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Bridging the divides

Filed under: — gavin @ 2 August 2008

We often discuss the issues that arise in doing interdisciplinary work in climate science, and Liz Moyer and I have a commentary on that just out in Nature Reports Climate Change. Normally I don’t mention these kinds of pieces on the blog, but in this case the editors commissioned a nice cartoon (from Mark Roberts) illustrating our point. I liked the cartoon a lot, and so it deserves as wide an audience as possible.

A bit of context is probably useful. The three main protagonists are representative of the somewhat different foci of paleo-climatologists, climate modellers and economists. Very broadly speaking, paleo-climate science is built around the analysis of single location time series (often from holes that are drilled). Climate modellers spend a lot of time trying to see what is coming up in all its complexity, while economists tend to eschew complexity and look for insight in highly idealised situations. But in order to increase the credibility of models, they have to do well at simulating past climates and what might happen in the future is certainly informed by what has happened in the past. And in order to better understand the impacts of climate change and various proposed policies, economists will need to embrace the complexity of human-climate interactions while modellers need to better understand what aspects of climate really do make a difference. None of these things will happen if we continue to all look in different directions, and more problematically, fail to support and reward those scientists who want to bridge the divides. Sea monsters notwithstanding.


270 Responses to “Bridging the divides”

  1. 151

    Re #147 where Jonh Donohue asks “could you provide us with the actual plus/minus” [for the effects of global warming]?”

    First, the figures are in the trillions not billions of dollars.

    Let’s assume that there is a sea level rise of only 1m, (3 feet) That will destroy much coastal farming land reducing world production of food. It will also destroy the homes of subsistence farmers. Positively, it will increase the shallow water where fishing will be possible, but since many edible species have now been fished out that not be a large plus.

    Of course this will also mean many beach homes in Florida etc. will also be destroyed, but people with cliff top houses on the coast of Carliornis will not have to climb as many steps when returning from the beach, until the cliff on which they have build their homes are eroded away by the rising sea levels.

    Every port in the world will be affected. Although a 1 m rise will not make them unusable, they will be vulnerable to storm surges, and each will probably require a Thames type barrier at $40 billion a time. See: http://news.bbc.co.uk/1/hi/uk/6964281.stm

    The advantage is that ships will be able to unload further up stream reducing transport cost, after the construction costs have been repaid.

    As far as the direct cost of global warming itself, then the loss of most farm land in the US to drought will be offset by a longer growing season and greater production in Russia. So that may balance out quite nicely!

    HTH,

    Cheers, Alastair.

  2. 152
    Rod B says:

    Timothy C. (146): I second that.

  3. 153
    Hank Roberts says:

    > a guy can support a family
    Rod, it’s mostly how you say ‘gals’ these days with the kids.

    But we digress.

    Mr. Donohue, for benefits of a warming world, you need to look past the disruption. The problem is the rate of change, far faster than anything in the past short of an asteroid impact; nothing adapts fast enough to make this a smooth transition. It’s going to be very messy. Economists dislike those times, they’re hard to account for.

  4. 154
    Nick Gotts says:

    #127 “in real life minimum wages hurt far more poor people than they help.” – BPL

    Nonsense on stilts. When a minimum wage was introduced in the UK, true enough lots of right-wing economists, and the CBI (employers’ organisation), predicted huge job losses. They didn’t happen, and a lot of people in cleaning and catering jobs began getting a wage they actually had some chance of living on.

  5. 155
    Nick Gotts says:

    #146 “But none of that changes the laws of physics or economics.”

    The “laws” of economics as defined by neoclassical economists are, to a considerable extent, simply obfuscatory ways to justify the status quo: they largely ignore the real world, where experience shows minimum wages do not in general reduce the number of jobs available at the lower end of the wage-scale, and construct a theoretical argument for why they “must” do so. As Rod B. notes, real-world businesses do not and cannot make the kinds of
    calculations theory says they “ought” to. More important, nor is the work to be done in a business neatly divisible into separate jobs that can be ranked by their profit-enhancing potential: workers operate in teams and networks, social interactions and morale effects are ineradicable complications.

    It simply is not the case that there is the kind of scientific consensus on how economies work – let alone how they could work – that there is on climate modelling.

  6. 156
    John Donohue says:

    I wonder if people have caught on to the “jack up the boat” principle of minimum wage policy. Government mandated minimum wage forces all prices higher because many labor contracts and standards are floored against the minimum wage. So, you have not just the artificial uptick of costs due to the min. wage earners, but also the automatic elevator for many levels above. Sometimes this escalator is actually wired into labor contracts, but a far more potent and far reaching effect is the ‘understood’ pressure that a semi-skilled worker ought to be paid more as minimum wage gets kicked up.

    While I personally favor total abolition of all minimum wage laws, it is in a context of a return to a free market; just changing that one policy would be all skewed up. We are far from capitalism and free market in this culture anyway; because of progressive taxation and designed government-driven inflation with relentless increase of the government sphere, we are lumbering through social democracy on the way to out and out so-cial-ism [frayed word because it triggers spam detectors!]. Seems to march along no matter which party is in power. Must be what we want, as opposed to what we made our Revolution about 225 years ago.

    On another note, I googled anthropocene and instantly got it. It’s the idea that human activity has trumped the natural cycles and is now determining climate. If so, who makes policy? Is it better to fight to stabilize the Ice House we are in for the past 30-60 million years? Better to aid more cooling? Or better, since we have trumped the Holocene, to reach even higher and also end the Ice House permanently and return to an ice-free planet, as is has been for over 85% of its history. After all, the dinosaurs flourished for 50 million years or more without Ice, wouldn’t we be better off without it too?

