But this is catagorically untrue. The need for labor has grown tremendously since the begining of the industrial revolution.
I don’t know if it would be in the same sub-set, let’s say, of market distortions; but, it is definately a distortion. In the case of the central banks deliberately distorting market prices of currency, you have a clear and unambigious manipulation of incentives.
I am not prepared to debate the wisdom of governments pegging the range in which they want their currencies to stay. Instinctively I’m inclined to think that it should be for avoiding crisis only. If a country’s currency rises or falls, that is in response to something fundamental. Meddling with exchange rates isn’t going to change those fundamental issues, and it seems that it can only go on for so long before those problems become unavoidable. Perhaps they give the country’s industries time to get their acts together; perhaps not. That question will make a huge debate by itself.
There is still no distortion of incentives. To put another way, finding a maximum on a curve is a calculus problem. When you find it, all the fixed things drop away and become irrelevant. If those fixed things change, they don’t affect the location of the maximum because they’ve dropped out of the problem and I’m still dealing with the things that do change. When the volcano god takes away my first two rats, my best decision is still to catch the same number of rats as I was before; I’m just two rats poorer.
To put it yet another way, prices contain information on where resources should be allocated to ensure that no resources are wasted. When wealth is redistributed without changing prices, then the information contained in the prices remains unadulterated and resources can be allocated without waste. If instead prices are changed by governmental fiat, then the information contained in the new prices is not accurate and the resulting allocation will be wasteful. Prices are key elements in ensuring that resource allocations aren’t wasteful, and policies that distort them are inherently wasteful. So to say that we want policies that don’t affect the market, I’m saying that we don’t want to distort prices.
A lump-sum reallocation may result in a change in prices because poor people will now be able to afford better dental care, thus dental care prices may rise. But these changes in prices reflect valid information on where resources need to be distributed. If instead the government subsidised the dental industry, prices in dental care may drop—allowing the poor more access to dental care—but this is a wasteful solution for at least two reasons. First, the government simply doesn’t have all the relevant information nor the computational power of the market. It is simply unreasonable to expect the state to make accurate judgements on this. Second, distortions are inherently wasteful. I don’t think I can do this justice, but let me try. Suppose you’re going to buy a pair of pants from Germany for ten bucks. Then the state imposes a tariff and now the pants cost fifteen bucks. So instead you buy a pair of American pants for ten bucks. The legislator who authored the tariff bill will say that you are just as well off because you got a pair of pants for ten bucks; they just happen to be American pants. But originally, you didn’t want those American pants for ten bucks; you wanted the German pants for ten bucks. That difference, the difference in satisfaction between the German pants and the American pants is lost forever; there is welfare that is lost in a way that nobody gets to enjoy; it is not simply a transfer of income from Germans to Americans with you netting neither gain nor loss, because you are stuck with a pair of pants that are second best. Lump-sum changes don’t do that because they don’t change marginal values.
Because I was trying to illustrate why the Invisible Hand is a good thing, and what sort of interventions we should aim for and why. One could get to that point by incorporating interpersonal trades, competitive advantages, and many goods & services, as long as that person wasn’t me. I had to keep the example artifically simple—just rats with a meddling god—because I’m not capable of pulling in all that other stuff and making it all work into a coherent illustration.
Hopefully, quite a bit. Does it cost more to get a Coke or Pepsi? Are gas stations in the same area generally pretty close in prices? How much do the prices of six-packs of American pilsners vary in the same cooler? Does price play a role in choosing the fast-food chain you choose when buying lunch? Do you generally pay the same for a hard-cover book at Borders vs. a local bookstore?
The key element is that individual economic actors are price takers. Look around and see if the (more-or-less) same goods cost (more-or-less) the same price. If it looks like the market, and not individual producers and consumers, is setting the price, then I think you’re a long way toward being in a competitive market.
I don’t know the criteria for determining “officially” whether a market is competitive. There are ways of doing that, like how much market share is taken by the top four firms, but I don’t know what they all are. Hopefully someone else can answer that for you.
If we say “this is at least as good as that” is our preference relation—so for example, for a drink with spagetti dinner wine is at least as good as beer—rational means that if wine is at least as good as beer, and beer is at least as good as milk, then wine is at least as good as milk, and that we can say “this is at least as good as that” for everything out there to consume.
