Way back when Smurf tried to tell us (on Jololoyn’s blog) that people attempted to maximise their income. I turned up in the comments to point out that no, the assumption is that people attempt to maximise their utility. He accused me of an ad hominem for correcting him.
Today:
A thought, inevitably, occurred to me as I was wandering around. In economic terms, model making (and many other hobbies) must be amongst the most unproductive things we can do. Vast amounts of effort is usually put into very small quantities of material input with a result that, if it were to be sold, rarely reflects the value of that time. And yet, what is produced is of great value to those making it.
This is virtually the exact opposite of what the economist values. They want to minimise labour input into any product, always seeking to maximise the material input instead. The result is a profoundly homogenised product that they actually say has only marginal value.
No. The economist says that people attempt to maximise their utility. Utility being that whatever combination of whatever makes the person happiest given the constraints faced. The economist absolutely is not attempting to say that maximal material output is desired. Further, labour minimisation isn’t an assumption nor an insistence either. If people like spending their time that way then bully for them. Granny knitting the booties for the new babbie might well be an inefficient use of time in clothing the baby. But that’s not in fact the point at all, it’s a demonstration from Granny as to how much she values the new babbie.
Economics, standard, neoclassical, straight out of the textbooks economics, already deals with all of this. But the ‘Tater hasn’t read any of the standard textbooks which is why he’s so ignorant on the point.
Where economists do go on – and what leads to my standard insistence that jobs are a cost, not a benefit – is that *if* you wish to maximise output *and* you face a universe of scarce inputs *then* labour minimisation is a good idea. Something that’s obviously true. Also something that leaves room for knitted booties, hobbies and even, sigh, model railway enthusiasts.
Further thoughts followed, of course. One was that until we cure the world of the economists’s obsession with productivity that maximises material input in proportion to labour cost we will not solve three problems.
Innit great? By not knowing the basics he then starts to design the new world.
One is sustainability. Productivity as defined by economists demands we consume ever more material resources in proportion to human effort. We know that is not possible now. It is, literally, killing us.
Entire fucking cretinism. You can – and we do – have the productivity of anything at all. The productivity of, say, gold. We used to plate connectors in computers to 200 nm. Now we do so to 2 nm. We’ve raised the productivity of the use of gold in computers. We now use *less* gold to make any given number of computers. We have *increased* sustainability by doing so.
Or, another example and one that surprised me. Iron and steel use in the US. This is now down to 1906, 1908 sort of levels. Tens of percentage points below peak usage in the 1950s. No, that’s not per capita, that’s not per unit of GDP. That’s a near doubling (??) of the population some three or four times richer (??) using less iron and steel in aggregate (yes, including exports and imports and before the effects of recycling, so iron ore use has fallen much, much, more). That’s an increase in iron and steel productivity.
Because Spud’s just ignorant he thinks “productivity” means “labour productivity”. Which is wrong. Which is why economists talk about “total factor productivity” of course.
Cretin.
Second, we need find ways to create meaningful work, which seems to me to be one of the great problems of our age. David Graeber described the world of work as being full of bullshit jobs. I would simply call them shit jobs, because that is what they are.
Yep, just think of all of those labour hours that go into country by country reporting. Soul destroying work for no added value whatsoever. Or gender pay gap reporting, or the $4 billion the SEC says blood mineral reporting cost in just its first year. We should certainly do away with all of that.
Third, public services and most things of value are destroyed. I refer, of course to what is called Baumol’s Law.
What this economic law says is that as the private sector improves productivity, as it has been able to do by destroying the planet and creating shit jobs, those engaged in the public sector, the arts and other creative sectors like education have not been able to match those productivity gains.
Oooooh, well done. Misunderstanding Baumol as well! Because of course shit jobs don’t improve productivity. Therefore they’re not an exemplar of Baumol – unless we’re to say that the public sector has more of them.
It’s also not between public and private sectors. It’s between manufacturing and services. Given that 80% of the UK economy is services this is not, therefore, a public/private split.
However, wages in the private sector have risen over time because productivity has increased. As a result those in the public, creative, education and other such sectors must do so as well or people engaged in them will have to move to the private sector. Politicians miss the point when they demand increased productivity in exchange for those public sector pay rises: that supposed increase in productivity actually destroys the service the public and other such sectors supplies.
And now really misunderstanding Baumol. Who did not say that services cannot become more productive in their use of labour. He said it’s more difficult. Technological change still makes it possible. Think before printing. Exaplaining algebra relied upon one to one attention. Now we can print books. So, at least some children can learn from the book not requiring one to one attention. We’ve increased the productivity of labour in explaining algebra. We invest aspirin and we no longer require the comely maiden wiping fevered brow with damp cloth as our only solution to a headache.
More difficult, slower, is not the same as impossible.
The reality is that the public sector cannot and never will match productivity gains that can be achieved in the private sector as a result of destroying the planet.
Services, not public sector.
But that does not mean we should abandon public sector services as unaffordable, which is the supposedly logical consequence that economists now says follows from this because those services have, apparently, become unaffordable.
But no economist does say that. Instead there’s rumination on how we might improve services labour productivity as best we can. Baumol is indeed one of those constraints we have to work within. Great, that’s what economics is, allocation in a universe of scarce resources. So, how best do we do that?
