Wassily Leontief and Larry Summers on technological unemployment

by on November 20, 2013 at 1:47 pm in Economics, History | Permalink

Here is a very interesting piece from 1983 (jstor), Population and Development Review, it is called “Technological Advance, Economic Growth, and the Distribution of Income,” here is one excerpt:

In populous, poor, less developed countries, technological unemployment has existed for a long time under the name of “disguised agricultural unemployment”; in Bangladesh, for instance, there are more people on the land than are needed to cultivate it on the basis of any available technology.  Industrialization is counted upon by the governments of most of these countries to relieve the situation by providing — as it did in the past — much additional employment.

If I may put this into my own terminology, Leontief is suggesting that at some margins fixed proportions mean many agricultural laborers, or would-be laborers, are ZMP or zero marginal product.

Haven’t you ever wondered how some traditional economies can have unemployment rates which are so high?  Those are “structural” problems, yes, but of what kind?

By the way, Brad DeLong cites Larry Summers on ZMP workers:

My friend and coauthor Larry Summers touched on this a year and a bit ago when he was here giving the Wildavski lecture. He was talking about the extraordinary decline in American labor force participation even among prime-aged males–that a surprisingly large chunk of our male population is now in the position where there is nothing that people can think of for them to do that is useful enough to cover the costs of making sure that they actually do it correctly, and don’t break the stuff and subtract value when they are supposed to be adding to it.

mexcimeaux November 20, 2013 at 2:09 pm

where’s a good world war when you need one. the ZMPs tendency to break stuff and subtract value might come in handy then.

ummm November 20, 2013 at 3:22 pm

well obama still has 3 more years to try to start one

dirk November 20, 2013 at 3:38 pm

Or we could employ an army of government workers or contractors to rebuild our infrastructure and lower unemployment without shooting anybody.

dirk November 20, 2013 at 4:04 pm

How about we build some cathedrals and pyramids? Free market capitalism makes for ugly landscapes of strip center after strip center. Maybe we, as a rich society, could create something aesthetically worthwhile while lowering unemployment.

ummm November 20, 2013 at 4:07 pm

infrastructure and other big projects tend to be very economically inefficient (Big Dig for example which was finished 9 years late and $20 billion overbudget)

dirk November 20, 2013 at 4:14 pm

Efficiency is not the point. Yeah, it’s a boondoggle. Right now we could use some big boondoggles.

mulp November 20, 2013 at 5:23 pm

Yeah, the economically efficient method of fixing the traffic problems of a city like Boston is to simply level it and start from scratch, hiring Walt Disney to create a Freedom Trail Ride to highlight a sanitized commercialized American Revolution history. After all, what rights do any existing property owners have or the community to dictate to businesses seeking profits how to get things done.

Clearly the Chinese are the superior capitalists because they place efficiency and profit above individual rights, and reject the very concept of property rights.

The Big Dig was, by the way, designed and implemented by private for profit architecture and engineering firms, and had to invent a number of new construction techniques to solve the problems of constructing under centuries old historic buildings.

And how about explaining how the terribly horrid inefficiency and incompetency of Microsoft and Amazon and Apple and Exxon and BP rates them as such valuable institutions. Delays and disasters have plagued them through the decades.

But I guess Windows which has been perpetually late is just one big government run boondoggle. And I remember the Amazon website disasters (working for one of managers of one of the vendors to Amazon whose systems were crashing under the load of a few thousand customers).

ChrisA November 20, 2013 at 7:21 pm

Dirk – Fiscal policy – see Sumner critique. Basically monetary policy is a better way to stimulate than fiscal policy, and if the central bank is doing its job fiscal policy will have no impact.

Also, Mulp, no-one forces me to buy from Amazon. I have no choice but to pay for big government blunders. Yes humans and organisations (private and public) make mistakes and are often run by megalomaniacs. That’s why free markets are a good idea, private organisations that don’t correct mistakes don’t get customers.