  7. 157
    Marc Roberts says:

    I’m the cartoonist commissioned for the cartoon, (Marc with a c) and I’m glad it’s met with such interested approval. I’ve been making cartoons designed to raise awareness and entertain the activist community for a few years now and am proud to appear on RealClimate.
    I’m currently building a humour/information resources site with a grant from Artist’s Project Earth and I would be delighted to play with any ideas that yourself or your informed readership might care to send my way. Editorial comment would also be welcomed. It needs to be right. I’d also be more than happy to work on ideas for the RealClimate community. I’m sure that together we can come up with humorous graphics that can get and keep people’s attention.
    The complexity of the issues tends to intimidate many people and humour, along with the playful twisting of stereotypes, can be an invaluable tool in persuading the many that this is not just the business of the few. A link to the site in the text would be great, incidentally.
    If anyone is interested they can find some of my work -from ‘Easter bunny island’ to “The Chocolate Fireguard” temporarily lodged at http://www.throbgoblins.blogspot.com.

    [Response: Thanks for stopping by! - gavin]

  8. 158

    Re my reply to John Donohue, when I wrote “cliff top houses on the coast of Carlionis” it was a typo. I meant California!

    Of course there are lots of other beach front and cliff top properties throughout the world, not just in the USA including such desirable areas as Martha’s Vineyard in the US, and Sandbanks in the UK, the fourth most expensive location in the world!

    But, John, I haven’t really answered your question, because I have not given you concrete figures. The reason is that as far as I know they do not exist, and that brings me back on topic.

    Gavin, is calling for scientists who can bridge the divide between the science of global warming and its economics. When even the modeling of global warming itself is broken up into specialties, and paleoclimatology into even more, then that seems a forlorn dream.

    The only answer is, as I see it, for Gavin to cross the divide and work out the cost of global warming himself, rather than for him to wait for some un-named grad-student economist to try and learn the effects of global warming from an economics professor in small business modeling. What do you say Gavin? Surely you could produce a better estimate than mine :-)

    Cheers, Alastair.

  9. 159
    Hank Roberts says:

    Alastair, the journalists answered that question to a fair approximaton already:
    http://www.theage.com.au/news/national/a-drink-that-might-just-cost-you-the-earth/2007/04/07/1175366538285.html

  10. 160

    RE #156:

    “If so, who makes policy?”
    One policy-making sector is us. We are making the policy, by either becoming energy/resource efficient/conservative (& saving $$ to boot), or not doing so (harming both earth & our pocketbooks).

    “After all, the dinosaurs flourished for 50 million years or more without Ice, wouldn’t we be better off without it too?”
    And fossil crocodiles have been found in the Arctic. But there was mainly death and devastation (from what I understand) in most other parts of earth during these extreme hysteresis global warmings. During the end Permian 95% of life on earth died. Is that the policy result for which we’re striving? Would you risk that, if there were even only a 5% chance it could happen again this time?

  11. 161
    Hank Roberts says:

    (no relation unless we share an ancestor somewhere back in Scotland or Ireland)

    Marc’s website is: http://www.throbgoblins.blogspot.com/
    (no dot at the end)

  12. 162

    Re #159, I vaguely remember from my economics class that it made more economic sense to ship things far way, like apples, than sell them locally. The best apples are shipped far bec they are expensive and it’s not worth it to ship the cheaper ones. So the less quality ones are sold locally, which I’d guess makes the locals buy good quality apples shipped from some other far off place.

    So I guess Australians tend to eat Washington apples, and Washingtonians tend to eat Australian apples (unless they’re in some money crunch). I’m probably wrong on this, but I remember thinking “this is cuckoo” when I read about it.

    While most proactive environmental actions make good economic sense (& leaves one wondering why people are not implementing them), not all things that make economic sense make environmental sense.

  13. 163

    I guess someone in govt doesn’t want to know about the socioeconomic impacts of global warming:

    “The National Center for Atmospheric Research, an important hub for work on the causes and consequences of climate change, has shut down a program focused on strengthening poor countries’ ability to forecast and withstand droughts, floods and other climate-related hazards.”

    http://www.nytimes.com/2008/08/07/science/earth/07climate.html?ref=us

  14. 164
    CL says:

    John Donohue, 156, said :

    “…in a context of a return to a free market; just changing that one policy would be all skewed up. We are far from capitalism and free market in this culture anyway; because of progressive taxation and designed government-driven inflation with relentless increase of the government sphere, we are lumbering through social democracy on the way to out and out so-cial-ism [frayed word because it triggers spam detectors!]. Seems to march along no matter which party is in power. Must be what we want, as opposed to what we made our Revolution about 225 years ago.”

    I view an un-regulated free market as totally unacceptable. It means that whoever has most power will grab whatever resources they want, regardless of the interests of anyone else. It makes perfect sense to mine any resource to exhaustion or extinction, as fast as possible, use the added power and wealth to repeat for another resource. It’s really a statement, ” I don’t want anybody to obstruct my lust for power “. In effect, the equivalent in civil life, would a license for criminal, socio-pathic behaviour.

    I find the suggestion that USA is not capitalist, and is a social democracy moving towards soc-ial-ism to be very strange. My impression is that the US system is some sort of militaristic imperialistic corporatism. My example for social democracy might be Germany, and for soc-ial-ism, Sweden. If I recall correctly, Jefferson wanted an agrarian economy, not free market industrial capitalism.

    Anyway, what’s so ‘bad’ about soc-ial-ism ?

    “The cultivation of self-interest and encouragement of private profit is not essential to economic efficiency. An individual desire to be of service and to increase the wealth of the whole society can be an equally strong motivation. Work does not need to be seen as a necessary burden, but as a desirable activity with physical, social and spiritual significance and benefits, allowing each person to have a recognized role and to make a constructive contribution to society. Just as the total productivity of an ecosystem is the sum of the net productivity of each organism within the system, so does each incremental contribution of some good or service add to the total wealth of the community.”

    http://www.bcca.org/ief/ddahl97a.htm

    I tend to agree with Nick Gotts, 155, that a large part of ‘economics’, is merely rationalizations for a extending or sustaining power structures that benefits certain parties.

    I also remember the cries of horror from industry and commerce, that a proposed minimum wage would cause millions to be unemployed , make the whole of Britain uncompetitive, spreading ruin and destitution across the land.

    When the minimum wage actually came, hardly anybody noticed, except that a few very poor people had a little more to spend.

    I will concede, however, that the economy was generally prospering at the time, and if jobs were destroyed because of the minimum wage, they were probably filled by illegal immigrants, asylum seekers, and the like, who were forced to accept whatever terms they could get, illegally, out of desperation.

    I know I’m in Lala Land, but I’d like to see a maximum wage imposed. I’d also like to see all businesses and corporations required to have an ecological audit, similar to the financial audit conducted by accountants, to measure the ecological impacts of all inputs and outputs.

    I’d then grade all businesses according to that audit, perhaps having 5 levels. Those with the best environmental record would pay the least tax, those with the worst, the most tax. Those graded below level 5 would be given a red card, as being ecologically insolvent, and, after a period to try and reorganise their affairs, if they failed, would ultimately have their license to trade revoked.

    Of course, my suggestion will be reviled and ridiculed, with much the same sort of arguments as the desire for fairness and justice via a minimum wage were rejected. If I recall correctly, the same sectors of soceity argued against the Plimsoll line, to prevent ships being overloaded, drowning many innocent sailors every year, whilst the ship owners happily walked away with the insurance money. They delayed it’s implementation for many years.
    Same goes for the abolition slavery, when business and commerce said the global economy would collapse without it. And I dare say, the same can be said of the oil and coal lobbies today, re costs of moving away from the carbon economy.
    Humans can be seen, by some, as no more than a commodity, like sugar, or wheat, or gasoline, or diamonds, and very often humans are less profitable, and so expendable.

    In a nutshell, I’d like a paradigm shift, to elevate the ways that we view ourselves and our fellow men and women. And for that matter, the whole of the biosphere, which created us, and upon which we all depend. Why not ?

    http://naturyl.humanists.net/synthesis/freedom.html

  15. 165
    CL says:

    An interesting little snippet for evidence of increasing temperatures and CO2, from monitoring of Lascaux cave paintings.

    (Small rise ? 2 degrees since 1982 seems a big rise to me.)

    “Some experts have pointed to climate change as a factor. Mr. Geneste said it might be too early to make such a claim. But he added that in the past two decades, a small rise in temperature and carbon dioxide had been detected in a number of caves in France. “And the average soil temperature in areas around the caves has risen by two degrees centigrade since 1982,”

    http://www.megalithic.co.uk/article.php?sid=6334433

  16. 166
    Mark says:

    #156: Regressive taxations.

    Well, the more money you have the more you get from things like transport, education, the police and armed forces.

    Transport: goods are cheaper and since you can afford more stuff AND buy from more places at distance you get more of an effect when rich than when poor

    Education: If you’re poor, you have been educated. If you’re a factory owner, you have educated workers (which are more efficient)

    Police: The more you have the more you need to protect and the more likely you are to be targeted. Also, the richer you are, the more connected and the more help you get (and listened to more, treated better and not hassled).

    Armed Forces: If someone invades it will be the mansion the new overlords will take, not the slum tenement.

  17. 167
    Mark says:

    Add to that the absolute and incontrovertible FACT of the rich being far richer than their economic output would suggest (and a lot of that being the richer you are the less money you need: you don’t get a suzaphone you pay cash, or a better rate with a 50% deposit).

    In the US it is especially bad with CEOs being paid VASTLY more than the mean wage of the workers who make the product to be sold (but it is bad elsewhere).

    When you’re rich you as an individual are listened to. As a poor Jenny Housecoat, you are a resource to be exploited at best. Only listened to when millions of you get together. And in the UK, not even then.

    So the rich get far more from the society than the poor and they have more ways of avoiding it. Hence regressive taxes. If rich people could be trusted to just pay the freaking taxes there would be much less need for regressive taxes to be so high. But they’d rather pay an accountant £100,000 to save £200,000 than just pay the £200,000 and find that maybe with all this new tax coming in, they can take £100,000 less.

    posted in packets to find what the heck is considered “spam” in the message. Sheet. “mort gage” looks like the spam word.

    I’ve use the word “suzaphone” instead of mort gage

  18. 168
    Lawrence Brown says:

    Re 163: This is a sad commentary on the priorities of the National Science Foundation. The economic divide between developed and undeveloped nations is already causing global friction. Poorer countries will suffer the most from the effects of climate change, and this cancellation is a step in the wrong direction.

