Interview with a Grouchy Economist
Will vowed never again to be sick on a school day.
Moving on from that story about the terrible state of modern English education (which will play a minor role in what is to come, below), a new instructor at one of the colleges where I teach apparently gave her students the assignment of interviewing a professor about an important topic in the news. That meant a class of maybe 18 students would be running around, trying to find some hapless sap willing to carve out the time to write out answers to a series of questions submitted by someone who might not have enough background in the subject area to pose questions that even make sense, and it would mean doing this in the last several weeks of the Summer Semester, the term when courses are twice as long each day so that a normal, 16-week semester can be compressed into eight weeks. It would also mean that the instructor who gave students such an assignment was going to be the subject of what in academia we diplomatically call a "conversation" with her division chairman. That conversation will be short: advise your teacher that, if she ever pulls a stunt like that again, your entire division will be denied access to the leftover doughnuts from the faculty senate meetings.
I have not spent a whole lot of time on campus the past couple of weeks; I have to gear up for the monster course load this Fall, a schedule that spans two schools and courses ranging from microeconomics, macroeconomics, and finance, clear through to a night course in transcription and proofreading. I keep my office hours, and that's it. That means the occasional student who is not in one of my summer classes is probably not going to catch up with me except by accident or by concerted effort to track me down.
Much to my dismay, several in that other teacher's class did. By last week, having been rebuffed by every other professor who was not particularly stupid, those students were desperate to find someone anyone who was an "expert" in an area of current news interest.
What was I supposed to do, tell kids to go away? I can't do that. My conscience doesn't bother me if the students can't find me; but if they catch me, my conscience pins me to the wall.
I agreed to be interviewed, but I stipulated that I did not care for giving answers that needed considerable background explanation that would be difficult to provide to an unprepared audience, and I made it clear that I reserved the right to publish the questions posed, along with my responses.
Below is the product of one of those interviews. The subject is unemployment. Readers should be forewarned that I took each question at its face value, trying not to read into the sometimes muddled grammar more than I had to. A phenomenon I have seen with increasing frequency is students who pound out text without even the slightest effort to look at what they have just slapped together. They print out what they have written and hand it in, send it out as e-mail, or otherwise publish it through their online communities; and they just don't care about the quality, comprehensibility, or readability of what they are presenting to others. I used to see this quite a bit among bloggers, but it seems to me that it is not quite as prevalent anymore, especially since many of the weaker bloggers have vanished and at least some of the survivors have become more aware of message quality as integral to the message being conveyed.
I should mention that the student who wrote the interview questions that follow has been in college for several years, and she has taken my course in microeconomics. She is somewhat accustomed to my sometimes sharp responses, and she probably knows that I will not allow for a simple answer without at least making mention of related issues. She also knows very well that I do not suffer fools: as I recall, she sat near the back of the class and took on the faint hint of a fetal position when I would start raging about the blazing stupidity of economic policies during the Bush era.
With all of that in mind, below is the product of her interview with me.
1) Is unemployment a big issue in U.S.A.? Why or why not?
- It is obviously a "big" issue because the mainstream media routinely report work force-related statistics, the most prominent being the monthly national unemployment rate and the bi-weekly number of net job losses. Another set of statistics being reported with some degree of regularity right now is the state unemployment rates.
While the importance of these statistics might be debated by conservatives and liberals, the numbers are a "big" issue because of two prevailing assumptions: first, that the national unemployment rate is a good measure of overall national economic vitality; and second, that a high national unemployment rate is an indicator of economic distress of citizens. To the first matter, the term "high unemployment rate" is relative: liberal economists have long held that there is a so-called "natural" unemployment rate, but we now understand that, even if there is some desirable level of unemployment, or some tendency of the unemployment rate to some long-term, equilibrium value, it might be dependent upon the era, and it might be a number we do not want to achieve until other numbers are in line with desired targets. To the second matter, economic misery translates at some point into political upheaval, as happens relatively peacefully from time to time in American history for example, in 1932, in 1980, and in 2008 and rather more violently in other places in the world from time to time.
2) How unemployment rate should be reduced (in your opinion)? Or what are the ways more jobs should be created? (because of the bankruptcy in businesses people are losing more jobs)
- Your question is too leading. Do not assume that I think the unemployment rate "should be reduced," at least not right away and not as a first priority; in fact, as painful as it is for people to be out of jobs right now, the longer the unemployment rate stays high, the longer we will postpone an inevitable, debilitated inflation spiral caused by years of outrageously malfeasant monetary policy conducted by the Federal Reserve, first in the later years of Alan Greenspan as Chairman, and then under the incompetent watch of Ben Bernanke and his fellow Federal Reserve Governors.
The Congress of the United States, with full support and encouragement by the Obama Administration, has authorized the expenditure of $787 billion in economic stimulus, much of it to the direct or indirect purpose of creating jobs. Fortunately, this recession is deep enough to make such otherwise ridiculously expansive fiscal policy stimulus actually work fairly slowly, which should lead to a controlled, slow decrease in the unemployment rate over the next three to five years. If the Federal Reserve can be brought back to conducting monetary policy responsibly, and if the Congress and the President can successfully move past their deficit spending binge, we might have a chance to move into an era of healthy job growth, while draining out the incomprehensible overhang of liquidity before it turns into a raging inferno of inflation.
In my judgment, will it work out that way? No. The Federal Reserve cannot be depoliticized, much less can it be brought back from utterly irresponsible monetary policy regimes. For its part, the Congress is not thinking about controlling the deficits; it is, instead, planning new, wildly out-of-control spending, while fantasizing that new taxes and tax structures, along with renewed, useless vows of spending control, will somehow make everything work out.