Claudia November 20, 2013 at 8:24 pm

ChrisA the consensus is not so firm on fiscal policy versus monetary policy when conventional monetary tools are maxed out ASIs the case now. Also monetary policy is a ‘gets in all the cracks’ approach to boost aggregate demand, and it is very hard to use it to mobilize, retrain, or incentivize specific resources (issues more on the aggregate supply). When we see underutilized workers (or ZMPs) it’s probably a bit of both forces.

Some of these people would be working the jobs they seek if growth were humming along faster and some should instead be shifting to new occupations. The latter is a big thing to accomplish with weak demand, less willingness to take risk, and tighter credit. I agree leaving it to the government to design the next ‘cathedral or pyramid’ sounds dicey but the alternative may be even less appealing.

dirk November 20, 2013 at 11:48 pm

True that the government is likely to build horrible works of art compared to the Incas or the Catholic church, but we could build all these structures out in the desert. If they are interesting, tourists will come. If they are ugly, most people won’t have to see them.

The idea is that in an Average Is Over world all the old rules of economics are reversed. We need two parallel economies: one which values efficiency and another which values inefficiency. The efficient economy should bat first and the inefficient economy second.

We can structure a new Socialism in which incentives are given as much consideration as the Libertarian economists give them. But we can work from a broader literary value set than the Ayn Randers and Horatio Alger fans that dominate this group.

There’s more to be learned about values from Balzac, The Gospels, Emerson, Chesterton. Tolstoy and Chekhov than the insipid Ayn Rand and Horatio Alger, which Alex and Tyler and other libertarians constantly pay homage.

Capitalism has failed America. Time to admit it. Time to rethink socialism in a manner that utilizes all the economic wisdom we have learned from this experiment with capitalism. (In other words, not from the perspective of the stupid socialist city council member in Seattle.)

ChrisA November 21, 2013 at 4:17 am

Claudia – “monetary tools are maxed out ASIs the case now” – have they broken the printing press at the Fed?

But really, I thought the consensus was clear among mainstream economists. Even Krugman accepts the better stimulus is through monetary policy, his arguments for doing fiscal policy are that the Fed refuses to do sufficient stimulus because they are too scared of inflation, and the Fed being independent, can’t be pressurized to do more. However this argument is subjected to the Sumner critique, basically the amount of inflation is controlled by the Fed and if they fear inflation they will fear inflation by fiscal policy just as much as by monetary policy (see Japan in 1990′s lots of fiscal no inflation, but they did get big debts). Of course you may think that you cannot stimulate the economy by increasing inflation expectations, but that also nixes any economic stimulation benefits by fiscal policy as well. Maybe there is an argument for more investment in infrastructure by itself (maybe) but that should be taken on merits of individual projects, not because it stimulates the economy.

Claudia November 21, 2013 at 5:38 am

ChrisA, you missed a word in the quote … *conventional* monetary policy. I do not know which is ‘better’ (especially, but not only, at the zero lower bound), but am skeptical of anyone who has a ‘clear’ answer. Policy, any kind of policy is NEVER formed in a theoretical vacuum. I am more interested in what is needed on the margin now, subject to all the constraints and preferences that seem to be in operation. In addition, monetary policy is designed to stabilize growth (keep us close to our economic potential) … maybe that effort would be helped along by further investments in our productive capacity, more a goal of fiscal policy. This is not an either/or choice, especially when the monetary offset is not in operation.

dirk, you make many great points and I think it’s important that ‘economic’ issues are not simply handed over to economists’ ways of thinking about them. I find efficiency a lot easier to measure and model empirically but that shortcoming on my part should not elevate its status over equity. I would like to think that there’s a way to even the treatment with more quantitative work but maybe more qualitative (literary) methods are needed too. It is all about balance here, no right answer.