  19. 169
    Jess says:

    @Rod B–

    I don’t think people ask miners to work dangerous jobs because they are personally mean people. Nor do I think business leaders are evil. I just think that the incentive is to cut costs wherever and whenever possible. If I am a mine owner with a nice, steady supply of people desperate enough to need the job (which is the case for almost any job, unless you’re one of a relatively small class of workers) then if the choice is a) send 100 men down, a X dollars per day, knowing that half of them are dead men and b) spend an extra $Y per man to keep them alive and cut my profits, b) always, always, always wins. Never in the history of the world has a capitalist enterprise made worker health and safety a priority without a lot of pushing. Market forces never do this — it’s always extra-market forces like unions, or laws, or people getting up and collectively saying “no way.”

    This is also why market forces are really terrible for dealing with environmental problems, at least as long as the science of economics says that profit is the only way to value anything. As long as I can externalize the non-monetary costs, then great. That’s why the incentives are not to conserve oil, but to use as much as possible. It’s why the incentive for BP, or Exxon, is to lobby governments to try and control resources, and why to an oil company democracy is absolutely unacceptable in any oil-producing country. (You think it’s an accident that the US did it’s level best to destroy democracies in any country that had anything valuable?)

    And for all those who speak of abolishing minimum wages, let me offer that “free markets” can’t exist for labor, because we are not all mind-readers. There are also transaction costs. I can’t magically teleport from one job to another in another region of the country, for example. Nor do I know what the employer offered to every other worker. Gaining skills or a degree is a cost, and most colleges are predicated on a young man being able to not work for four years. it is only in the last generation that they have started to offer programs for people who are working, and even those are pretty thin on the ground. (Contemplate getting a professional degree if you are already working or working with kids and you will see what I mean).

    Then there’s the matter of power. Anyone reading this who has been forced to work a minimum wage job (or low-wage job) because they needed the money has experienced this. Lets say you are a woman with children who needs to support them. Your boss says “sleep with me now or I fire you.” What do you do when jobs aren’t falling off the trees? Remember, you need the money.

    Only a very small class of workers can negotiate their pay (I wasn’t in that situation until I had been in the workforce for a good 15 years). Only a very small class of workers is in a position to save enough that they can quit for a while when they run into something unacceptable. This is a basic reality. It’s why corporations hate anti-discrimination laws, because it makes too much economic sense to have workers who can’t say no tot anything for fear of losing their jobs. Employers aren’t evil people, necessarily. Jack Welch is a fine man, I am sure. But he had a large incentive to tell the local managers in Lynn, Massachusetts to hire out the cops part time to beat up union organizers. And he did it all through the late 70s and early 80s. But his personality is irrelevant.

    Minimum wages are designed as a floor of income, similar to Social Security. It’s a way for society to say it won’t tolerate semi-slavery, which is what you get without them. (In a similar vein, Social Security is a kind of deferred wages, a way of saying that as a society having people work until they die is unacceptable and taking care of people who may not have had children, or whose kids live far away, or whatever. It is made necessary by modern capitalism which demands we move around a lot compared to ages past).

    Here’s what I would like to see: economists figuring in the cost of having an uninhabitable planet, or at least one less friendly to human civilization. I’ll take a percentage point off the economic growth if it means my kids will have a decent world to live in and a civilization to inhabit.

  20. 170
    Geoff Wexler says:

    Climatia is part of Scientia which has been connected to Economistan by a rickety old bridge for some time. On entering Scientia travelers used see a big notice to leave their ideological baggage behind them. On the other hand those entering Economistan were just warned to cover up their ideology. In the old days there were conflicts between Marxist, Keynesian and Classical Liberal Economics but these have been influenced by events on the other side of the bridge especially in the USSR.

    The communists had hoped that human nature could be fundamentally moulded by the state and the science of genetics was throwing some doubt on this goal ; in addition it contained an inbuilt inequality between individuals. So when Comrade Lysenko entered Scientia he ignored the big notice. He asserted that the whole of genetics was based on lies and therefore purged the entire Soviet genetics community. This enabled him to modernise Soviet agriculture, a process which led to massive starvation as well as a failure of the USSR to develop new hybrids, unlike the rest of the world. According to the British geneticist Steve Jones, this failure of Soviet agriculture is the real reason why the USSR collapsed. It was however interpreted quite differently in Economistan where the theorists proclaimed the triumph of Liberal (now neo-Liberal) economics. They confidently gave advice to post-communist Russia which proceeded to have a severe slump and huge fall of life expectancy. This may have delayed the advent of democracy there.

    Similar advice was given to some African governments which led to to their populations being denied universal education and health care. The advisors do not of course blame their theories, they assert that some minor errors were made. The Russians are now beginning to join the rest of the world. They now have a massive CO2 generating capacity and show every sign of developing their own form of climate change denial.

  21. 171
    Rod B says:

    Lynn (162), the trade theory assumes that we send apples to Australia, and they send something else to us, presumably something that they can produce more efficiently than apples.

  22. 172
    Hank Roberts says:

    > argued against the Plimsoll line
    Thanks CL
    Searching on that turns up some fascinating material.
    Why the heck didn’t that get taught in history class, I wonder?
    Belongs with “from the people who brought you the weekend” in history.

