Tuesday, April 02, 2013

Non Sequitur Abounds

Paul Krugman is not alone in his ability to abandon logic, and even common sense, in pursuit of validation of economic theories. Dean Baker is no slouch either. Consider a “point/counterpoint” thread I had with him the other day regarding his statement that, “The BLS actually measures the rate at which jobs are becoming obsolete, it's called ‘productivity growth.’"

My mind immediately went to the manufacture of gas-powered refrigerators. I don’t think that it was “productivity growth” that led to jobs manufacturing those things becoming obsolete. Same with those telephone modems where you put the handset into the cradle. There are no jobs left making those things, but I doubt that “productivity growth” caused that to happen. So I wrote a comment on his post.

Productivity does not equate to jobs becoming obsolete as whole industries disappear or jobs are shipped overseas. If making 1 million units by 100,000 workers drops to 100,000 units made by 5,000 workers, you certainly have seen a major productivity growth, but that only explain 5000 job lost. The loss of 900,000 units of production explains the other jobs lost, and those jobs can fairly be said to have become obsolete in a manner that had nothing to do with productivity gains.

His response was truly weird.

Sorry Bill -- you just gave an example of productivity growth -- what is happening to the money that people used to spend on the products that no one wants or are produced overseas? Presumably they spend it on something and that something has the same or higher value than the items the laid off workers were producing.

I love arguments which begin with the word "presumably." We have no facts, so we will base our argument on presumptions. Excellent.

Well, if that’s true than other jobs were “presumably” created, but those 90,000 jobs still became obsolete, so his argument about people spending money is a complete non sequitur. Jobs which became obsolete and are replaced by other jobs are still obsolete, and the suggestion that the replacement goods have “the same or higher value” as the lost production does not assure that the workers will be paid the same to produce them.

Nor does it assure that the production workers will even be in this country and the BLS does not, I believe, track jobs in China. It doesn't occur to him that people might actually not be spending that money, accounting for something like 14 million jobs that disappeared during the recession, or that they might be spending it on items manufactured overseas. He continued,

And if they are not spending it, then the problem is bad macroeconomic policy that is not making up the shortfall in demand. This is a case of policymakers who lack the skills for the jobs they hold.

And here he admits that jobs would be becoming obsolete not due to “productivity growth,” but rather to “bad macroeconomic policy,” and in so doing shoots himself in the foot as economists tend to do it they babble on long enough.

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