ChrisA November 21, 2013 at 8:29 am

@Claudia
Your previous posts have indicated you are quite an intelligent person as well as being an economist, so I am genuinely interested as to why you say it is not clear that monetary policy is better than fiscal. For instance at the very least, a loose monetary policy avoids the debt problem of fiscal. This is not a trivial issue, misunderstanding this issue cost Japan billions upon billions of dollars. And if you wanted to create inflation, surely debasing the currency is the most obvious and easiest to go about this? Even Zimbabwe was able to do this. Your arm waving that implementing this preferred policy is difficult because of “constraints and preferences” is not good enough for me I am afraid. If there is a better way of doing things, we should advocate that, not a second best policy (that also, by the way is subject to the same maybe even more “constraints and preferences”, even if you don’t accept the Sumner critique which says it will be completely nullified by the CB).

On the benefits of public investment, go ahead and make the case as I said. If they really work, why not, but don’t make the case as a short term stimulation exercise, rather as a long term one. My experience with governments though all around the world are that mostly these are about benefiting agents who can make the most compelling arguments. The public choice argument is very real, you should not be naive about that.

Claudia November 21, 2013 at 3:43 pm

ChrisA, I doubt I’d be able to answer to your satisfaction … I’m not that intelligent, just sharing my opinions here.

Owen November 20, 2013 at 9:55 pm

*Free market capitalism makes for ugly landscapes of strip center after strip center*

This is beside the point, but ugly landscapes of strips centers are the result of command-and-control Soviet style planning of land development. Parking minimums [0] and zoning rules[1] are the opposite of free markets. When less regulated development was legal, and in the parts of the world where it still is, the result is charming mixed use with retail storefronts directly on the street [2].

[0] see _The_High_Cost_of_Free_Parking_ by D. Shoup
[1] read your local zoning code
[2] http://www.sfgate.com/bayarea/article/Small-S-F-shopping-districts-get-nod-3850300.php

Ray Lopez November 20, 2013 at 10:02 pm

@Owen. Lack of zoning as charming. Charming as in a Philippines wet market? It is kind of charming actually, but probably not in the way you would like. Actually a study found (comparing free-market Houston with other areas such as NYC) that there’s no difference in the composition of how a place looks with or without zoning rules, the only effect is to ‘tax’ land owners a bit. And anybody who lives in a big city on either coast these days doesn’t mind paying taxes, as long as there’s profit. Plus you can always take the zoning commission to court if they mess up, kind of like Kelo v. City of New London, but hopefully without the unhappy ending.

Ray Lopez November 20, 2013 at 9:58 pm

Isn’t that conventional wisdom for how the US got out of the Great Depression? Not Keynesian spending, which FDR did not practice in sufficient quantity for it to matter to the economy, but the start of WWII stimulated production?

George A. Selgin, a professor of economics in the Terry College of Business at the University of Georgia, would disagree about starting a war being a good way to stimulate the economy, but reasonable minds might differ? Isn’t the Jewish “debt Jubilee” based on this concept of ‘burn it down and start anew’? Is capitalism a series of cyclical bubbles, Larry Summers style, with the overall trend line being positive? Brad DeLong was taught so.

I just summarized about 10 man-years of wisdom in one post.

Bill November 20, 2013 at 2:19 pm

How many ZMP tenured faculty do you know, and when will tenured Libertarians renounce their tenure.

Free the faculty of ZMP!

They break minds on a daily basis.

Willitts November 20, 2013 at 3:25 pm

Very few ZMP faculty. That is not to say that most faculty wages exceed their MRP.

Bill November 20, 2013 at 8:42 pm

Then, they don’t need tenure, do they.

Willitts November 20, 2013 at 11:20 pm

Nope, don’t believe so, but isn’t tenure just another term of employment between employers and employees? The profession had a rather sordid history of tolerance to new ideas.

Dangerman November 20, 2013 at 2:30 pm

I get the ZMP thesis in general, but as applied to the US… I have a hard time believing that all those people have ZERO marginal productivity.

I would guess that a great many of them just have marginal productivities that are just lower than either (1) the minimum wage, or (2) the amount our collective “welfare” system pays them to not work.

