Noah Smith wrote a pretty compelling op ed in Bloomberg on Tuesday demonstrating that worries about a robot apocalypse–the eclipse of human labor by machine labor–are unfounded. He points to the rather steady employment-to-population ratio, the positive correlation between IT investment and jobs, and low productivity growth as proof that robots do not, in fact, cost at least the macroeconomy jobs. (We can't necessarily make assertions microeconomically.)
This is a bad thing.
Angela Nagle pulls at our collective memory of decommunization by invoking Reagan's Berlin Wall speech in the lede of her latest for American Affairs Journal. In keeping with her steady slide into Strasserism, we find her parroting some of Tom Metzger's favorite talking points by positing unchecked immigration as inherently anti-working class (and the reverse position as the True Left).
This week, I wrote a post on the New School Economic Review blog advocating for a complete abolition of immigration restrictions. Here's a sample:
From my interactions with Branko both in person and online, I'm fairly certain that he has absolutely no desire to embrace racism and would likely rebuke it at any opportunity. However, the geopolitical paradigm he crafts here makes such a result nearly inevitable. By essentializing historically fluid categories such as national culture and language, Milanovic sets up a framework in which migration is an invasive force. By treating geographic income disparities as historically neutral and sacrosanct, he sets up a Paretian world in which changes are only permissible insofar as they are immediately beneficial to everyone involved. In other words, Milanovic's assessment of migration creates a paradigm in which only the wealthy should be allowed to migrate.
For Milanovic, migrants bring nothing but their monetary endowments to their new host countries. Anyone migrating without her own wealth, according to this reasoning, will merely drain the system. Nothing could be further from the truth. In reality, studies show that more often than not, migrants end up in forms of employment that create the opportunity for the creation of new higher-skill job in complementary sectors. All of this amounts to the strengthening of the very systems which Milanovic claims they will destroy.
Far from being idle surplus population, migrants provide an overwhelming economic boon where institutional systems support it. Historically, this institutional support has not led to the destruction of national culture and language, but rather its expansion. When flocks of Jewish and Slavic migrants fled the Ottoman and Austrian persecution in Milanovic's native Serbia in the latter part of the 19th century, they brought with them cultural and linguistic traditions that have since become so sewn into the fabric of this country as to go without notice.
Charles Cobb & Paul Douglas - A Theory of Production
Robert Solow - Technical Change and the Aggregate Production Function
Anwar Shaikh - Laws of Production and Laws of Algebra: Humbug II
Kenneth Arrow, et al. - Capital Labor Substitution and Economic Efficiency
Paul Romer - Endogenous Technological Change
Francesco Caselli - Accounting for Cross-Country Income Differences
Michael Isaacson - Braaaaaaaains! The Undead Humbug Production Function: Now With Human Capital
After weeks of googling myself, I am pleased to announce that my working paper on human capital augmented production functions is finally live on RePEc. You can view it here. You might recognize the theoretical proof from a previous post I wrote on here a few months ago while the paper was still in development.
What is in the paper that was not in the blog post are as follows:
UPDATE: In the interest of transparency and what I meant to do but just forgot (thanks to Robert Vienneau for reminding me), here are my R scripts. I apologize in advance about the run time of the second one:
Humbug Simulation Success SimulationIf you have any trouble with the scripts, make sure you clear your R environment from one before running the other.
Shaikh's "Humbug" paper should have sounded the death knell for the Cobb-Douglas "production" function. Instead of accepting that the Solow residual (A in the equation below) was identically equal to the share-weighted geometric mean of the factor prices, New Classical economists have turned inward.
$$Y = AK^{\alpha}L^{1 - \alpha}$$Now, the mainstream theory of growth is in constant search to "endogenize" the Solow residual. Thus, the hunt has been on for additional factors to "explain" the Solow residual as "accumulated" factor productivity.
If you take as given the Shaikhian formulation, then it becomes obvious why "total factor productivity" increases over time. Since average wages have generally been increasing over time while the average rate of profit is roughly constant (per the last two Kaldor facts), the Solow residual will necessarily be increasing over time. Thus anything roughly correlated with the average wage rate should allow for the ad-hoc creation of a "factors only" production function.
Since the publication of Piketty's Cspital in the 21st Century, mainstream economists have been falling all over themselves to deny the empirical reality of the unabated increase in inequality following World War II.
There have been largely two fronts to this campaign. The first is to insist that this empirical reality is theoretically impossible. The second is to attack Piketty's measure of capital.
The former attack is rather boring in that it largely rests on supposed laws of production, which are in fact laws of distribution. This is done largely for the purpose of arguing that any inequality is merely reflective of the contribution of the endowments of different strata of society. Call it C.R.E.A.M.-washing.
One of the more amusing fronts of this attack has been the nitpicking around Piketty's measurement of capital. On the one hand, it's too narrow for the stalwarts of neoclassical/neoliberal economics. They want to cram human capital as well as expected retirement pensions and transfers.
Nevermind that whatever qualifies as human capital and retirement earnings are likely to be as unequally distributed as any other measure of capital. But retirement account can earn interest, and human capital has capital in the name! Sure you can't borrow against your retirement account, or employ someone to work your human capital for you.
And yet, another common gripe is the inclusion of housing in the measure of capital. Even according to these trolls' own estimates, the percentage of capital that housing accounts for in the US is at most 30% of total capital. Except around 35% of that housing is not owner occupied - in the hands of banks or landlords, earning a return on a physical asset in the possession of another.
Certainly, it's exciting that neoclassical economists finally want to go about defining exactly what they mean when they say capital. It's a shame that this is the direction that they've chosen.