I find the assumption to stand to reason, and to be pretty well supported. It ain’t perfect, but it seems to be a good approximation, which ain’t shabby when dealing with people.
This statement is completely opposite all statistics. While there may be one or two exceptions, in general, industry automation REDUCES the number of people required to do a task. It sure would be helpful if you would produce some cites when you make categorical statements like the above. I could easily disprove your blanket assertion, but I’m not going to do your legwork for you.
A lot of good letters from readers of the San Francisco Chronicle newspaper on the subject of outsourcing to other countries are here: Readers sound off
Despite all the government pronunciations of record GDP growth, low unemployment and other positive statistics, there is a distinct lack of jobs ads in the newspapers here. Sunday’s San Francisco Chronicle has ONLY 9 ads under the COMPUTER heading (and one of them is for a search firm)! Back in 1999/2000, the ads under the COMPUTER section often went to 4 full pages.
I’m curious how many tech employment ads there are in other newspapers in the country and if you remember, how the current numbers compare to the 1999/2000 period?
Really, can you show me any statistics which indicate that fewer people are working now than at the begining of the industrial revolution? That is “less and less need for labor”? Which was what I was responding to.
Wel, now we are getting somewhere. Clearly if there are fewer COMPUTER job adds this sunday then the whole country must be doomed.
Seriously, can you not see that both the imporving GDP numbers and the derth of computer job adds in this Sunday’s San Francisco Chronicle might not be contradictory?
We had a record low temperature here a few weeks ago. Does that mean that Global Warming is a lie?
So, your saying that you don’t care that you have to work harder for the same amount of nutrients? Really?
We’ve been over this before, but in the real world, the value of a thing is not determined solely by the marginal cost difference between it and the last thing. Things have value to individuals for many reasons.
What if 1 rat is enough to feed you? Remember we don’t have refridgeration, so you can’t store them. If you have to catch 3 rats to eat 1, are you still contending that it does not cost you any more or change your motivation at all? Your sure you won’t try fish? Your sure you won’t live for more days on coconuts?
If you have choices as to your nutritional input and I don’t, what has the Goddess’ action done to my ability to get nutrients? If you eat other things, and I cannot, how will I trade for your rats?
I think I understand your idea of marginal costs, but I don’t think it applies to economies. 
<How’s that for a radical statement?>
Well, As I said above a little less succintly this assumes that the fixed things are far enough away from this maximum point. Surely, wherever the fixed things are, the maximum point on the curve is the maximum point on the curve. However, unless the economy in question is so artificially restricted as to be unrecognizable. That is, if you restrict our island so that the only food of any sort whatsoever is rats, and if you restrict the size and availability of those rats such that removing 2 of them form one catcher will not starve him, then sure, it will not materially effect the economy.
However, you have to maintain these restrictions in order to make the case. And I doubt very much that any economy (even 2 people on an island) is so restricted.
Your reply is pure nonsense! “Less and less need for labor” doesn’t translate into a statement that less people are working now than at the start of the IR. I’m confident that is not what Mr. Visible intended.
There are many more industries and technologies than there were at the beginning of the IR. Trying to compare then and now is like trying to compare apples to oranges. Pick any industry from farming to car building to technology to whatever and they are each employing LESS people than they were say, 30 years ago. And 30 years from now, they will employ even less people…
[QUOTE=pervert]
Wel, now we are getting somewhere. Clearly if there are fewer COMPUTER job adds this sunday then the whole country must be doomed.
Seriously, can you not see that both the imporving GDP numbers and the derth of computer job adds in this Sunday’s San Francisco Chronicle might not be contradictory?QUOTE]
Huh? The contradiction was what I WAS trying to point out. Not sure why you didn’t understand this. What I said is quite straightforward. I’m beginning to think your sole focus is on getting your post numbers higher. Is it too much to ask that you first read and give some consideration to what was posted before replying?
Exactly. Thank you for proving the point.
Yes, and I was pointing out that there might not be a contradiction at all.
In other words, there might be a derth of computer jobs AND an increasing GDP. Just as at one time the GDP grew even while auto manufacturing jobs were disapearing. Even as the GDP grew while buggywhip manufacturing jobs disapeared. It happens all the time.