Bill November 20, 2013 at 3:01 pm

ZMP is meaningless without considerations of aggregate demand, but those who talk ZMP do not want to discuss aggregate demand, which determines what input is marginal or not.

During the Great Depression, 30% of the working population was ZMP, but during WWII, 4% was.

ummm November 20, 2013 at 3:10 pm

the demand is there
Look at at companies like Chipotle, Besy Buy, Amazon or Taco Bell. production can barely keep up with demand

companies don;t like to waste money in good times or bad

Bill November 20, 2013 at 8:10 pm

Re: “The demand is there…”

What is the percent of plant utilization at the moment, ummm?

dirk November 20, 2013 at 3:31 pm

Tyler has explained the notion of ZMP in the US with the concept of a high risk pool of workers. Think of it the way the insurance companies do. If you fall into a high risk pool (by say, going without car insurance for more than a month, or in this case going without a job for more than six months) it doesn’t mean that everyone in the pool will create problems, but thanks to some bad apples, on average they will.

I say it’s time to start socialism here to employ those in the high risk pool.

sailordave November 20, 2013 at 4:01 pm

that’s the best argument for socialism i’ve ever heard.

but, what you need is a way to employ them _and_ have individually measurable results, so the non-ZMP members of the pool can transition to better jobs

dirk November 20, 2013 at 4:09 pm

Good point.

Ray Lopez November 20, 2013 at 10:09 pm

@Dirk and others – Or, time to let foreigners into the USA in large numbers to make up for the employers prejudice against putative US ZMP workers. The employer theory: “better the devil (potential ZMP worker) you DON’T know (the foreigner) rather the devil you do know (the US putative ZMP worker)”. The US ZMP can try his or her luck outside the USA, where westerners are prized just because they are westerners. Eventually game theory says employers will figure out they are being irrational with US ZMP-styled workers, and the cycle will begin anew, but with the side benefit, if free marketeers are to be believed, of a one-time multi-trillion dollar post to US and world GDP due to unrestricted immigration. Alex T, you with me on this?

Dangerman November 21, 2013 at 1:04 am

I appreciate this point, but I don’t see how it’s contrary to my original point.

The pool is only “high” risk because you the employer have to get $X in value back out of them, where $X is >SUM(human capital investment costs, actual total pay).

Since Tyler LOVES him some MO[O]Cs, the first of those two variables should be decreasing all the time. Government policy artificially inflates the second.

Let me train 100 guys at a time, and pay them $1/hour… and suddenly we’ve got a LOT less ZMPs. Ergo, they’re not ZERO MPs… they’re “Less-than-our-government-allows Marginal Productivity.”

Morgan Warstler November 21, 2013 at 9:49 am
ummm November 20, 2013 at 2:33 pm

Maybe individuals contribute more to the economy as reflected by higher valuations and profits & earnings through passive consumption such as using snapchat, posting on facebook, downloading from netflix,etc than going to an overpaid job that could be outsourced or automated.

dave smith November 20, 2013 at 2:43 pm

So, Summers and DeLong think that the only reason people drop out of the labor force is because there is nothing for them to do?

XVO November 20, 2013 at 3:01 pm

What other reasons were you thinking of?

dave smith November 20, 2013 at 3:10 pm

Live in mom’s basement playing XBox? I know that is stereotypical and snarky, but to think that people drop out of the labor force only because of no jobs it pretty narrow too. I don’t think Tyler was talking about discouraged workers here who are not working because they can’t find work during a recession. Economists think about this problem in many contexts such as more generous transfers and workers comp giving people incentives not to work. So, yeah, there are many reasons I can think of that would cause people to drop out of the labor force.

Turkey Vulture November 20, 2013 at 6:28 pm

I think about dropping out of the labor force every day, and I am pretty sure there is stuff for me to do.

john personna November 20, 2013 at 2:57 pm

I’m middle aged, and retired, on a nest egg poor people think rich and that rich people think poor … I’m not out there working, but I’m not actually going to spend a marginal dime today. I have done a hike this morning, and have books to read. I make a mean breakfast burrito. There’s a roast still to eat in the refrigerator. In terms of aggregate demand, I’m sure I’m not creating a lot of reasons for other middle aged men to work.

