Employment,efficiency and bullshit

LI has been pushed over the edge, a bit, by Matt Yglesias’ link to University of Chicago economist Kevin Murphey’s “best anti-stimulus argument I’ve seen.”

Of course, meritocratic liberals love to be entangled in a discourse full of lambda’s and “model” talk. It is like being a smart sophmore again. The professor’s favorite!

But of course it is all bullshit. Unfortunately, this bullshit is increasingly setting the agenda – that is, it is being answered in its own terms. I’ve seen this happen before – it happened with Clinton’s health plan. We are in a much worse place, but it is worth noting that any conversation with bullshit has to call bullshit correctly, otherwise we go into the Laocoon dimension where liberal pundits flail and weep.

Here’s the truth. Since WWII, the government has gone from employing about 13 percent of the workforce to close to 17 percent. At the moment, according to the Bureau of Labor, there are around 22 million Americans employed by local, state and federal governments.

This means, at first glance, that the private sector employs on average about 82-84 percent of the work force. In actuality, given a very rough average of unemployment of 5 percent, the private sector ends up employing closer to 80 percent of the work force.

At the moment, what has happened is that the private sector employs about 78 percent of the work force, as unemployment has gone up. Although government has held steady, no doubt in the next year, there will be layoffs from the government, too, This means that neither the private sector nor government will employ the percentage they do on average since WWII.

I put these figures out there so that one isn’t lulled into a discussion of whether the neo-classical models assume full employment or not. This is a nice, liberal discussion, but it overlooks the more fundamental lie of Murphy, et al., which is the assumption, which is swallowed like the sugar in liquid cough medicine, that the private sector somehow could efficiently employ 100 percent of the work force. It can’t. It has never been able to get past 85 percent in the post war period. There is a limit to the weight it can lift. We know what it is.

So the only argument about the stimulus is this: should the government absorb the extra unemployed or not? That is, should the government grow 3 or 4 percentage points?

The argument against this is not an efficiency argument. That is a stupid argument. The argument is, rather, that somehow, business can absorb the extra unemployed. Which means that the right is saying that, in the next year, the private sector can expand 4 or 5 percentage points to assume its usual standing in the economy.

Do you believe this? Does anybody? No tax break tax cut bullshit should take anybody’s eye off that ball. The question is: how can the private sphere possibly expand to absorb the 4 to 5 percent of the unemployed?

In reality, the right is saying, let the unemployed grow. And underneath that is the notion that if we can actually diminish the salary of the average worker, then businesses will be inclined to hire them. This, without the bullshit, is the righ’s position. The recession is an opportunity for business to gain permanent tax cuts and hire people at reduced rates.

Now, the only way this will actually bring business back up to its traditional 80 percent position is if the pie shrinks.

I foresee that laying out the numbers in a way that everybody can understand them will not happen. Rather, we will have more endless droning about endlessly bogus functions from conservative economists, who will be countered with ever more esoteric models from liberal ones. The point will be to cover up the real situation, so that we will be fogged in, and deprived of the ability to use our own two eyes to see what the situation is, and decide for ourselves what we want done.

Class dismissed. Oh, and watch this economics lecture for an important message.