The two facts may exist in the same world at the same time without contradiction. You pointed out that they are being reported at the same time as evidence of some vas government conspiracy to conceal the true GDP.
Please go and re read my post.
Indeed? Because he also said “At some point, if our technology does what we’ve designed it to do, there will be more willing, skilled workers than there are jobs.”
I have to point this out again. I would like to suggest to someof you doom sayers that this is not an accident. We have more varied industries precisely because we are so good at running old industries with less and less people.
That making, programming, installing and using computers is easier now than it was is a factor in the proliferation of computers and the need for computer literate workers.
You may choose to read long term doom and gloom into a temporary and local downturn in the rate of hiring of computer specialists. But you really need to have more data to support such an assertion.
I tell you what. In order not to bump my post count unduly, I will leave you with this cite from the U.S. Department of Labor Bureau of Labor Statistics. In part it says:
“*Computer software engineers are projected to be one of the fastest growing occupations from 2002 to 2012. Rapid employment growth in the computer systems design and related services industry, which employs the greatest number of computer software engineers, should result in highly favorable opportunities for those college graduates with at least a bachelor’s degree in computer engineering or computer science and practical experience working with computers. Employers will continue to seek computer professionals with strong programming, systems analysis, interpersonal, and business skills. *”
and
“Computer software engineers are projected to be one of the fastest growing occupations from 2002 to 2012. Rapid employment growth in the computer systems design and related services industry, which employs the greatest number of computer software engineers, should result in highly favorable opportunities for those college graduates with at least a bachelor’s degree in computer engineering or computer science and practical experience working with computers. Employers will continue to seek computer professionals with strong programming, systems analysis, interpersonal, and business skills.”
And of course,
“As with other information technology jobs, employment growth of computer software engineers may be tempered somewhat by an increase in contracting out of software development abroad. Firms may look to cut costs by shifting operations to foreign countries with highly educated workers who have strong technical skills.”
So, we have above average growth as well as outsorucing. Perhaps they can exist without contradiction as well.
You guys return to your expose’ of the conspiracy to hide the bad news. 
I don’t see any logic conflict with what was said above. Not sure why you do. There’s more skilled workers and less jobs for them to practice their skill, so there is less need for labor. Pretty clear to me. Did you have problems diagramming English in school? Have you taken a logic course?
As to quoting the Bureau of Labor on job projections, that’s about as valid as relying on the BLS for your unemployment statistics <lol>. I too can pull all sorts of excerpts off of this site. For instance:
*Service-providing industries. The long-term shift from goods-producing to service-providing employment is expected to continue. Service-providing industries are expected to account for approximately 20.8 million of the 21.6 million new wage and salary jobs generated over the 2002-12 period *!
In other words, 96.3% of the ALL new jobs to be created through 2012 will be in the service industry, by the Bureau of Labor’s forecasts. And as we know, service jobs generally don’t pay that well and benefits are often not included.
Need help with you cart sir?
I don’t. The case has been made and proven. I’m trying to illustrate it. You can’t argue the point by trying to add complicating or irrelevant elements to the illustration because the illustration isn’t a proof, it’s an illustration. If you want proofs you’re going to have to do the math. You can find the proofs of the Fnd. Thms. in Mas-Colell and Varian. Of course, for a better illustration, you can go to Landsburg’s The Armchair Economist.
Goddamn hamsters. Ugh! I didn’t even get to post and a bunch of stuff was eaten.
Here’s the short version:
Don’t change the subject. Whether I like the volcano god’s view on social justice is immaterial to the fact that my optimum is to do something until the costs are equal to the benefits.
The proof involves and aribtrary number of variables defined in the most abstract way. If you want to claim that adding variables will change the results, then you have to show it. If you want to claim that adding another variable will make it optimal to quit when doing more will clearly be of greater benefit, then you have to show it; if you want to claim that not quitting is optimal even though the cost is greater than the benefit, then you have to show it.
In the meantime, here is an experiment for you to enjoy
There’s significant evidence that unemployment numbers are not reliable and cannot be trusted. Frex, in my home state, there was a recent announcement that the unemployment figures for last year, which showed the state as a whole gaining (albeit slowly) in job growth and the metro Atlanta area in particular, were, well … WRONG. In fact both the state and the city LOST jobs last year, according to the revised figures.