That’s pretty much the demographic wave to come, right? Not only do we have the paradox of thrift, we have paradox of a simple life.

Rusty Synapses November 20, 2013 at 3:09 pm

I think you are the future, at least for a lot of people (young and old) – if you like the outdoors and/or the digital world, you can live pretty cheaply these days. Of course, that ignores the arms race that is raising children – I’m assuming you’ve raised yours or you don’t have any.

Turkey Vulture November 20, 2013 at 6:33 pm

A lot of the expected costs of raising children can be avoided if you are living a john personna lifestyle: you can watch your own kids, and provide your own enrichment activities to them, when they aren’t at their good-enough rural public school.

Rusty Synapses November 21, 2013 at 12:43 pm

That’s harder – I can’t speak to rural areas, but near a big city, if you want your kids to play sports with other kids, for example, you have to play the game somewhat, so to speak, and even worse, it’s hard for your kid to dabble in sports or not specialize – we don’t really care how our kid does in sports, but when every other kid is treating “their” sport like a year-round effort to train for the pros, it is hard for your kid to play sports, and it does take some $ (there are no longer informal ways to play in the neighborhood for free, because no one else does – you can’t play baseball by yourself). Also, to take education, even state colleges are 10X more expensive than they used to be. Kids cost $ (although less, the less you buy-in to the arms race).

Marie November 22, 2013 at 4:31 pm

This is, unfortunately, true.

We tried really hard to find “activities” where you didn’t have to spend thousands and deposit one eyeball in order to get in the game.

It’s just the case that for most American kids the opportunity to learn how to play passable baseball without being on a team is pretty much gone.

It’s a loss and I’ve seen it in suburbs and rural areas, too.

Willitts November 20, 2013 at 3:20 pm

One of the biggest shortcomings of our measure of national well-being is that we don’t count the value that many people explicitly choose, for example firing the nanny and being a stay-at-home parent. Much of the growth in household income came from women and minorities entering the labour force. That certainly could not continue forever (at the margin). We can also not assume that the preference for two incomes or working until death would remain constant.

kebko November 20, 2013 at 3:51 pm

That Delong post was a great read, but he’s got the whole labor force thing completely wrong. Male 30-somethings have had a linear labor force participation trend that goes back 60 years. It was about 98% then and it’s around 90% now. It goes down about 1% a decade. Considering this spans the rise of the women’s movement, that is a very level trend. Think of extended education, house dads, early retirement, etc. The fact that all of these factors have failed to lower middle age male LFP below 90% is astonishing. The idea that there are a bunch of males out there that just can’t find anyone with something for them to do is unlikely, considering the historical numbers.

He also claims that female LFP doesn’t have the same trend. That is not true. Female age-specific LFPs climbed until the mid 90′s, then they leveled off at a level slightly below the longstanding male levels, and they now also appear to be declining very slowly over decades.

John Personna is right. This is mostly a product of lifestyle choices and a failure of GDP and employment statistics to capture the fullness of people’s lives. I am also not officially in the labor force. But, just think of the huge amount of consumer surplus we both provide by correcting Tyler in the comments section. ‘myright John? :-)

Turkey Vulture November 20, 2013 at 6:31 pm

Seems like the good life to me.

cournot November 20, 2013 at 3:13 pm

One of the structural problems is that poor countries often have subsidy policies which keep ineffective farmers down on the farm. The more inefficient the farm is (or seems to be) the more it becomes eligible for various kinds of aid. Similarly, there are various regulatory constraints which limit low end jobs in the commercial sector. Other policies are directly designed to limit migration. Simple public choice considerations plus constraints on urban jobs lead to bad structural problems. Aren’t some of your colleagues studying this in the Philippines?

