and demand what is yours. The economy can't operate without the masses, what are the academics and wealthy going to do, create a mass immigration to replace us? Hardly.
I say purge the ideology and belief systems and free yourself from the shackles and demand what is yours.
They will tell you that you are also being ideological (and you are after all) and your point is not more valid (and objectively they are right, but you can disagree about what social principles will drive progress and prosperity faster of both).
Look, 2k years ago slavery was something considered normal and all the economic order was sorted around it. Even if it was the norm it was driven by ideology, an ideology which was based on primary instincts. The current wage-slavery and income distribution problems have the same problem.
We are just monkeys that have a bit more elaborate language and cognitive structures, sad but true.
Sentient beings are not independent observers of objective reality but rather see through the lens of the nervous system in terms of its collection and processing of data. Insofar as humans are hardwired the same way genetically as a species, their collection and processing of data is similar as member of the species.
However, using the cybernetic model, sentient beings are comprised not only of hardware but software.
Humans don't arrive in this world with either an operating system or an operating manual, let alone specific applications. These are all acquired in the learning process, first through imprinting, which lays down a basic operating system that persists throughout life and is difficult to alter. This is the basis for both individual and social biases.
Individuals also have unique characteristics, such as disposition and temperament, that make even family members different and unique, and seem to be natural rather than acquired. How this happens is not yet understood scientifically. (The doctrine of karma addresses this in terms of past impressions.)
Humans also acquire language and with it meaning in a specific context of geography and culture. Language learning imparts an individual's worldview that is shared with the group and provides fundamental criteria and norms.
Overlaid on this are the specific "applications" that an individual acquires in the course of experience, training and education that enable individuals to deal with specific types of information.
In addition, much of the software that individuals acquire is created and organized by others for a variety of reasons, often involving biases and many of these biases are based on interest.
Powerful institutions have been developed to transmit and shape this information processing system and the information itself within the context of a culture and its subcultures. This gives biases social and historical foundations.
All of this amounts to significant cognitive-volitional-affective-behavioral bias that is reflected in both individual lives and collectively in culture and institutional arrangements.
Since individuals, groups and societies are complex open systems, they can and do change but only within the boundaries that have previously been established. Most change either doesn't affect those boundaries or only alters them minimally.
It is also possible to reflect on and question the boundary conditions as a whole, even though it is not possible to know all of them. It is even possible to change boundaries in major ways, as history goes to show. But nature does not make jumps and the process is path dependent, so the path also comes along to some degree through hysteresis, even with the most drastic change. Individual habits and social conventions are persistent.
On one hand, this is a dialectical process that is driven systemically and on the other hand, human affairs are directed by the choices made by individuals. However, choices are not completely rational, since cognitive science reveals that reason and feeling are bound together inextricably in brain functioning.
Many see the the present as a period in which the old order is breaking down, and a new order has not yet been born. A number of factors are involved, chiefly technological innovation and globalization, that are leading to shifts in the collective consciousness of the species and making humans more species-aware, that is, increasing their appreciation of universality. This is "spiritual" progress in a humanistic sense.
It is possible for individuals and groups to influence the direction of change by influencing the collective consciousness. In fact, the buzz work of the day seems to be "influencers." So what is emerging is a jockeying for power among different interests. This power involves being able to affect the worldview of others with respect to norms and criteria, and thereby the lens of ideology and valuation based on it.
Right. It's key and it dovetails into what Roger has been saying about how evolutionary development occurs in complex systems.
The scientific method was developed as a filter to separate the flood of ideas from the ones that were useful and those that actually correspond with reality empirically.
Rigid ideologies that generally favor vested interest oppose this pragmatic and objective approach. It's basically dogmatism versus the scientific approach, and conventional economics has succeeded religion as the chief dogma socially, politically and economically. The persistence of dogmatism is based on power and the perpetuation of ignorance.
Reality is the great teacher that tests ideas and behavior. Dogmatisms are eventually swept aside by the course of evolutionary development, either by endogenous forces for change or exogenous or natural shifts, such as conquests and natural disasters.
This article should go with Whitney's chart:
ReplyDeleteHow Reaganomics Started With Carter
Right. Carter began the trend that is still running. It's bipartisan.
ReplyDeleteThe chart shows average worker productivity accross the population.
ReplyDeleteIt includes of course rentiers like Warren Buffet, but also Surgeons and Physicians, Mark Zuckerburg type capitalists, Government employees and other highly productive people.