Can we expect politicians to get their heads around this very obvious idea? Or should we accept that what was once entirely affordable is now not so entirely because the costs of trashing the planet are not taken into account in economists’ (and accountants’) estimates of productivity?
What is it to be? A sane economics that says we must stop trashing the planet so that we not only have a chance of survival but also can have the things (like the NHS) that we value, or are we to just live in a literal throwaway society where everything of worth is going to end up abandoned and destroyed?
We could start by employing economists who actually understand economics…..
For example, if we increase the productivity of labour in services provision – even if it’s all in the public sector – then we can enjoy more services (more public sector output) without trashing the planet. So, we’d really rather like to increase labour productivity in the provision of public sector and services output, wouldn’t we – it’ll make us richer.
This will be news to diamond cutters.
This is so absurd in so many ways that I wonder if it was an attempt at satire? The type of drivel a first year college student might spew.
“The reality is that the public sector cannot and never will mtch productivity gains in the private sector …”
Ridiculous – the public sector can match productivity gains in the private sector simply by demanding that public sector employees adopt the work ethic seen among the self-employed and workers in small businesses.
The multitude of complaints by current and former public sector workers about shirkers demonstrate this (and the existence of Capita and other outsourcing firms whose only excuse for existence is that they can do work for the public sector cheaper than the public sector can do it in-house is further evidence).
Gee – that’s the first time I (or anyone else in the world) has heard that claim. Producers generally try to minimize both labour and material inputs relative to the value (not quantity) of the output, and optimize between the two. Economists have recognized this since before the subject was called ‘economics.’ There really are some third-drawer institutions that would hire a fatuous little twat like spuddo, aren’t there?
Further to the above, David Thompson notes that City University (who saw fit to to retain the spud – for a couple or three years, wasn’t it?) have now confiscated the research data and prohibited publication because some areas of inquiry are “too dangerous.” There’s a truly sorry example of abject institutional failure.
I’m curious whether the effects of labour unions who are omnI present in the public sector also contributes to low productivity growth there. Driverless trains? You’re having a laugh! SatNav for district nurses? You need a massive purchasing department and a rigorous long drawn out tender process for that! Typing courses for Doctors? That’s not something medical so they can refuse (old ones at least!). More doctors? Nope as that reduces wages but you can’t insist on productivity improving activities as they are gods in their own domain. Etc wtc
So a study about lack of free speech about gender in academia and academics being afraid to speak out for fear of sanctions has lead to the research being blocked and the researcher fired
I sometimes wonder if God became bored and asked Orwell and Pratchett to collaborate on the script for a while
“academics … who identified as feminists”
So you don’t have to actually be a feminist, just identify as one.
City is treading on very thin ice there…
Will be ….interesting.. to see how that one pans out.
Having worked for HMIT (as was) for 10 years and then spent 20 years in the private sector I know this.
In the private sector you work extra hours, late evenings, weekends, whatever if a client needs something doing urgently or if you have a lot on at the time. I was in work for 5 or so hours earlier today. There was no expectation of ‘overtime’ for this – although one place I worked at did pay overtime for the December/January tax return season but at Senior Manager and above that was only if you did more than 10 hours extra in a month.
At HMIT you worked your hours and no more. If there was a backlog, there was a backlog. There was no sense whatsoever that it mattered if things were turned around quickly. Overtime had to be ‘approved’ by management. There had to be a case made for it. The only occasion I was aware of it ever being approved was when one (married) inspector approved Sunday overtime for himself and the co-worker he was having an affair with. Ingenious but I don’t think much inroad was made into the work backlog.
Some parts of HMRC work today do have statutory response times (applications for clearance are assumed to have been granted if HMRC don’t respond to the contrary within 30 days). If these don’t apply it is currently a lottery whether things get dealt with in weeks or months. Or years. Or not at all.
Tim:
“The economist says that people attempt to maximise their utility. Utility being that whatever combination of whatever makes the person happiest given the constraints faced.”
I agree that Murphy understands nothing. However, this assertion seems unfalsifiable.
People maximise their utility. So anything they do, no matter how odd, must be maximising, because otherwise they would do something else. How do you know? See the first sentence.
john77:
“the public sector can match productivity gains in the private sector simply by demanding that public sector employees adopt the work ethic seen among the self-employed and workers in small businesses.”
I don’t think it works that way. You increase productivity by someone having an idea and then trying it out. If you end up with it costing less, then it gets adopted – assuming that something else isn’t made worse as a result. If it is, then you make a judgement call, and you are either vindicated or not.
Work ethic is an indirect means of doing this. Sometimes you can see that someone is not doing all they can, but often you cannot. Sometimes the problem really does require someone to sit and think; meanwhile they look like they’re doing nothing.
The big problem with having something done by the public sector is that there is no cost pressure; no competitor trying to do it a different way. Often the public sector actually bans trying different things as being a waste of resources – which is true, many ideas are wrong and a waste but you can’t know until you try.
We are to some extent seeing a “winner effect” with the private sector because firms that try the ideas that are a waste tend to go under (at least unless they get “too big to fail”).
So a person who was paid to teach economics at university appears very likely to fail a GCSE on the subject.