  23. 173
    Rod B says:

    CL (more 164), Price and Wage controls (always maximums) never work in the long-term and cause major disruptions. I actually agree, in general, with your idea of an ecological audit to compliment actual financial audits, as one way to insert those externalization costs into the equation. But then you took it to ridiculous and silly extremes. Shows again your interest is in lambasting capitalists, not improving economies.

  24. 174
    Rod B says:

    Mark (167) says,

    When you’re rich you as an individual are listened to. As a poor Jenny Housecoat, you are a resource to be exploited at best…..

    Substitute “rich or in power” and find me any system where this is not true.

    Who in the U.S. pays federal taxes? The “rich”, by a vast proportion. This applies to State income taxes as well. Property taxes, a primary method of financing localities, is not regressive. Sales taxes, a primary source of (some) State funds, I agree, is clearly regressive and ought to be mitigated. Our forefathers correctly IMO expected, though they did not proscribe it, that the upper middle and rich class would pay the taxes. For the most part that is what’s happening.

  25. 175
    Rod B says:

    Jess (169), I agree capitalists come in various flavors, some pretty unsavory. But to say b) always wins is just not true. There are numerous examples of capitalists showing much concern for the safety and well-being of its employees. T. Vail comes to mind as one. Early in the Bell System’s life he declared that the safety of the operators and lineman should take second place to nothing. In fact employee safety was officially their top priority (“most important”) into the 1980s.

    This doesn’t mean that there aren’t meanies out there. I agree, as I’ve said, they need regulation and mitigation from governments or unions or public pressure.

    You say, “…market forces are really terrible for dealing with environmental problems…” As I’ve said/implied often, Well! Duh! So? This simple means the society has to instill other motivations through regulation, law, etc.

    Just an observation: If you would look for info other than in your butt, you wouldn’t say things like, “…the US did it’s level best to destroy democracies in any country that had anything valuable…”

    You are correct: what is missing in capitalism (both theory and practice) is that it takes no account for transitions, and the theory assumes full disclosure and complete info for everybody which does not exist, and is more detremental to labor than business owners.

    For the record, when Social Security was started the life expectancy was a bit over one year more than retirement age — a fact that was well-known and salient in the minds of the government.

  26. 176

    RE 45 Kevin: Sorry. I should have referenced books by Don Richard Riso. I should have said Riso divides people into 9 basic types.

  27. 177
    Timothy Chase says:

    Rod B wrote in 148:

    Timothy C (142) I tend to agree with you analysis. The difficulty is that most business managers, even in small enterprises, but especially in large corporations, do not have the capability, inclination, or even the responsibility even if they had the first two, to apply such finite econometrics. You show me a Division manager who can precisely rank every employee by their measured productivity worth to the enterprise and I’ll show you, as Deming would say, a guy making up numbers.

    The fact is that they do not have to engage in this exact calculus for the principle to apply at all levels of the free market. They do not have to precisely enumerate each the exact cost of each task. But nevertheless I would argue that they approximate it — and those who do not are necessarily less competitive than those who more closely approximate it — and will tend to go out of business — whereas those which more closely approximate it will tend to expand and be emulated by those who wish to remain business. What we are dealing with in systemic causation — where the more efficient businesses will tend to attract better employees, offer products at a lower price or offer better products (as judged by those who actually purchase and use those products) at a comptetive price and so on. Likewise, as a matter of systemic causation, those businesses which are more efficiently organized — in terms of the cognitive division of labor whereby business decisions are made — will tend to succeed whereas others will fail.

    This is the reason why capitalism works and centralized economies do not. In essence, the free market naturally tends to break up economic decision-making into manageable units, where those who have access to the information that is is specifically and concretely relevant to a given decision will have the power to make that decision. And economic calculation, in the form of decisions to buy from one business or another or buy one brand rather than another, is performed by each and every participant in the economy every time they make a purchase decision — taking into account their specific needs and context. By way of contrast, a centralized economy is the attempt to substitute the collective intelligence of a centralized economic planning committee for the collective intelligence of the millions of participants in the economy as a whole — and is necessarily doomed to fail. Free markets are able to make use of information that generally cannot even be discovered by any other means. Such was the central insight for behind Frederick A. Hayek’s 1945 paper for which he won the Nobel Prize in economics in 1974.

    Rod B wrote in 148:

    Doubly, a hiring manager could in no way do this. So they make their best guess as to worth to production and then add all kinds of other stuff into the hiring equation. Hiring, firing, and managing is related to the econometrics you discuss, but it is very loose and decoupled. However, the smaller the enterprise, the less what I said is applicable. Oddly though you will never find a small enterprises doing the square of factors multiplied together divided by a marginal productivity.

    Their best guess cannot possibly include everything that each of the potential candidates for a given position knows, but it should at least include all of the relevant and available information to the extent that it is both relevant and available — and to the extent that it makes economic sense (in terms of the actual benefits and costs) of including such information. And once again, I would argue that simply as a matter of systemic causation, the free market will tend to make better decisions in this regard than any conceivable alternative in terms of the social and economic organization of society given the same resources.

  28. 178
    Timothy Chase says:

    Nick Gotts wrote in 155:

    The “laws” of economics as defined by neoclassical economists are, to a considerable extent, simply obfuscatory ways to justify the status quo: …

    It has been said better before:

    But don’t wrangle with us so long as you apply, to our intended abolition of bourgeois property, the standard of your bourgeois notions of freedom, culture, law, etc. Your very ideas are but the outgrowth of the conditions of your bourgeois production and bourgeois property, just as your jurisprudence is but the will of your class made into a law for all, a will, whose essential character and direction are determined by the economical conditions of existence of your class.

    The selfish misconception that induces you to transform into eternal laws of nature and of reason, the social forms springing from your present mode of production and form of property –historical relations that rise and disappear in the progress of production– this misconception you share with every ruling class that has preceded you.

    Karl Marx, The Communist Manifesto

    The trouble is this is simply an ad hominem attack aimed at anyone who disagrees with you rather than a thoughtful examination of the science of economics — and in Marx’s case, he is raises this fallacy into a central principle of social epistemology. Under such circumstances it is no wonder that “theoretical” disputes get settled at the sharp end of an axe.

    Nick Gotts wrote in 155:

    … they largely ignore the real world, where experience shows minimum wages do not in general reduce the number of jobs available at the lower end of the wage-scale, and construct a theoretical argument for why they “must” do so.

    History would beg to differ:

    The alternative explanation of high black teenage unemployment by “racisim” collides with two very hard facts: (1) black teenage in the 1940s and early 1950s was only a fraction of what it was in the 1960s and 1970s (and was no different from white teenage unemployment during the earlier period), despite the obvious fact that there was certainly no less racism in the earlier period, and (2) unemployment rates among blacks in their mid twenties drop sharly to a fraction of what it was in their teens, even though the workers have not changed color as they aged, but only become more experienced… A decade of rapid inflation after the federal minimum wage law of 1938 virtually repealed the law as an economic factor by the late 1940s and early 1950s– before a series of amendments escalated the original minimum. During the late 1940s and early 1950s, when inflation and the exemption of many occupations from wage control made the minimum wage law relatively ineffective, black teenage [un]employment was less than a third of what it was in the later period, after the minimum was raised to keep pace with inflation and the coverage of minimum wage laws extended to virtually the entire economy.

    Thomas Sowell, Knowledge and Decisions, pg. 175, 1980 softcover edition

    Nick Gotts wrote in 155:

    More important, nor is the work to be done in a business neatly divisible into separate jobs that can be ranked by their profit-enhancing potential: workers operate in teams and networks, social interactions and morale effects are ineradicable complications.

    … and nevertheless — despite all the complexity, economic decisions have to be made — who to hire and who to fire. Who will make them? By what criteria, and what manner of social organization are you proposing? Systemic causation seems to work well enough in the other sciences (despite whatever cries of censorship or conspiracy you might hear coming from the creationist ranks), and judging from the success of that barren rock we call Hong Kong or the rapid industrialization and consequent rise of living standards in the United States during the 19th century, it seems to work quite well in the realm of the economy.

    Nick Gotts wrote in 155:

    It simply is not the case that there is the kind of scientific consensus on how economies work – let alone how they could work – that there is on climate modelling.

    Economic science has been around longer. The Wealth of Nations dates back to 1776. And I believe that you will find that there is considerable consensus to the effect that Adam Smith is a good place to begin and that the law of supply and demand applies — both to prices and wages.

  29. 179
    John Donohue says:

    I’m not going to argue my politics here; clearly this is not the home of the free market, so be it.

    Since this is the home of “let’s control the environment and plan the economy”, I continue to contend that the economists heading the plan are exaggerating the helplessness of human culture and acting as if we will just be victims as things warm up.

    I’d dispute the notion that the world cannot cope with rapid climate change. Now, if it occurs in a HollywoodMinute (1.75 hours or three reels) like in “The Day After Tomorrow” okay, you got me. More realistically, a spectacularly rapid warming will take a generation, two generations, three generations. People will move away from the problem inland on a basis of attrition. We get the chance to rebuild cities and do it right. Is that a gigantic disruption? Yes, but not overnight. When the last cooling cycle resumed 800 years ago, the Greenland wheat farmers simply walked away from their farms. When the cooling ended 150 years ago, people in Europe rejoiced at the mild weather and began growing crops previously untenable.

    Meanwhile, I think the economists have been very aggressive in totaling up the damages, and quite shy about totaling up the benefits. As acknowledged in #151 above, won’t Canada, Russia and other northern nations, who have vast lands of fertile soil (but it is too cold there to grow important crops) suddenly become enormously important? (I contest the claim of total loss of US farm land). The minus of your ‘coastal farming’ loss against the plus of millions of square miles of new agricultural/living land? I’ll take it. What about the benefits of the open North Sea and the assets to be taken off the seabed? What about just the fact that it is easier to survive in a warm world than one on which snow and ice descend every winter?

    In #153 “nothing adapts fast enough to make this a smooth transition. It’s going to be very messy.” applies, IMO, to animal populations and plant life. Humans will cope. No one will die from global warming; they may die because of politics/personal issues. But are we sure the animal populations are so fragile? How did the polar bear, for instance, survive the drastic reduction or total absence of Arctic ice for perhaps 1000 years just “a moment ago” at the Holocene maximum?

    Look, if the human race is here for good, we have to contend with two extremes. The return of deep glaciation with ice cap down to Chicago on the one hand and the eventual return to the normal state of the earth: 22 degrees C. with no ice. Shouldn’t we practice up on our flexibility and problem-solving for those?

    The causes of the Permian extinction are not firmed up. My reading tells me it did happen very quickly, however, and was drastic. “Quickly” was 1-3 million years. I believe the human race could cope with that.

  30. 180
    CL says:

    Rod B. !73. opined :

    “But then you took it to ridiculous and silly extremes. Shows again your interest is in lambasting capitalists, not improving economies.”

    I think that is extremely ridiculous and silly that we have an economic system which is wrecking the only place where we can live. Capitalism is a primary cause of most of the problems we face, not a wise solution that secures a sustainable future.

    Rod B, 171:

    “the trade theory assumes that we send apples to Australia, and they send something else to us, presumably something that they can produce more efficiently than apples.”

    I live in Wales, where there are at least twice as many sheep as people. Bizarrely, lamb meat imported from N. Zealand, on the other side of the planet, is cheaper to buy in a butchers shop than Welsh lamb. I guess if the true cost of shipping (fuel and pollution) Welsh farmers could compete. I don’t think they are any less efficient or hard-working than N. Z. farmers.

    In UK, it is cheaper to buy Japanese oak that British oak. In Japan, it is cheaper to buy British oak than Japanese oak. So ships carrying oak trees pass one another between Japan and Britain. Sense ?

  31. 181
    CL says:

    Hi Hank,

    “Why the heck didn’t that get taught in history class, I wonder?”

    In my schooling in UK, the history classes and text books omitted Tom Paine and John Paul Jones…I think maybe an old grudge, not wanting to mention colonial heroes even after a couple of centuries ? but who knows…I learned an immense amount of fascinating stuff about American education, from a wonderful read

    http://www.johntaylorgatto.com/historytour/history1.htm

  32. 182
    CL says:

    Rod B. 175 :

    “Just an observation: If you would look for info other than in your butt, you wouldn’t say things like, “…the US did it’s level best to destroy democracies in any country that had anything valuable…”

    I believe it’s on the record that the USA caused the overthrow of 75 democratically elected governments since WW2. That was the figure a few years ago. I expect it has risen since then. IMO, when US administration (and UK for that matter) speak about ‘spreading democracy’, what that really means, decoded, is spreading US advantage and hegemony. US is more than happy to wreck democracy and support dictatorships if it thinks that is strategically advantageous. There’s really no argument about this Rod B. You only have to look at international affairs as recorded over the last half century or so, but I’ll not pursue it further because it’s well off topic.

  33. 183

    Re: comment #142

    Timothy, the theories you present have been used time out of mind to argue against increases in the minimum wage. You could argue that at some point companies find it more profitable to outsource their production to countries where the price of labor is even lower.

    However, there is another thing that is affecting the profits of large companies — the ever-increasing and ridiculous salaries paid to low-performing CEOs. These salaries were already out of hand more than 20 years ago. Nowadays there are hardly words available to describe their absurdity.

  34. 184

    In re 175:

    You say, “…market forces are really terrible for dealing with environmental problems…” As I’ve said/implied often, Well! Duh! So? This simple means the society has to instill other motivations through regulation, law, etc.

    No, market forces are not. What we lack is regulations which state that things be fully costed. “Environmental Problems” have costs, but because there’s no capturing of those costs by the government, destroying the environment to have a buck is advantageous.

    Just an observation: If you would look for info other than in your butt, you wouldn’t say things like, “…the US did it’s level best to destroy democracies in any country that had anything valuable…”

    It’s not an unfair statement. If you look at, for example, the history of American exploitation in Cuba, one of the primary reasons for the Cuba Revolution was the way in which America deprive Cuba of the same liberties we enjoyed for ourselves. It would have been better for the people of Cuba if a democratic government had been established, but we certainly weren’t down there to promote the Declaration of Independence. It was more like agricultural exploitation, entertainment and prostitution, and who cares about the Cuban people or their liberty.

    You are correct: what is missing in capitalism (both theory and practice) is that it takes no account for transitions, and the theory assumes full disclosure and complete info for everybody which does not exist, and is more detremental to labor than business owners.

    I’m not sure what “full disclosure” has to do with anything. If the buy / sell transaction is treated as a complete black box, each side still has sufficient information to engage in a fair-market transaction.

    The real detriment to Labor is not the lack of transparency on the part of Management, it’s governmental interference in Labor having the ability to establish parity with Management through organization. Two business entities are perfectly free to negotiate terms and conditions, but when one of those entities is a labor union, suddenly the right to negotiate terms is a bad thing.

    (ReCaptcha: sentence Staff. grammar Police.)

  35. 185
    Hank Roberts says:

    Look, if you want to be horrified about labor, management, and valuation, google U.S. Department of Labor Employee Benefits Security Administration (EBSA) Prohibited Transaction Exemption (PTE) 2003-39. To pick one outrage more or less at random. All you have to do is look closely to find this kind of stuff. But it’s all off-topic here.

  36. 186
    Anne van der Bom says:

    #179, John Donuhus:

    Look, if the human race is here for good, we have to contend with two extremes. The return of deep glaciation with ice cap down to Chicago on the one hand and the eventual return to the normal state of the earth: 22 degrees C.”

    Where did you get the idea that we face a problem of return to deep glaciation? As far as I know, this will not happen in the next 10.000 years. To me this looks like you are using a fictive problem to construct a benefit of GW.

    The Earth has no natural state, it is constantly changing. You must look at what state life on this planet (including the human race) is optimised for. Then you must conclude that life is currently optimised for the climate we have experienced in, say, the past 10.000 years. The climates Earth has gone through before the end of the last ice age are irrelevant.

