Posts Tagged ‘Keynes’

2016 Labor Day Post

September 5, 2016

It is a healthymemory tradition that on or about Labor Day, HM laments about the adulthood and retirement he was promised in elementary school in the 1950s.  During this time it was highly unusual for mothers to work.  One of the primary benefits from technology was to be a large amount of leisure.  The economist John Maynard Keynes predicted in 1930 that the work week would shrink to 15 hours by 2030.  Actually, technology advanced further and faster than was predicted.  Wi fi and smart phones were never imagined, along with the internet.  Now more people, including mothers, are working more hours.  What happened?

Current economies are based on Gross Domestic Products (GDPs).  Economic growth requires increasing GDPs.  Eventually this model runs out of resources and steam.  Yet we have to work more and consume more to foster this growth.

Not only has technology advanced, product quality has improved.  An inexpensive watch has the same accuracy as a ROLEX.  People pay for more expensive products for prestige.  There is ample research showing that scotch drinkers pay substantially more for high quality scotch yet are unable to distinguish the difference when drinking blind.  Scotch drinkers are just provided as an example.  Premiums are paid for many products for prestige, not for the utility of the product.

Voters grovel at the feet of politicians for jobs.  Jobs lost to trade are a primary focus in the current elections in the United States.   However, the trade problem is minuscule compared to the lost of jobs that will be taken by technology.

The following data and projections have been taken from David Ignatius’s column in the 12 August 2016 Washington Post article titled “When robots take all the jobs.”  McKinsey & Co. estimate that  in manufacturing, 59% of activities could be automated, and that includes 90% of what welders, cutters, solderers and brazers do.  In food service and accommodations, 73% of the work could be performed by machines.  In retailing, 53% of the jobs could be lost.  If computers can be programmed to understand speech as well as humans do, 66% of jobs in finance and insurance could be replaced.  So, to use the vernacular, we ain’t seen nothing yet!

Economic security can be addressed by a greatly expanded earned-income tax credit, or by large public works programs.  But the topic of the immediately preceding post, a Universal Basic Income, is inevitable or violence will break out and public disorder will become the order of the day.

Under a Universal Basic Income, everyone would have enough income to live comfortably.   To increase one’s standard of living, or to purchase prestige, employment would be required.  But people could drop out of the economy and pursue an education, training, artistic pursuits,, travel, whatever would increase the quality of life.

The reader should be aware that this view of automation creating enormous job losses is not shared by all.  So some regard this as a pseudo problem.  But HM would still argue for changes that would provide the freedom and leisure activities that would result from technology that were promised him back in the nineteen fifties.  HM has retired, so he finally has leisure time.  His wish applies to all that there be vastly increased amount of leisure time.

Consider reading or rereading HM blog posts, “Gross National Happiness (GNH) and “The Wellbeing of Nations: Meaning, Motive, and Measurement.”

© Douglas Griffith and healthymemory.wordpress.com, 2016. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Douglas Griffith and healthymemory.wordpress.com with appropriate and specific direction to the original content.

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Wealth and Leisure Go Hand in Hand—except in the U.S.

March 6, 2016

The title of this post is identical to the title of an article b Christopher Ingraham in the Business section of the 28 February 2016 issue of the Washington Post.  That wealth and leisure go hand in hand has been a belief held by many, economists included.  Quite some time ago the famous economist John Maynard Keynes predicted that his grandchildren would have 15-hour work weeks due in part  to increased productivity from new machines and technology.  There have been many healthy memory posts on this topic (enter “Why Are We Working So Hard” in the healthymemory search block).  I’ve mentioned many times that when I was in elementary school back in the fifties that we were told that we would have ample free time today due to technology.  At that time it was unusual for women with children to work.  Today it appears that everyone is working more hours, so what happened to the benefits to technology?

