Brad DeLong's Semi-Daily Journal (2004)

There is now way to know what wages will do over the next 5 years. The wage gains do outpace inflation when the cost of oil and other imported inputs are factored out. If we could get the fed to raise rates (0.25% per quarter for the next 18 to 24 months)sooner rather than later the rise this will cause in the Dollar will bring down energy cost and curb the rising inflation.

Some real life examples of the state of the economy: In my profession (commercial and educational sales of audio visual equipment) manufactures have so vastly underestimated demand for equipment that nearly every project big or small is held up by some type of product back order. While this is inconvenient, it is encouraging because I know that I am not the only salesman out there making sales. Further 2004 will surpass 2000 in total sales the largest in the history of my industry.

I thought Niskanen was being a bit overly pessimistic, too - unless he's assuming the Fed will eventually fall into the liquidity trap (next cycle, if not this one) and will be unable to hold the unemployment rate at or below NAIRU.

But from George W. Bush's perspective, what happens over the next five MONTHS is what matters, not the next five years. And over that time frame, Niskanen is almost certainly correct.

I'll say it again: the Bush economic policy is an unprecedented success. Huge productivity gains, and all the proceeds have been channelled to the wealthiest 10%, and now a Republican economist predicts more of the same, attributing it all (of course) to various impersonal "trends".

The redistribution in the first Reagan-Bush 12 years was pretty substantial, and Bush II is way ahead of Reagan's pace.

The Republicans are not aiming at the same target as the rest of us; let's not be surprised when they hit the target they are aiming at.

What are the components of the CPI?

I remember the housing components getting reduced in the late 70s/early 80s, because it produced increased CPIs when the Fed raised interest rates.

If housing continues to grow (I don't think so, I'm of the bubble mind set), it makes it even worse, because IIRC, housing is under represented.

Kerry is promoting an increase in the minimum wage. This is long overdue. Small businesses that want to pay a living wage should not have their hand forced by big chains paying slave wages. Raising the minimum wage would level the playing field. (As a bonus, it would boost SS receipts).

And what's to stop that "unprecedented" shift from labor to "property"? The Unions? Hah. Competition for labor? But with outsourcing as an alternative?

On an anecdotal basis, seems to me that that's a shift favoring "property" is what's been going on for some time now. Glad somebody noticed, even if he had to be somebody from the Cato Institute.

If a job is sent over seas at a lower wage rate, this is included in the labor "productivity" increase, how pray tell does this lead to higher wages. "Productivity" increases really are only higher profit margins, I fail to see a connection between them and higher wages, except for an inverse relationship. Indeed all this globalization and productivity has not led to real wage increase in the US.

If a job is sent over seas at a lower wage rate, this is included in the labor "productivity" increase, how pray tell does this lead to higher wages. "Productivity" increases really are only higher profit margins, I fail to see a connection between them and higher wages, except for an inverse relationship. Indeed all this globalization and productivity has not led to real wage increase in the US.

Matthew, i'm no expert on this, but i recall reading some discussion a few months back that housing is under-represented in the cpi currently because there is the imputed rent calculation, and rents are so much lower than housing prices compared to historic relative norms....

sidenote: I recommend everyone see the new doc
'The Corporation'.

High praise: this is the most devasting critique *imaginable* on the false naturalism of free-market corporate capitalism. Jeez, even The Economist was impressed.

Well, Niskanen doesn't specify which "average" he's talking about, but if you're concerned about the impact on the electorate, mean wages aren't very interesting. If he's claiming that median wages aren't going to grow in the next 5 to 10 years, he's not exactly going out on a limb here. Why should they grow in the upcoming decade - they didn't in the previous three.

The measure of real wages that the article seems to be focussing on -- real hourly earnings -- hit an all time high in 1973. Since then productivity measure Mr. DeLong quotes is up more than 75%.

Evidence that there has been a spectacular disconnect between real wages and productivity? No. Evidence that the real hourly wage measure is flawed.

The only thing that _ever_ drives up labour's relative share is scarcity; either of labour in general (periods of rapid expansion like the post-War 50s, or extreme shortage, like the post-Plague 1350s) or specific skills (what computer programmers used to be able to get paid).

The whole _point_, the entire corporate point, of globalization is to prevent there from being any kind of labour shortage ever again.

This is policy; it's a diffuse, distributed, non-governmental policy, but it's policy all the same, and it's effective, and it's succeeding.

You can have a Guardian model economy, which exists to get all the wealth -- conceived of as a fixed quantity -- concentrated and protected; you can have a Trader model economy, which exists to broker and distribute access to choice.

We're in the middle of a fight about which kind of economy we ought to have; the folks who want a Guardian economy are winning, in part because they're such effective liars about what they're actually trying to do.

(_Sane_ Guardians want a Trader economy that agrees to be taxed in return for government services; they've got all these lovely clear historical examples about what happens when you put a Guardian economy and military up against a Trader economy and Guardian military.)

The idea that there is one natural kind of economy, which of course acts to benefit everyone, is to my mind distressingly naive; the reduction of the relative economic share of wages is deliberate policy, long sought and actively pursued.

The effect of labour scarcity is of course why sensible governmental policy would be to create a _real_ labour shortage; not a severe one, but a real one, instead of the artificial surplus of globalization or the artificial scarcity of strong traditional labour movements.

Maybe Jeremy Rifkin had a point after all? Technology, and productivity growth in general will tend to decrease the number of workers necessary to perform any given function.

Technology and productivity growth will indeed tend to decrease the number of workers necessary to do any particular thing, yes.

The question I mentioned above can be considered as "when this happens, does the economy as a whole think the appropriate response is to reduce the payroll, or to do more kinds of stuff?"

Jane Jacobs talks about this as city economy import replacement -- you learn how to do new stuff, you start making what you were importing, and then you start importing *new( stuff, keeping your import expenses roughly (proportionately) constant, so that the amount of choice in the city economy goes up.

One of the problems with the corporate profit model is that it is a measure of economic performance which divorces itself from any sense of location; the whole import replacement, increase of choice process is invisible to it.

This is not likely to have good long term effects; you get what you reward, and the entire system is set up to reward wealth concentration, rather than the increase of capability. And, in effect, the maintenance of the social status quo; real economic progress inevitably _oversets_ the social status quo, by created new groups of wealthy and new groups of prosperous people.

The way to get _really_ rich is to ride a major change; canals, steam, IC engines, personal automobiles, personal computers, there's a lengthy list of examples. So if you want to keep your social status intact, you are against major economic progress, because -- no matter how economically beneficial -- it will lower your relative social status, even as it increases your absolute wealth. This is one of the places where the concerns of a gregarious plains ape aren't all that suitable to a technological culture.

I admire the scope of Graydon's last line.
We were poor then, but we were happy (swinging from the trees).
You think we should do something about the increasing disparity of income distribution because our genetic heritage is endangered? I do admire the leap over 'what enhances America' and even 'what endances Weatern Civilization' but to think of the lineage of the gregarious ape ...I am speechless.

Or: we will slowly tranmute into people who really don't care much about material status, so long as basic needs are met. That is related to Schumpeter's argument; sort of the other side of the Enlightenment. Can we head into a Star Trek future, where there's no system of money, but people still strive to be the best at fixing the warp drive engines? Certainly the tendency is already there: the love of learning for its own sake in children; our occasional attempts to redistribute to the poor and working poor.

The current trend won't continue as long as America remains a democratic republic. If all the productivity gains continue to be channeled towards employers, the candidates nominated will make John Kerry look like a rock-ribbed conservative.

Calmo --

That's what we are, plains apes specialized to gang up on problems.

(I doubt our ancestors were especially happy, hiding from leopards. It's just where we did actually start.)

We're extremely good at ganging up on problems, too, but the constraints on the available solution set -- the stuff that will really work, rather than the stuff that would work if only people were rational actors, or statistical abstractions, or only mildly divergent from a single central ideal -- include the gregarious plains ape, and the gregarious plains ape's insecurities about band status and being cast out to be food for leopards. Relative status is inescapably important; how relative status is constructed is (thankfully) social, and not immutable.

So it's not our genetic heritage, at all, that mostly immutable thing (so long as there are lots of us, and we don't set out to edit it); it's our cultural heritage, the toolkit of extelligence that defines the problems which we are presently able to solve.

What we have, as individuals and polities and as a species, the power to do. The answer to "What problems can we gang up on in the expectation of success?"

Their understanding of "we" in this context of the -- quite literal -- social construction of power is one of the reasons to so heavily criticize the American neocons, and the general corporatist agenda. They claim to be deeply concerned with the clear-headed exercise of power, hard numbers, simple facts, and yet are so blitheringly incompetent that they are unable to extract from history the awareness that the way to _absolute_ power is technical progress, for everybody -- the broad "we" of "We the people".

Yes, you lose relative power, relative social status, by the train load; the complexity handling to get your complex, capable, co-operation-of-billions culture to work means you have these pesky things called due process and the rule of law, so you can't argue for being a different type of creature than the lowly underlings, you can't say 'off with his head!' when someone annoys you, you can't beat your underlings and you can't rape the help.

(Basic, basic plains ape power status markers -- "I can hit who I want" and "I can fuck who I want"; note how much trouble the neocons have with the idea that anything else really matters.)

But the absolute power -- to put a hundred thousand troops halfway around the world for a year? Fully supplied, communications in real time, reconnaissance from the cis-lunar sphere? Louis XIV would have someone take your head off for telling such outrageous lies.

It is a great pity that the neocons have, in their incomprehension, mistaken their patrimony for laws of nature.

You'd think that people so good at asking "what's in it for me?" would manage to grasp the idea that other people have a legitimate interest in that question.

Genial posts, Graydon! Thoroughly enjoyed the anthopological approach to neocon psychology. In terms of your last point, about neocons being unable to look at things from anyone else's point of view, I would see this as a bad effect of american exceptionalism. So much of their rhetoric consists of america as the 'uniquely benevolent' superpower which seems to resonate with the idea of america as the promised land of the chosen people, so strong in early puritanical thought. To my mind, it is precisely this sort of thinking which is most dangerous in today's globalized world where nuclear arms are relatively abundant. If one truly believes, as the neocons' own literature states they do, that america is 'uniquely benevolent', then we are setting ourselves up for enormous tragedies. See, for example, our 'kinder, gentler' rape rooms and torture chambers at Abu Ghraib prison.

"Can we head into a Star Trek future, where there's no system of money, but people still strive to be the best at fixing the warp drive engines?"

I already know the answer to that: simply look at the Forbes 400 wealthiest people, and look at how many of them work, versus being the idle wealthy.

You'll find that virtually all of them work.

Now look at retired professional athletes (e.g. Magic Johnson, Michael Jordan, Joe Morgan, Chris Evert, etc. etc. etc.) How many of the work, versus sitting idly with their multiple millions? Most of them work.

There is absolutely no doubt in my mind that people will work, even in the event they have more than enough money to be completely idle.

Where Star Trek got it wrong is thinking that people would still rely on the incredibly slow human brain, with its even more limited memory banks, even 100 years from now (let alone 200-300).

Star Trek also gets it wrong in that they always wear long sleeves. Can't they find the thermostat?

Graydon
I have this (nearly) insurmountable urge to quote from Genesis against you and your gang of apes. I better thank you instead for the lesson in anthropology -something I never studied. Can that period in our evolution have mapped our future responses as pervasively as you seem to think? Is there any evolution within that period (from a small group to a larger group say) that would further demarcate plains ape? Who were his ancestors and how important are they in our development? 'Nuff.
Better recommend an Anthro primer for me.

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