Rusty Synapses November 20, 2013 at 3:15 pm

I’ve always wondered whether, if we added a carbon tax (making running the equipment more expensive) and/or imposed taxes on the overused fertilizer (which also would help the environment), it would create a lot more jobs in farming compared to current practices, which emphasize equipment and fertilizer/weedkiller over labor. Not great jobs, to be sure…

Ray Lopez November 20, 2013 at 10:17 pm

@Rusty–a carbon tax would not only create more jobs, but some have argued more smart jobs and raise Total Factor Productivity in the long run. Expelling CO2 poisonous waste in the atmosphere is an externality on all of us and our children. Society years ago got rid of satanic mills, black soot spewing trains, forced child labor, slavery, chopping down 2000 yo sequoias to make paper pulp, and ‘no women can work’ laws (all externalities in a way, even though some are economically justified) so time to do the same with cost-free CO2 emissions? I and others say yes and the AFL/CIO would love a carbon tax once they figured out the short term implications for them.

TMC November 21, 2013 at 12:47 pm

“CO2 poisonous waste”

Talking points are horribly out of date.

Willitts November 20, 2013 at 3:30 pm

Seems like we have a welfare and prison system designed to keep ZMP people from breaking things. It doesnt disturb me that we do this, but rather we have implicitly written off a substantial portion of our people. It is more distressing that the write off has a strong racial component.

whatsthat November 20, 2013 at 3:31 pm

It was Amartya Sen who came up with this idea, your excerpt of Leontief and Summers is simply a restatement, if you spend any time more than a week in any village in India, this disguised unemployment will seem blindly obvious.

I’m stunned and surprised Sen is not mentioned.

whatsthat November 20, 2013 at 3:31 pm

*blindingly

Marie November 20, 2013 at 3:43 pm

“a surprisingly large chunk of our male population is now in the position where there is nothing that people can think of for them to do that is useful enough to cover the costs of making sure that they actually do it correctly, and don’t break the stuff and subtract value when they are supposed to be adding to it. ”

Isn’t this because we are idiots?

The above is framed in terms of the people being incapable of fitting a good economy, but isn’t it possible that the economy is not fitting the needs of increasingly larger numbers of people? Who is here to serve whom, after all?

If we were looking at an economy where 60% of the people were innovating in science, tech, medicine, etc., and 30 or 40% simply couldn’t keep up with those powerhouses (who had long ago built the solar robots to do the stupid person jobs) I could understand, I guess.

But that’s not the case, is it? What we have done is, as a society, classed some forms of work as not worth doing and other forms of work as worth doing, based on what we consider valuable as produced goods and services. So, for example, we could have remained a nation of small agrarians (go Jefferson!) and had less and better food, probably. Instead, we collectively prefer a nation with large corporate farms and lots and lots more lawyers. And Lady Gaga.

We have picked this. And what it means is there are a lot of young men who can’t work in a way that supports themselves because they don’t have a farm, they’re not needed in the field, and they’re not Lady Gaga. We don’t like it, we should pick different. Don’t blame the robots.

ummm November 20, 2013 at 4:05 pm

the unfortunate reality is that some people that cannot keep up will fall between the cracks and wedges of society and don;t expect uncle sam to do much to lend a hand to pull them out.

Sam November 20, 2013 at 3:57 pm

Isn’t this essentially the Lewis dual sector model? How can that possibly apply to an advanced nation?

Steve Sailer November 20, 2013 at 4:17 pm

“He was talking about the extraordinary decline in American labor force participation even among prime-aged males”

Did Brad or Larry or Paul or Tyler ever mention the word “immigration”?

msgkings November 20, 2013 at 10:35 pm

I don’t think they did. Do you have any thoughts on that topic, Steve?

tomrus November 20, 2013 at 4:22 pm

Is it not true that with fixed proportions all workers have ZMP?

