Posner, Clark, Efficiency, and Economic Hematoma

Judge Posner has a blog entry entitled “Decline of U.S. Manufacturing” that, coincidentally, touches on some issues I mentioned in my prior post, “Technology and the Future of Work.” He, more lucidly, makes a point that I was sort of groping toward: there is nothing magic about having your workers employed in manufacturing versus some other kinds of work. After all, our economy did not become unsustainable just because Americans, by and large, left agricultural work to work in manufacturing jobs. By extension, there is probably no reason to believe that having Americans leave manufacturing work to work in service jobs is inherently any worse of a problem.

The decline in agricultural employment is a product of technological advance, and likewise the decline in manufacturing employment. Subsidizing manufacturing will no more increase employment in manufacturing than subsidizing agriculture has prevented the precipitous decline of agricultural employment, for a manufacturing subsidy will be used to speed the automation of manufacturing tasks and so accelerate the decline of manufacturing employment–unless the subsidy is conditioned on increased employment, which would would mean diverting workers from more to less productive work. We would not be better off if 40 percent of the labor force were in farming rather than 2.5 percent, or if 28 percent of the labor force were in manufacturing rather than 9 percent.

(emphasis added).

The problem is that we may not be diverting workers from more to less productive work. The workers themselves may not be engaged in any work at all. If we made a subsidy contingent on increased employment, we may well be requiring that the manufacturing be performed in a less efficient way. But, we’d be doing this to give the individual worker a basis for staking a claim to some of the value created by the production. This is less efficient, but it may be necessary so long as: a) we know of no more productive work that the individual worker can do; and b) we require work as a basis for making a claim for income.

That latter point touches on the issue discussed by Fred Clark in his reflections on John Kenneth Galbraith’s “The Affluent Society” which I summarized thusly:

Galbraith discusses the Puritan origins of a moral imperative to work. Goods were vitally necessary; the loss of available labor to produce those goods was extremely detrimental to society; and, therefore, the penalty – deprivation of all or most of an individual’s income – was appropriate. The penalty was so justified that there was no moral obligation to help someone who wasn’t helping themselves by working.

Now, in a world awash with goods, the loss of an individual’s productive capacity is incidental but the penalty remains almost equally severe – even where the failure to work isn’t through sloth but through lack of obvious opportunities. And, yet, the quest continues for a moral justification to allow the affluent to settle into a comfortable disregard for those not sharing in society’s affluence.

You get an economy that’s working very efficiently. But, because the world’s necessities can be created by a relatively small percentage of the population, the vast income generated pools in relatively few places; sort of a hematoma of the economic circulatory system. To remain healthy, the body politic needs good circulation, else part of it becomes gangrenous and poisons everything else. If possible, we need to find more productive work for our citizens. Otherwise, we need to figure out some other way for allocating some part of the economic flow to idle citizens.


  1. Jason says

    According to Star Trek, this is close to the point where we eliminate money and take on careers that better humanity.

    The transition appears to be a bit more complex, though. Roddenberry never quite explained how we got from where we are to where his vision was.

  2. says

    Actually, some of the Trek books (and this is where I confess my geekdom) state that it was the advent of replicator technology that enabled a largely cashless society. After all, when a machine can create nearly anything you want seemingly out of thin air (actually raw materials reassembled), what value is there in labor? Those who craved labor tended to move to pioneer planets.

    We are a bit far away from replicator technology however, to say nothing of interstellar travel.

  3. MartyL says

    I guess we’re living in SF times; Doug’s analysis made me think of P.K. Dick’s “Solar Lottery”. But then I’ve become worried the P.K. Dick was some kind of prophet. Yeah, that’s frightening… Here’s a link if you haven’t read it.

    (Comment modified to embed the link for formatting reasons. —Doug)

  4. Jack says

    Several good points presented. Many many manufacturing jobs are gone and many more will go the way of automation/technology. The recent (?) recession may well be the forerunner of companies reducing human activity in their manufacturing process. The “normal” level unemployment and under employment may well have a different level than what has historically been thought of as “normal”. Answer—have no clue and being at an advanced age it is a problem for generations of which I am not a part of.

  5. Carlito Brigante says

    Theories of wages are widely divergent. But many economists in the last century argued that wages for general labor would always be close to a subsistence level. Only in times of labor shortages, have wage risen and rent above and beyond a labor wage have been paid to labor.

    Productivity increases have been great in this economy, but they do not translate into higher wages. They are retained by producers as higher profits. In the current economy, with wages stagnant, unemploymen high, wealth increasingly concentrated, many will be relegated to subsistence living in the wealthiest economy in the world.

  6. Matt says

    The mention of Puritans and wages reminded me of a history schoolbook from about 1860 (the Civil War hadn’t happened yet) that I ran across at my in-laws’ house. One of the things that I thought was very interesting was the overt bias towards capitalism. This is me, a 21st century American, noticing a bias towards capitalism.

    One of the examples the history book cited was the Puritans (I think… it could have been another colonizing group, but I think it was the Puritans). According to the book, the Puritans came over and initially tried to do everything communally. Because no one profited from working more, people generally didn’t work that much, and a bunch of people starved. At some point, the colony allowed private land ownership and BAM everyone had enough food. Capitalism saves the day!

    A couple of things impressed me about it: one was the obvious bias towards capitalism. The other was how the story of the Puritans was different in this book, vs. the folklore that I remember from growing up. It’s interesting how 150 years changes the slant on the story, and it’s a good illustration of how the story-teller can use the same events to reach different (though not necessarily opposing) conclusions.

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