Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Monday, July 21, 2003

Never Say Die

Joerg just won't give up. There are two many points here for me to come back on, some I think are well founded, and others I can't swallow. I don't, for eg see how the unions are going to get anywhere with things like shorter working weeks etc, when, as Joerg himself says 'labour is the buffer', and what we are going to have is labour market reform, of both the 'good' and the 'bad' type all round. On the japanese car industry, again i'm sure he's right, this is a sector where the Japanese operate 'final product' control to perfection. But eg Richard Katz has some interesting, and to me relatively convincing arguments about how things aren't so clearcut upstream. Productivity is a very tricky question, there are no clear answers, Joerg is quite right that you can read the data in ever so many different ways. Also, I don't want to box myself too much into a corner, clearly there is potential for us to work and enjoy life longer, and this will help ease the demographic situation. It's is just I'm not sure how far and how fast this can go, when the reality seems to be that the real problem is just around the next bend. And anyway, it's hot, and I'm on holiday, and I'm going to take a rain check:

"My riposte, I suppose, would be, the envigourated old-age model should be indentifiable in the productivity numbers, Japan doesn't seem to be too encouraging in that regard, and Germany still remains an unknown entity."

The productivity numbers hide substantial methodological problems. The first one is the use of nominal values - plainly an absurdity. Secondly, if we look at the real world, we see that twenty years ago the Japanese car industry had an 80% productivity advantage over the U.S. Has it lost that advantage? No. The Japanese still beat everybody else in terms of time-to-market, technical innovation, just-in-time production, energy efficiency, reliability etc. What changes there have been seem to be partly attributable to American outsourcing of components manufacturing to China and Japanese FDI in the U.S. - plus the Daimler merger. (The picture is largely similar across a wide range of industries, with only two major exceptions.) The methodology used to determine productivity is definitely not sophisticated enough to accurately portray this situation. I could easily construct more reliable indicators for projecting future market share by just taking a look at trade journals and incorporating some of the comparative indices available there into a new composite measure. Another problem to deal with is that some facts about the future are knowable - e.g., the increasing importance of energy efficiency in an environment where resources become scarcer and more expensive. In other words: the U.S. automobile industry is mainly profiting from its output of SUVs - a class of vehicles that will lose most of its market share within the next few years, with part of the rest going to the new - technically and environmentally superior - Japanese competition in the segment. In the field of supercomputing, Japan is perceived as delivering the equivalent of the "sputnik shock" to the U.S. Etc. How about including imported productivity in the numbers? The fact that the U.S. will either have to import less in the future or not be able to continue profiting from foreign advances in productivity at all also casts doubt upon optimistic interpretations of the U.S. situation with regard to its productivity ranking. While some of the factors I mentioned could more accurately be subsumed under a term like "adaptability to market evolution", another reason that "the envigourated old-age model" is not necessarily identifiable in the productivity numbers is the snapshot character of this statistic which doesn´t reflect the nature of the phenomenon it purports to capture too well. Consider how Konosuke Matsushita built his company. When confronted with the decision to lay off thousands of factory workers during the Great Depression he instead chose to have them sell lightbulbs and promote electricity among the farmers in the countryside - clearly demonstrating that there is a trade-off between present and future productivity following from different modes of response to market pressures.

The same logic is operative - although in reverse direction - in the U.S. tendency to trash its social capital, as evident in, e.g., its decision to start furiously investing in prisons rather than education (a similarly inadvisable but not quite as detrimental practice is putting people on the dole for the long run rather than retraining them). I hope to present a table of the respective numbers sometime soon - these data are real eye-openers. (And, no, George Bush is not Reagan redivivus. That comparison is like claiming that Wilhelm II just continued in Bismarck´s path. Similar observations apply to Clinton in relation to former Democratic presidents.)

"Germany still remains an unknown entity": Not quite. Its ranking is somewhere midway between the U.S. and Japan - probably a bit closer to the losing (the U.S.) side than the winning (Asian) side. (However, at a birthday party on Saturday I heard a lady mention the fact that she had just taken a job with a 79-year-old architect who had told her that last year he had done more business than ever before - so she shouldn´t underestimate the volume of work ahead...) "Equally, again as I keep insisting, it is one thing declaring that people should work longer, and another getting the labour market (ie those who seek to employ) to agree to this": But that is exactly the point! By dint of not "agreeing", the market would prove that the demand for labour is not as large as the projections of a diminishing ability to support old people would imply - due to advances in productivity. There is, however, no way to sell the notion that self-employed people should keep on working ever longer while workers retire decades earlier. There are many other options available to the unions. In the U.S., the AFL-CIO could start calling for a shorter workweek and longer vacations to catch up with Europe. In Europe, much more could be done with regard to retraining, sabbaticals, flexible employment for women etc. - the last one being an issue that has a heavy impact on the fertility rate among
European and Japanese academics!

"what my brother once referred to as my tendency towards the 'single minded and relentless pursuit of an idea to its logical end' has both pro's and con's." I guess I could use some of that ability to indulge in consequentialism. For a long time now I have wanted to stop following everyday news and instead elaborate on a few fundamental links between what Keynes termed the "monetary theory of production", Popper´s logic of discovery and Luhmann´s sociology. I think the prize would be an understanding of economic sociology that offered an alternative to both leftist idealism a la Habermas and Hayekian pseudo-libertarianism (which nowadays wins far too many arguments even among people who are not principally inclined to support it - just because the other option seems to be starry-eyed wishful thinking.)

BTW, not voting doesn´t seem to be a successful way of practising Popperian falsificationism to me - I would think I´d have much more trouble identifying my errors of political judgment when not committing myself to taking a position, but could only feel tempted to blame myself for any catastrophic outcomes if I had really cast the decisive vote...

No comments: