T.D.C.o.t.E: Persistence of Idiocy in Economics

Recently there's been a lot of ink spilled in the financial press about what responsibility, if any, should be acknowledged by economists regarding their role in not sufficiently anticipating the onset or the extent of the current economic crisis.  Sometimes reading this stuff is exasperating to the point of annoyance, or even anger, like when Alan Greenspan gives his suggestions for fixing a financial system he obviously had a huge role in destroying.  But nothing has made me more angry recently than a piece I saw a week ago.  At the time, I didn't even think it was worthy of a response (I know, not that a response from me would matter a whole lot, anyway...).  But all week it weighed on me: how was it that such a terrible piece could be taken seriously by anyone in the first place?

And taken seriously it was: The

opinion piece, "Tax and Spend, or Face the Consequences," by UC-Davis economics chairman Gregory Davis, was linked to by at least three of the most visited econ blogs: (the usually good) Economist's View, (the usually awful) Marginal Revolution, as well as (the always pompous) Brad DeLong, and I also saw it on the Economic History Blog.

Clark has recently written a book, A Farewell to Alms, which is a silly and preposterous title, as anyone who has had to fight his way, as I just did moments ago, through city streets full of beggars and (far more annoying) solicitors for charities.  But his book purports to be no less than "A Brief Economic History of the World."  I managed to make it through about fifty pages before almost throwing the book out the window in disgust: his crass technological determinism coupled with institutional Malthusianism does a disservice to serious research in economic and technological history. But this book isn't what I want to talk about here: I'll confine my remarks to the article.

Clark's basic line is that technological change will force society, or "us"--whoever that may denote--to choose between subsidizing a growing number of "socially needy but economically redundant" people, or "confront growing, unattended poverty."  After seeing off the current financial crisis as a "minor blip," Clark opens his piece by stating where the real challenge will lie:

Despite the nonchalant tone in which this simply unacceptable--morally speaking--idea is couched, it is hardly a novel one: serious scholars like Richard Sennett (but he's not an economist, only a sociologist...) have been researching and writing about the plight and diminishing prospects of the modern "precariat" for some time now.  But, to Clark, there's nothing to do about it: consumers' preference for technology, presumably, simply demands massive labor-saving substitution such that only the most "skilled" will be able to outperform machines.  So the challenge for policy will be reduced to figuring out a way for the "winners"--those who still can command an ever-increasing premium on the labor market, as well as those who have benefited from previous accumulation--to basically pay off the losers, and make them, for all practical purposes--except as consumers--simply go away.  Will the "winners" be politically astute enough to buy off the rabble?  Or will they risk unrest by failing to stump up?

As I said, Clark's nonchalant tone in outlining this nightmarish scenario is noteworthy: I suppose it has something to do with his idea of being a detached "scientist".  And in his notion of economics, any idea of an intrinsic dignity to labor certainly doesn't trump consumer preference, and the associated notion of labor as simply a means to the former.  As for faith in the power of social movements, he seems to have none.  But, then again, I don't have a whole lot these days, either.

Many of Clark's arguments are just plain silly.  At almost every turn he makes the most unacceptable or plainly misleading generalizations.  For example, consider the following:

He makes no mention here of the labor movement, or of the perhaps more important fact that the requirement on the part of competing states and empires to maintain mass armies between the 1860s and the end of the Cold War (in many places) dictated that generous welfare policies, involving active (though insufficient) government efforts to keep employment rates as high as policymakers felt possible (given their other economic goals and assumptions), would determine employment levels as much as, or, at times, far more than levels of technological change alone.  Both the labor movement and mass conscription are pretty much things of the past now.  But it is arguably this lack--far more than demand (by whomever) for technology that is leading to the situation Clark so nonchalantly remarks upon. But this sort of thing is a social phenomenon, and one that can conceivably be changed by the actors themselves, as well as committed, activist intellectuals--not detached "scientists".

And then there's this beauty:

Modern society seems comfortable with the rich and poor living in vastly different housing, eating disparate qualities of food and facing radically dissimilar crime risks. No one pickets four-star restaurants because they feed only the rich, or the Waldorf Astoria because only the wealthy can afford to sleep there. But when it comes to medical care, Americans display strong ethical resistance to having the poor receive a substantially inferior product. (Just recall the outrage a few years ago when news reports emerged of Los Angeles hospitals discharging poor patients onto city sidewalks.)

Just this week, many Americans have shown that they have no problem with the idea that the poor receive worse or no health coverage at all.  For what such polls are worth, The Financial Times reported earlier this week that "[s]upport for Mr. Obama has dropped furthest and fastest among people earning between $60,000 (42,000 euros, 36,000 pounds)and $89,000 a year--those who are likely to have health insurance and fear that they may face higher taxes to pay for the extension of coverage to the almost 50m Americans without it."

Then, a couple of lines later, Clark says that the "United States was founded, essentially, on resistance to taxes."  This is a simplification of the most boneheaded sort.  America was founded on free land for increasing numbers of settlers.  The British wanted the settlers to pay for the increasing cost of protection as they expanded the frontier and decimated the native population (the factor that made the land free).  This was the taxation the Americans resisted.