Bill Reeves November 20, 2013 at 5:02 pm

Larry Summers blames falling labor participation by men on their stupidity and destructiveness. I guess that’s the New Dem line: our constituents are too damned stupid and destructive to do anything. Of course apparently the chaps living in California or NY are extra stupid and destructive when compared to those who live in, say, Texas or Oklahoma. Gee, I wonder what is making all of these largely Dem voters extra stupid and destructive? Anything? Larry? Larry?

Attaboy, Larry, you’ve just proven why you made such a lousy Harvard President. Arrogant and intellectually sloppy is no way to go through life, son.

Claudia November 20, 2013 at 5:14 pm

What if the classic trade off had not been framed as efficiency versus equity but as efficiency versus dignity? And is this really a trade off, at least on our current margin?

Bill November 20, 2013 at 8:13 pm

+1 This would support a value in creating work beyond efficiency. But, with so many unmet social needs, we don’t have to go that far. We can repair the roofs of schools, or roads, etc. It’s just that some do not see value in social goods.

chuck martel November 21, 2013 at 10:44 am

“with so many unmet social needs”
Care to expand on that a little?

Willitts November 20, 2013 at 11:23 pm

And how do we define “dignity” today?

Steven Kopits November 20, 2013 at 5:24 pm

DeLong on Summers: “the extraordinary decline in American labor force participation even among prime-aged males–that a surprisingly large chunk of our male population is now in the position where there is nothing that people can think of for them to do that is useful enough to cover the costs of making sure that they actually do it correctly, and don’t break the stuff and subtract value when they are supposed to be adding to it.”

Curiously, people do seem to be able to figure out what to do with uneducated, illegal Mexican male immigrants: “Among undocumented immigrants ages 18-64, men are more likely to be in the labor force than are men who are legal immigrants or who were born in the U.S. Among men of working age, 94% of undocumented immigrants are in the labor force,compared with 85% of legal immigrant men and 83% of U.S.-born men.” Pew Hispanic Center, http://pewhispanic.org/files/reports/107.pdf

Steve Sailer November 20, 2013 at 6:00 pm

Sshhhhhhh … Don’t mention the I-Word! This is an economics blog, so we can’t go around talking about labor supply and demand.

Brian Donohue November 20, 2013 at 11:05 pm

I don’t believe Steven Kopits’ point is what you think it is there, partner.

Steven Kopits November 21, 2013 at 9:16 am

No, it wasn’t the point I was making, but it was the point I was thinking.

Steven Kopits November 21, 2013 at 9:19 am

And to Steve’s point: There is the underlying lefty assumption that markets won’t clear, so we have to keep intervening. It’s the intervening that’s keeping the markets from clearing.

john personna November 21, 2013 at 10:11 am

Illegal immigrants work hard because (1) they self-selected to come here and work hard, and (2) they have neither wealth nor benefits to fall back on.

Now, when you say “liberals don’t want markets to clear” I presume you mean “liberals don’t want to bring back starvation as a motivator.” In that you are probably right.

Brian Donohue November 21, 2013 at 10:13 am

Oh ah- the fault is mine.

I’m with msgkings- these data say to me that there are jobs, just not jobs home grown people are interested in.

john personna November 21, 2013 at 10:17 am

Americans aren’t fit enough for many of these jobs. A man who has been a laborer since 15 is strong.

msgkings November 20, 2013 at 10:37 pm

Isn’t this point so obvious as to be banal? All those undocumented immigrants aren’t here for a vacation.
And how is this a bad thing exactly?

Note, in places like Dubai I’d wager the citizen LFP is far lower than the immigrant LFP, far more so than in the US.

Brian Donohue November 20, 2013 at 11:07 pm

Wait, what? Either you picked up the same comprehension fail as Sailer, or I’m nuts, or something.

Ryan Vann November 20, 2013 at 5:36 pm

LOL at ZMP nonsense. The ask is higher than the bid, that is all that is going on with UE.

derek November 21, 2013 at 10:50 am

Yes. And the ask includes the overhead of the NPPF, negative productive policy fools.