The official explanation – the earlier figures failed to take into account
MASSIVE layoffs by
LARGE corporations.
Frankly, that stinks to high heaven to me. WTF? Did they think that people are somehow less laid off because they were part of a massive layoff? I don’t buy it for a minute, I think some kind of chicanery was going on in back rooms. And I’m SURE Georgia isn’t the only sort of state where this kind of crap occurs.
xt: Do you have a cite to back up this statement, because at least when I was in India this didn’t seem to be much the case. Most of the people working in India did not seem to purchase much of the products they manufactured. They were mostly exported. In fact, in many cases I remember they actually IMPORTED electronics (fully manufactured electronics) as they were building parts and components. This might have changed since I was there of course […]
I think it has. I’m living in India now, and I’m seeing quite a boom in the domestic market for appliances, electronics, consumer goods in general; and it is predicted to go in increasing quite rapidly for quite a while. I don’t know what percentage of that consumption is imported goods and what part is Indian manufactures, but certainly electronics manufacturing is increasing quite rapidly here. (High import tariffs also make the domestic products more appealing.)
You are right though. I can’t predict the future. I have no idea what scientific or technological breakthroughs that might (and probably WILL) occur next week or next month or next years.
Well, nobody’s got a crystal ball. I tend to agree with you that there are always going to be new things coming along. The question is whether the “Productivity Revolution” is going to mean that on average, each new thing will end up requiring fewer workers than the old thing it’s replacing.
Even if so, I agree that it probably won’t be the end of the world. However, if so, then we should get on the stick and figure out how we want to spread less work among more people (and/or use some of the gains from increased productivity to generate more work). Waiting around to make sure that we’re really in a full-blown socioeconomic crisis before we take any steps will likely make the whole situation much worse than it really needs to be.
And that, I think, is what’s fueling a lot of the alarm and anger about this: not sheer Chicken Little catastrophism so much as the sense that we’re not getting the Straight Dope from those who ought to know. After all, in 2003, the Administration was predicting that the “tax cut stimulus” would be adding over 300,000 jobs per month, starting last July. Well, where are they? In fact, we’ve still got a net loss of millions of jobs since the recession started.
So the people who are running the show are either lying to us or they don’t know what they’re talking about. This is not encouraging. We all realize, I think, that Presidents and Congresses don’t create economic conditions. But they do control how the government responds to the current conditions, which can make a profound difference to how well people manage to adjust to them.
So it’s pretty worrisome when the Administration’s estimates of the effects of its policies are so drastically off for such a long time. If this really is a new labor-market paradigm, as several economists (cited in above-linked article) are suggesting, there is no sign that our current leaders have recognized it.
It’s not the captain’s fault that there are icebergs in the water. But if that thing out there really is an iceberg, then I want the captain to realize that and not steer the damn ship straight toward it. Under such conditions of uncertainty and distrust, you can’t be surprised if the predictions tend to get gloomier and doomier.
I agree that more people are working now than at the beginning of the Industrial Revolution, especially seeing that at its beginning the Earth’s population was six hundred million, and by its end was a mere 1.5 billion.
A lot of our industries have been working full-out to keep up with population growth. Since the end of the 19th century, we’ve quadrupled our population, adding (on approximate average, given my limited mathematical skills) two hundred million people per year to the world. In the course of the next thirty years or so, that number will, according to current estimates drop to about sixty-four million per year, thanks to population controls of various sorts.
A lot of the massive growth in industry of the past century has been driven by the need to keep up with the vast numbers being added to the population. With the population growth tapering off, will there be as much need for industry? Will new industries be created that need more and more workers?
But that’s all a tangent, though an interesting one. My main point, refined and summed up:
We have been working to increase productivity for hundreds of years now. One of the main goals of this increase in productivity has been the reduction of human involvement in the production process. Another effect has been the creation of new industries. Will productivity ever rise to the point where resulting job losses can no longer be offset by the creation of new, incresingly efficient industries?
And what do we do then?
I know I bowed out, so I’ll not comment on the continuing conspiracy expose. However, I thought js_africanus deserved a response.