As for the President, he is an institutional center-right leader. Some of his people are the very individuals who had a hand in making our economy such a mess. Far worse, regardless of what he says, his actions belie a belief that we can somehow return to a set of status quo ante assumptions that, in reality, are no longer operational. The lasting legacy of the era of George W. Bush is that the extremists of the Republican Party, who long ago had expressed the desire to "change government as we know it," did so. They wrecked entire groups of solutions that were attainable from the Clinton years; yet, Mr. Obama and his Democratic allies just keep plowing ahead as if the Bush years and the degraded nation we now have from that time never happened.
Here's the reality. Keynesian policy relies upon a lag between economic recovery and the realization of wage gains by workers. The aggregate price level rising without contemporaneous increases in aggregate wages means workers will have to work harder and longer to cope with prices rising all around them. During the Bush Administration, this "sticky wages" effect extended from the factors of production we call "labor" and "human capital" over to another factor, the one we call "equity." The factors we call "land" and "physical capital" were left to benefit greatly (as were narrow channels of human capital we generally refer to as executive compensation). The lag between the strong economic expansion and significant wage gains during the Bush Administration was considerable: only by the period near the end of the last overall growth phase did labor experience anything remotely like real gains; and as for equity, the stock markets never did deliver broad-based, real (that is, inflation adjusted) gains before the crash.
3) Should jobless people get an extended aid? Why or why not? Is extended aid making those people lazier?
- Asking me, "Should jobless people get an extended aid?" is tantamount to asking me if we should feed starving children. Yes, of course we should expand the period of unemployment benefits in bad economic times, and we should contract that period when economic times are good. Whether or not it induces the moral hazard of making people "lazier" is irrelevant: if a working-class family has no income, the children in that family go hungry. Regardless of whether or not their parents are lazy, public policy must always be to the effect of maximizing the survival of children, making sure that they are healthy, and seeing to it that they understand that the government can be a beneficent force in their lives, so that when they grow up, they not only support the government, but insist upon a government at least as humane in that future time as it was when they were children in need.
That does not mean I support any and all government programs that give people incentives not to care for themselves and watch out for their own interests. This talk about government-funded, comprehensive health care is a case in point. I most certainly do not want my tax dollars paying for those who take inappropriate risks with their lifestyles, nor do I want to pay for goods and services sold by a medical-pharmaceutical industry that delivers dangerous, worthless, and over-blown products and procedures to gullible health care consumers. If the government is paying for everything, we rely upon that same government which has so massively, systematically failed us in the past to somehow, this time, do right on a permanent basis. If we are talking about life-saving and critical quality-of-life medical matters, and especially if we are talking about them for children, the elderly, and the truly poor, then I shall lead the parade for government-funded health care; but when I hear others promoting their own desire for health care consumption excess by hiding behind the needs of the genuinely needy, then I condemn it, and I condemn those who have the brazen gall to wave yet another bloody red shirt just so they can get something and make other people pay for it.
(On the topic of health care industry reform, I shall soon offer a small, pure, "market reform" proposal at which I know right now both liberals and conservatives will sneer derisively; but mark my word, if that idea were ever to get before Congress as proposed legislation, the medical-pharmaceutical industrial complex would see to it that the bill got killed like a sparrow being silenced by a nuclear bomb.)
4) Who is being more affected by decreasing unemployment rate: educated or non-educated?
- The unemployment rate is most certainly not "decreasing." I have no idea where you got that information, but it is wrong. The unemployment rate is increasing, and it is increasing for both the "uneducated" as well as the "educated." You have taken a microeconomics class, now, and you should know better than to classify workers as "uneducated" and "educated"; labor supply is far more nuanced than that. The purely unskilled labor market in this country is but one of many, each characterized by some greater or lesser degree of valuation based upon the degree of formal education, training, and/or on-the-job skills development and innate ability.
In virtually every one of the definable labor markets, unemployment is far higher right now than it has been historically. That having been said, though, myths abound about how recessions differentially impact these different labor markets. For one thing, unskilled labor generally has two advantages in recessions: first, basic services are always needed; second, low-skilled workers who exit the "official" labor force are more likely to have resources and/or lack of countervailing risk aversion to enter less formal, "gray" or "black" market work.
More educated people, while appearing to be better able to retain employment, too often face the phenomenon or "underemployment" (not getting enough work) or "misemployment" (working in jobs that do not utilize the most valuable of their skills). Remember that the U.S. Bureau of Labor Statistics counts a labor force participant as "employed" even if that individual worked only one hour during the reporting period; and the BLS makes no effort in its widely reported unemployment statistics to determine the extent to which a worker is utilizing the skills he or she has spent the most time developing to highest comparative advantage.
So, there they are: my answers to interview questions from a student who probably wanted short, easily digestible responses. Quite obviously, that is what I provided. If she and her instructor want the long answers, they'll have to take several of my courses, or they'll have to read several hundred articles I've written and published.
Either way, they will get a whole lot more than I can provide in a short interview that neither of them probably really wants to read; but, then again, that's the way it is with most people who avoid my lectures and my writings: they want answers, but they want nothing to do with the knowledge that leads to answers. Hence, they don't really want answers.
That, of course, is what makes you readers different from most people. You made it all the way through to the very end, in fact of yet another one of my articles.
The Dark Wraith is, once again, mighty annoyed that not everyone can be dismissed as incurious.
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Wrote Dark Wraith:
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Wrote Dark Wraith:
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