The US has hit the point where the overhead of policy stupidity prices a large proportion of the population out of the market. You come out of school with a huge debt that sets your price in the marketplace too high for the skills that you have. You need a place to live, and the total screwup of the housing market is due to policy initiatives. You want some land to build a small house, and the layers of policy, rules, regulations drive the price up very high, driving your ask price for wages high. The government price setting in health care has made it too expensive.

As well the low productivity worker has a choice of employer. Government assistance in all it’s guises or working for a paycheck.

Mike in Qingdao November 20, 2013 at 7:05 pm

It seems to me that the ZMP workers are workers who had positive marginal product contingent on an egalitarian distribution of consumption spending. In other words, these workers could be of use to the middle class.

Now that the middle class’s consuming ability has been eviscerated by stagnation of incomes, increased health costs, and tighter credit, ZMP workers can’t produce anything of value for rich people while the middle class attempts to retrench.

ChrisA November 20, 2013 at 7:34 pm

I bet most of these ZMP workers could be employed in personal services with a positive return, you don’t need to be too smart to be a driver, guard, maid, gardener etc. Just be willing to show up on time and be reasonably diligent and polite. But likely these workers chose not to enter the workforce due to the very high marginal tax rates experienced by someone moving off various forms of welfare. I bet we would see increased workforce participation if we brought in a GMI. Also, there are some stupid cultural attitudes in the US about personal services, for some reason it is seen a demeaning.

msgkings November 20, 2013 at 10:38 pm

+1

mulp November 20, 2013 at 10:39 pm

Economists created ZMP individuals and families and bands by violating the Lockean Proviso which requires sufficient common to sustain those without land on which to create capital or for others to to have done so to employ them.

“Nor was this appropriation of any parcel of land, by improving it, any prejudice to any other man, since there was still enough and as good left, and more than the yet unprovided could use. So that, in effect, there was never the less left for others because of his enclosure for himself. For he that leaves as much as another can make use of does as good as take nothing at all. Nobody could think himself injured by the drinking of another man, though he took a good draught, who had a whole river of the same water left him to quench his thirst. And the case of land and water, where there is enough of both, is perfectly the same.”

—Second Treatise of Government, Chapter V, paragraph 33

If common land still existed to support those without property to support them, or jobs to sustain them, then there would be no prospect of ZMP individuals – they would simply wander the common living off its abundant resources in a state of nature.

By failing to maintain sufficient common to sustain all, society has taken on the role of nature in providing for those without property or employment sufficient to sustain them.

Of course, not all production is perceieved to have value sufficient to pay a wage sufficient to sustain any person doing the work.

For example, how much are you willing to pay to have the roads you travel cleaned of trash, especially if you consider your labor in carrying the trash you create in your car to a disposal bin to be ZMP so you simply chuck it out the window as you drive?

If you live in a region depending on tourism, litter has a negative impact on the economy – touring a litter dump is not considered scenic, yet for the inns and other tourist attractions will not see picking up litter as being anything other than ZMP. Thus, society ends up seeking some means of providing ZMP labor to do ZMP work, but the ZMP labor must earn a sustainable income just to survive.

Disaster cleanup, pollution cleanup, restoring depleted or destroyed lands and forests to a state of nature are ZMP, yet great value exists for society in doing these things.

FDR won significant public support from all sides for the CCC which put the ZMP individuals to

Fred November 21, 2013 at 10:11 pm

Wildavsky, not Wildavski.

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Boonton November 24, 2013 at 5:54 am

Why would this not be a problem of insufficient demand? A zero marginal product worker would require a true zero marginal product. Whatever your business is, putting stuff on shelves at Wal-Mart, making burgers, mowing lawns, a ZMP worker would add nothing to your output no matter what you paid him, even if you paid him nothing.

But this is very different from a worker who adds fewer burgers per hour than his other coworkers and either there aren’t enough people to buy those burgers or the price they are willing to pay for them is less than the cost of having him on payroll for the hour.

The first case no amount of demand can solve the problem, in the second case the problem is caused by demand.

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