I understand. I agree. However, in order to claim that “There is still no distortion of incentives” you have to define the costs such that taking the 2 rats from you is not a large expense. I’m not trying to add any variables except to illustrate that your illustration is not very encompassing. But if you change your assumptions a little bit, namely that you only need 1 rat a day to survive, then I don’t understand how you can maintain that a tax of 2 rats a day is not a large burden on your efforts to survive. Obviously it is still the optimum solution to catch 3 rats in order to have the 1. 1 is still better than none, after all. However, I don’t understand how you can suggest that the taking of the 2 rats is stil not a distortion. Perhaps I am misreading your intention.
I understand that finding the maximum on a curve does not require that the curve be far up the graph or low down on the graph. I get that, I really do. However, when you apply a model to the real world for predictive purposes, you may, in fact, need to consider where on the graph that curve lies. Specifically, if the entire curve lies beneath the point where action along that curve is profitable, then it does not really matter where on the curve the maximum is. The maximum in such a case is simply the least unprofitable.
I may be misreading your point, but it seems to me that you are saying that taxes are not market distortions regardless of how they are applied or how large they are. Can you clear that up for me?
This is my worry also. Ever more automation, the increasing use of robots and doing the job yourself (self-service such as checkouts in stores, changing your own oil, etc.) will eventually result in an economy where unemployment is and stays high. And I am not talking about 7 or 8%. I’m thinking more like 50% unemployment!
If we try to cut the birthrate to compensate for less work (one child per couple anyone, ala China?), then there won’t be enough younger people to support retirees, who because of technology, are living longer and longer. Maybe this is why Bush has suddenly decided that we need to get back to the Moon and to Mars. We can always send the unemployed there. 
Pervert: I think the problem you are having is that you are trying to take an example that is simplified to its roots to illustrate a concept, and then complaining that it’s not complex enough.
I don’t think js_africanus is saying that taxes do not modify supply and demand. He’s not addressing the psychology of taxes or the disincentive effects of subsidies - it’s outside the scope of the model he’s trying to get across, which has more to do with efficient pricing and tariffs.
I’ve written a ton of messages about this before - prices carry the critical information regarding the supply and demand of goods and services. When you manipulate prices directly through tariffs or caps, you destroy this information. Producers no longer know how much of something to make, and consumers no longer know what the ‘rational’ price is for something. From an information-efficiency standpoint, it is far better to seek to address social issues by leaving prices alone and simply offering social assistance to people who need it.
Now, the social assistance distorts the economy as well, but it doesn’t break the price mechanism. Prices may change as the result of a subsidy, but the price itself still accurately reflects the supply and demand of products, and therefore allows us to rationally manage them.
Take, for example, rent control. Let’s say we start with a problem - poor people can’t afford housing in New York. Now, we can solve that problem two ways - the first would be to give poor people rent credits that they can apply to the apartment of their choice. The second would be to artificially fix rent prices.
Let’s look at the two options: First, subsidies. Sure, if you give people rent vouchers, the demand for apartments will go up. So prices will rise somewhat. So definitely, your subsidy will cause price movements. HOWEVER, the prices still accurately reflect supply-demand. All you’ve done was increase demand, and let prices work.
Under this system, people still have an incentive to find the lowest-cost housing they can. And the increased rent prices stimulate production of apartments to meet demand. Eventually, a new equilibrium price is reached which reflects the new supply and demand relationship between apartments and renters. The market still functions.
Now look at rent controls. By fixing the price of rent, you break the informational content of prices. Rent no longer reflects the real demand for housing. Now everything goes to hell. Producers can no longer measure the demand for apartments (which they would normally do by raising prices until their apartments on the margin go unrented), and prices can’t rise to give them an incentive to make more apartments. Consumers no longer have information about the relative costs of apartments in different areas. They have no incentive to seek cheaper alternatives. The end result is shortages of apartments and ‘irrational’ use of resources by consumers.
This is the fundamental difference between the two scenarios. Both are intrusions in the marketplace, but the first is of a wholly different class.
Tariffs are an example of the latter form of intrusion. By artificially modifying prices, you screw up the functioning of the market at a very fundamental level, rather than just pushing it in various directions as you would with general taxes and welfare.