Two economists, Charles  Jones and Peter Klenow have examined the number of hours worked as a function of the fraction of per person GDP.   So the value for the U.S is 1, and the values for other country are some percentage of 1.  The average annual number of hours worked per capita in the U.S is 877.  The only countries in the study with a higher number are Malawi, India, and Mexico.  The average number of hours worked per capita in France is 535 hours.   So the average number of hours worked in France is less than two-thirds as much as the average hours worked in the U.S.  The average number of hours worked in Italy and the United Kingdom are slightly higher than in France.

The standard of living of these countries is close to that of the U.S.  Moreover, the social  amenities offered in these countries are often superior to those offered in the U.S.   For example, medical care is free in the United Kingdom.  Not only is medical care free, but statistics indicate that the quality of medical care is superior in the United Kingdom.

So why is this the case in the United States, and why do citizens in the U.S. tolerate this situation?  I think this situation in the United States is not beneficial to health, in general, and memory health, in particular.

© Douglas Griffith and healthymemory.wordpress.com, 2016. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Douglas Griffith and healthymemory.wordpress.com with appropriate and specific direction to the original content.

The Wellbeing of Nations: Meaning, Motive and Measurement

August 26, 2015

This excellent text is by two researchers in England, Paul Allin and David J. Hand.  It is written in the spirit of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, which is usually abbreviated as The Wealth of Nations.  Smith is commonly regarded as the father of capitalism.  Although this is true, he is misrepresented by many politicians.  Smith was concerned with increasing the wellbeing of nations and their inhabitants.  Smith wrote an earlier book titled The Theory of Moral Sentiments.  He argued that moral sense was based on mutual sympathy, a term best captured today with the concept of empathy.   Smith advocated progressive taxation, in which the wealthier paid a higher percentage of their income to taxes than the poor.  Often politicians argue for a “flat tax”  for simplifying the tax code.  Progressive taxation is not responsible for the complexity of the tax code, but the many specific benefits and costs written into the tax code are.  The Gini coefficient is an index of the spread of wealth in an economy.  And healthier economies require that wealth be distributed among the citizens of a country.  As one Texan put it, “Money is like manure; it’s no good unless it is spread around.”

The authors note, “It looks as if the capitalist business model has evolved over the centuries into one that relies on population growth and expects economic growth.”  Clearly, this is a model for ultimate disaster.  There is no doubt that capitalism has been a success, but it is time for fine-tuning.  There have been several healthy memory blog posts wondering what has become of all the leisure time that was promised to be available today.  When I was a child few mothers worked.  Today, everybody works, and for longer hours.  Why?  John Maynard Keynes envisaged a time in which increased leisure time would enhance the quality of life for all.  Why has that time not arrived?

I believe that if Adam Smith were alive today he would have joined Allin and Hand in authoring The Wellbeing of Nations, or would have written his own complementary volume.  The starting point for this  volume is that Gross Domestic Product (GDP), although important, should not be the primary metric for economies.  Previous healthy memory blog posts had described the metric of Gross National Happiness (GNH).  Although this is a promising start, the problem is quite complicated.  It requires a variety of disciplines such as the social sciences and statistics that had either not yet developed or were still in the early stages of development when Adam Smith lived.

Although I am praising this work, I am not recommending that you read it.  It is technical and complicated.  For most of us understanding that this is a problem that needs to be addressed and is being addressed is enough.  However, if you are interested in the topic and are willing to expend the effort, this is an excellent text that cites many references and resources.

I do not mean to imply that a the solution to this problem will be easy.  One must always be aware of the dangers of unintended consequences.  When a psychologist who won a Nobel Prize in Economics, Daniel Kahneman, was asked about the speed of research and progress in this area, his advice was that it be slow and reversible.  That is, provisions should be made so that any mistakes could be easily reversed.
As the immediately preceding blog post, the Automation of Journalism suggested, many skilled jobs might disappear.  Now the disappearance of jobs could be good, if they resulted in increased leisure time where people could enjoy themselves and pursue their interests.  However, if significant proportions of the population become alienated, there will be trouble indeed.  As was mentioned at the outset, capitalism is in need of fine tuning.

© Douglas Griffith and healthymemory.wordpress.com, 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Douglas Griffith and healthymemory.wordpress.com with appropriate and specific direction to the original content.