The average hourly worker is the other line shown on the chart, it doesn't include the people listed above. The remainder doesn't produce much, their productivity didn't increase. They clip your hair. They mow your lawn. They wipe your ass when you get old. They teach your kids from a scripted curriculum. They pick your organic tomatoes, They operate the cash register and make your cup of coffee. They sell you your house and make loans to you. They stamp documents with "Professional Engineer" and the like. They do these things not because they aren't capable of producing more but because those are the types of jobs in the country and available.
If they don't want to serve you, they need to pull themselves up by their bootstraps and do something innovative and productive. They could move themselves to cities where productive things happen. As an alternative they could go to school and learn how to serve you in a way that adds more value.
But there is moral hazard here, and voters hate moral hazard. They want strong incentives to promote prosocial behavior and discourage free riding.
Ryan-
ReplyDelete" The remainder doesn't produce much, their productivity didn't increase.
Thats simply ridiculous
"They mow your lawn."
Because 48 inch zero-turn mowers and modern line trimmers and blowers dont allow crews to do twice as many lawns in a day, this just shows your ideological bias and ignorance of the field.
"They teach your kids from a scripted curriculum."
Right, because the information in the textbooks and the way digital material is used to supplement learning havent improved education at all in America. All our bad education numbers come from poor areas where they dont have these benefits. Education is much better off today than 40 years ago simply because we know more.
The bootstrap comment is so stupid. By definition everyone cant be better than average. It doesnt mean that the below average people should suffer in poverty or that helping people at the bottom is a moral hazard. Thats just the conservative sickness in you.
This comment has been removed by the author.
ReplyDelete-Union membership has dropped dramatically in the 40 year span.
ReplyDelete-Open border, Chamber of Commerce driven immigration policy, allowing for tens of millions of low skilled workers to flood the country, has certainly driven down labors share of productivity gains. This goes hand in hand with the demise of unions.
-Globalization's so called free trade miracle has American workers competing with workers who get pennies on the dollar.
Absent a strong labor movement I fail to see how labors share in productivity gains can be realized. Contrary to what some might think, running large deficits certainly won't do the trick.
This comment has been removed by the author.
ReplyDeleteThe bootstrap comment is so stupid. By definition everyone cant be better than average. It doesn't mean that the below average people should suffer in poverty or that helping people at the bottom is a moral hazard.
ReplyDeleteWhat is so difficult to understand about this? Half the population is going to be "below average" as a logical/mathematical necessity.
Economic liberalism is geared to over-compensate the top "as an incentive" that "lifts all boats." This is the essence of trickle down.
The logic is to establish flow upward so there will be at least some flow downwards. So the society is geared institutionally to direct flow upward.
But without institutional provision, experience shows that markets do not themselves direct flow downward and many people get left out of "progress" measured statistically when distribution is ignored, as it is in neoclassical economics and neoliberal politics.
This falsifies the logic of the argument and turns it into rhetoric promoting the interests of the ruling cohorts.
I should qualify the above with the observation that the "middle class" is comprises the three middle quintiles. Those in the upper of the three are upper middle class and those in the lower of the three are lower middle class. Those in the upper quintile are the rich. Those in the lower quintile are the poor.
ReplyDeleteThe paramount social and political issue concerns the poor, since they as a group have "special needs." This is a knotty issue that can't be addressed by throwing money at it. Many of these people are in families that are stuck at the bottom inter-generationally. Others have mental or physical issues, including substance abuse. It's easy to blame them for their predicament at the micro level, but that doesn’t solve the macro issue.
Some of the issues involving the middle can be addressed through education, but probably improving labor share, for example, through labor bargaining power, is the faster way to approach it.
This comment has been removed by the author.
ReplyDeleteThe important divides in the country are socio-economic divides and not philosophical dispositions. Threatening the framing and rhetoric of partisans who try to divide based on conservative, liberal human dispositions or their preference for liberty vs authority is key to destroying the political system that oppresses the poor. The sense of entitlement that people feel they have in the system from their wealth and education melt away when you show no regard for their framing and ideology.
ReplyDeleteThe bottom line message, that people need to understand is that, we want your money and your power and we don't care about your ideas or what you think about us. It's chilling and should be frightening for those in political parties as they exist today.
Message is we want a bigger part of your profits and since you won't accept this willingly, we'll have to use force.
ReplyDeleteThe wage contract, in conjunction with an oversupply of labour, produces graphs like this.
50% of the population is above and below the median. 50% of the population is not above and below the average because income distribution isn't normal. The average is skewed toward the top with very few, very rich that are "productive" beyond any reason, in the top and the vast, vast majority below the average. In other words the median productivity of workers is far lower than average productivity. If Economic models were to be believed the marginal productivity gain of adding a CEO to a S&P 500 company is thousands of times greater than non-executive employees. Good CEOs are a dime a dozen. China and Europe have them in spades for fractions of the cost, we can import as many as we need.
ReplyDeleteThe only way "it" can be fixed is through "unfair" wages where professionals and the rich are put at a disadvantage. There is no reason a doctor or corporate lawyer, CEO, Washington bureaucrat or sports star on average need to earn 100x-1000x as much as a clerk at Kroger or Walmart or Safeway. The reason it happens has nothing to do with market forces but with ideology, beliefs and regulatory monopolies from capture of government. I say purge the ideology and belief systems and free yourself from the shackles and demand what is yours. The economy can't operate without the masses, what are the academics and wealthy going to do, create a mass immigration to replace us? Hardly.
I say purge the ideology and belief systems and free yourself from the shackles and demand what is yours.
ReplyDeleteThey will tell you that you are also being ideological (and you are after all) and your point is not more valid (and objectively they are right, but you can disagree about what social principles will drive progress and prosperity faster of both).
Look, 2k years ago slavery was something considered normal and all the economic order was sorted around it. Even if it was the norm it was driven by ideology, an ideology which was based on primary instincts. The current wage-slavery and income distribution problems have the same problem.
We are just monkeys that have a bit more elaborate language and cognitive structures, sad but true.
Sentient beings are not independent observers of objective reality but rather see through the lens of the nervous system in terms of its collection and processing of data. Insofar as humans are hardwired the same way genetically as a species, their collection and processing of data is similar as member of the species.
ReplyDeleteHowever, using the cybernetic model, sentient beings are comprised not only of hardware but software.
Humans don't arrive in this world with either an operating system or an operating manual, let alone specific applications. These are all acquired in the learning process, first through imprinting, which lays down a basic operating system that persists throughout life and is difficult to alter. This is the basis for both individual and social biases.
Individuals also have unique characteristics, such as disposition and temperament, that make even family members different and unique, and seem to be natural rather than acquired. How this happens is not yet understood scientifically. (The doctrine of karma addresses this in terms of past impressions.)
Humans also acquire language and with it meaning in a specific context of geography and culture. Language learning imparts an individual's worldview that is shared with the group and provides fundamental criteria and norms.
Overlaid on this are the specific "applications" that an individual acquires in the course of experience, training and education that enable individuals to deal with specific types of information.
In addition, much of the software that individuals acquire is created and organized by others for a variety of reasons, often involving biases and many of these biases are based on interest.
Powerful institutions have been developed to transmit and shape this information processing system and the information itself within the context of a culture and its subcultures. This gives biases social and historical foundations.
All of this amounts to significant cognitive-volitional-affective-behavioral bias that is reflected in both individual lives and collectively in culture and institutional arrangements.
Since individuals, groups and societies are complex open systems, they can and do change but only within the boundaries that have previously been established. Most change either doesn't affect those boundaries or only alters them minimally.
It is also possible to reflect on and question the boundary conditions as a whole, even though it is not possible to know all of them. It is even possible to change boundaries in major ways, as history goes to show. But nature does not make jumps and the process is path dependent, so the path also comes along to some degree through hysteresis, even with the most drastic change. Individual habits and social conventions are persistent.
On one hand, this is a dialectical process that is driven systemically and on the other hand, human affairs are directed by the choices made by individuals. However, choices are not completely rational, since cognitive science reveals that reason and feeling are bound together inextricably in brain functioning.
Many see the the present as a period in which the old order is breaking down, and a new order has not yet been born. A number of factors are involved, chiefly technological innovation and globalization, that are leading to shifts in the collective consciousness of the species and making humans more species-aware, that is, increasing their appreciation of universality. This is "spiritual" progress in a humanistic sense.
It is possible for individuals and groups to influence the direction of change by influencing the collective consciousness. In fact, the buzz work of the day seems to be "influencers." So what is emerging is a jockeying for power among different interests. This power involves being able to affect the worldview of others with respect to norms and criteria, and thereby the lens of ideology and valuation based on it.
This comment has been removed by the author.
ReplyDeleteRight. It's key and it dovetails into what Roger has been saying about how evolutionary development occurs in complex systems.
ReplyDeleteThe scientific method was developed as a filter to separate the flood of ideas from the ones that were useful and those that actually correspond with reality empirically.
Rigid ideologies that generally favor vested interest oppose this pragmatic and objective approach. It's basically dogmatism versus the scientific approach, and conventional economics has succeeded religion as the chief dogma socially, politically and economically. The persistence of dogmatism is based on power and the perpetuation of ignorance.
Reality is the great teacher that tests ideas and behavior. Dogmatisms are eventually swept aside by the course of evolutionary development, either by endogenous forces for change or exogenous or natural shifts, such as conquests and natural disasters.