But the true awfulness of the article concerns Clark's policy prescriptions.  He confines these two a choice between two: increased access to education and, as mentioned before, paying off the economically redundant via transfers of wealth.  Clark brushes off the education option because of one thing, and one thing alone: grade inflation.  He actually seems to be saying that a perceived prevalence of grade inflation in US schools means that any attempt to increase access to education is bound to fail, and will be unable to halt the relentless capital substitution demanded by the stern taskmaster technology.  As if cost inflation in education alone had no part to play in this process!  Indeed, it's arguable that the grade inflation is part and parcel of an educational system built on profit, just as medical inflation is the result of largely for-profit medicine: the need to graduate more students to keep the tuition dollars flowing in is a consideration regarding higher educational costs just like the need to order the most expensive tests is to medical finance.  Also, if Clark wants to mention grade inflation, he should also consider the inflated value of much of the teaching that goes on.  He may want to start by examining his own....

And then there's culture.  Clark's seeming emphasis on the primacy of revealed preference causes him to neglect completely the role of the culture industry in dumbing us down, well before schools and universities can work their grade magic.  I remember seeing something in the British press which may serve as an instructive anecdote here.  Some children's program producers were having a party for their kids, and a dressed-up version of one of their creations came in, and was recognized by none of the children.  The parents, who would, no doubt, be classified by Clark as "winners" and, as creative artists, relatively unlikely to be replaced by machines, actually shielded their own children from what they produced.  "Do you think we let them watch this garbage?" I think was what one of them said.  It's a cliche itself, but cultural fast food, like that of the real variety, affects different segments of the society in vastly different ways; and some have no choice but to consume it, while others have whole worlds available, even if they themselves consume their share of the junk.

So that leaves the only other option: paying off the losers.  Clark actually ends his piece by quoting Marx: "Unfortunately, such measures are only stopgaps. In the end, we may be forced to learn to live in a United States where, by stealth, "from each according to his ability, to each according to his need" becomes the guiding principle of government--or else confront growing, unattended poverty."  But to my mind, the biggest error of all in his  analysis is his complete disregard for the essential role that the undereducated play--and will continue to play--in our shamefully wasteful economy.  Far from being increasingly redundant, as Doug Henwood has remarked, a good amount of the leading employers of the next decade will be industries in which low levels of skill (or of formal education, anyway) will be required: health care, retail, telemarketers, security guards, receptionists, et cetera.  According to Henwood, "a quarter of the new jobs will require a bachelors degree or more--but almost twice as many will require no more than short-to-medium term on-the-job trainning.  Three quarters will require less than an associate's degree."  And he's looking at US Bureau of Labor statistics for 2000-2010 (in 2003).

Now this is precisely where Clark would say that the inexorable force of technology will reduce these exceptions rapidly, especially in the wake of a financial crisis that has hit some of the listed industries, like retail, very hard.  And 2010 is, after all, only next year.  But I don't know how soon it will be before technology will be cheaper than humans in performing many mundane tasks, even if machines are better.  There's much talk in Japan about deploying robots to service their rapidly ageing population in a few decades, so that they won't have to rely on unwelcome immigrants.  Given the financial state Japan is in now, and the fact that the famed Japanese saver has gone the same way as the almighty Yen, I wonder whether or not even the most jaundiced Japanese retiree will have enough money to pay for the services of a perfectly good robot in a score of years or so.  In fact, I'd put my money on the unwelcome immigrant.

But there's a deeper problem than this, one that's totally unappreciated, to my mind, by just about everyone, in terms of its ramifications for society.  A big reason, to my mind, why the relatively unskilled and uneducated are so important in our economy is the fact that as providers of services like security, child-care, home maintenance and so on, they actually provide the wealthy or more competitive workers with the means to increase their competitive advantage (and that of their progeny) over rivals and, needless to say, the less well-endowed.  So it is they, and not just the technology, that allow the best off, many of whom work (unlike earlier elites) incredibly demanding schedules, the time to successfully take in what they need to in order to compete at the highest levels.  And this while, at the other end, the rudimentary provisioning of the same sorts of services to the less well-off is becoming de-funded (if it's public) or prohibitively expensive.  In this sense, many of our celebrated service workers are performing a social function that is more regressive than their counterparts, who worked as domestics in Victorian times.  And if the kind of technological growth Clark envisions continues apace, it is arguable that the place for these "unskilled" workers, anyway, will become more--not less-demanded.

And there's one more thing.  Clark doubts that increased efforts to improve education and access to it will result in capacity-building to a degree that it will be able to offset technological change.  But, as I mentioned before, Clark seems to see no role for the unwashed themselves to rise up and demand more dignified treatment, and a bigger presence in economic decision making.  I lamented that this is unlikely, under present conditions, to take place in such a way as to prove Clark wrong politically speakin g.  But it may come true in a more sinister way.  Much of the more publicized "debate" on the health care issue has taken the form of the aggressive assertion of claims that are patently untrue.  It's hard for me, sitting in my stifling little room in Cambridge, Massachusetts, to gauge how prevalent these sentiments really are amongst the population, but it's clear that two things are responsible for much of the phenomenon: poor education and the popularity of corporate hate-radio and hate-media amongst the relatively poorly-educated, and especially among those who have suffered most from job losses.  If these people were to be paid off, as Clark wishes, to remove themselves permanently from the labor market, would that not potentially lead to the formation of a culture politics of a very dangerous variety?  Already the health care issue has shown that, like the Iraq war, warring elites are incapable of doing what needs to be done to keep their gravy train rolling; and that they rely on the active solicitation of cultural warriors to fight their increasingly destructive cultural wars.  And, after the healthcare mess goes its ignominious way, there's the climate change issue; and, as the Financial Times reported last week, the oil companies are trying to corral folks for the interminable "town halls" that will take place then.  But for the "detached scientist" Clark, these things are of little consequence.

It's hard to believe, that in a time as desperate as ours is, that people can stomach this kind of detached, and yet utterly misleading twaddle.  Why do we listen to these people?