    A changing climate is a fact, and even a disruption of the climate will not even come close to wiping out life. But the climate is currently changing too fast and what it will lead to is that life will be temporarily less optimised for the climate. Imo this will always lead to lower production. With more than 6 billion mouths to feed, we need a planet that is in top shape, not in suboptimal shape.

  37. 187

    Jess writes:

    And for all those who speak of abolishing minimum wages, let me offer that “free markets” can’t exist for labor, because we are not all mind-readers.

    You are confusing a free market with top-down planning. In a market you don’t need to know what the supply and demand curves are, prices adjust the system automatically. I’d recommend reading a good introductory text on microeconomics. The whole point about a free market is that you don’t need to plan it all.

  38. 188
    Anne van der Bom says:

    #179, John Donahue (sorry for misspelling your name in my previous reaction):

    Thinking about you post, I have another comment on your following argument:

    More realistically, a spectacularly rapid warming will take a generation, two generations, three generations. People will move away from the problem inland on a basis of attrition. We get the chance to rebuild cities and do it right. Is that a gigantic disruption? Yes, but not overnight.

    Overnight or not is a matter of perspective. True, the changes due to GW will play out over generations, but that does not mean we have ample time to react. From a regional point of view the changes will be drastic and largely unexpected. In one area they will suddenly have to deal with unexpected side effects of sea level rise. Twenty years later, on the other side of the world there will suddenly be drought. It will be a random collection of changes affecting different regions at different moments.

    The only thing we can now predict are ‘changes’. For the people affected by these ‘changes’ we need accurate predictions of what will change where and when. We can not do that. This is amplified by human nature. People generally start dealing with a problem only when they can no longer ignore it. It makes no difference whether these problems are personal or global. The reality for the next 100 years or so will be humanity passively waiting for the problems and dealing with them as they come.

    As we are seeing in the Arctic, things can go over the edge in a matter of years. The ‘tipping points’ scientists keep warning about. Because of this I think most problems will be sudden and therefore very disrupting.

    Another thing you must never forget is the fact we have now more than six billion humans. Simply walking away from your farm is as easy as 800 years ago, constructing another is most definitely not. According to your vision, it may become possible to farm in the Taiga, but then we’ll have to deforest the region first. Hmmm, as far as I know this is a positive feedback not yet accounted for in the models.

    At this moment the best we can do is predict ‘problems’. But we can only deal with them if we exactly know what will happen where and when. Only then can the smooth, well planned adaptation that you foresee take place.

  39. 189
    Mark says:

    BPL, #187

    That doesn’t work either because the employer will just shop around for the cheapest labour and then pocket the extra.

    Think about it: banks, shops and so on all roll out new computer systems and reduce headcount “to save you, the customer money” but how much have you saved? Nil. If they were reducing costs (based on them using “I’m the CEO of a big company with a large workforce/turnover so I MUST get much more money” excuse), why are the CEO wages STILL going up? Why are profits STILL increasing?

    Because they are pocketing the cash.

    Short term this works, but this is NOT a good economy.

  40. 190

    John Donohue writes:

    Humans will cope. No one will die from global warming;

    People are already dying from global warming, like the 30,000 or so killed by the unprecedented heat wave in Europe five years ago.

    Global warming causes increased droughts in continental interiors; in the 1950s and 1960s 20% of agricultural areas were experiencing droughts at any given time. Now it’s 30%. Screwing up agricultural production means people die. Maybe not in America, but in a hell of a lot of poor countries.

    Global warming will mean the disappearance of glaciers. 100 million people in Asia depend on glaciers for their fresh water.

    Lastly, sea-level rise will create refugees. A hundred million Bangladeshis will be seeking a new home; do you think India will anxious to take them in and provide for them?

    Global warming is going to kill a lot of people.

  41. 191

    CL writes:

    I think that is extremely ridiculous and silly that we have an economic system which is wrecking the only place where we can live. Capitalism is a primary cause of most of the problems we face, not a wise solution that secures a sustainable future.

    Has it escaped your attention that the worst pollution on record happened in the USSR and eastern Europe, neither of which could be remotely called capitalist? The Black Sea is a sewer, vast swaths of forest are gone, and half a century after the Chelyabinsk waste dump exploded, it’s still radioactive.

    Central planners can be just as bad for the environment as capitalists.

  42. 192

    FurryCatHerder posts:

    If you look at, for example, the history of American exploitation in Cuba, one of the primary reasons for the Cuba Revolution was the way in which America deprive Cuba of the same liberties we enjoyed for ourselves. It would have been better for the people of Cuba if a democratic government had been established, but we certainly weren’t down there to promote the Declaration of Independence. It was more like agricultural exploitation, entertainment and prostitution, and who cares about the Cuban people or their liberty.

    Do you like the present regime? Fulgencio Batista was a fascist dictator who had political enemies thrown down water slides into a shark tank. On the other hand, Castro’s regime still features block and apartment political officers, secret police, and labor camps. Remember when it was Cuban policy to throw gay people into concentration camps? That was under Castro, not Batista.

  43. 193
    Timothy Chase says:

    Tenney Naumer wrote in 183:

    Timothy, the theories you present have been used time out of mind to argue against increases in the minimum wage. You could argue that at some point companies find it more profitable to outsource their production to countries where the price of labor is even lower.

    … and raise the wages in those countries to the point that temp companies in India start outsourcing the very same jobs to the Philippines. Yes, I could.

    Actually there are a number of other things which I could argue — all of which are true. For example, minimum wage laws have been deliberately used as a means of preventing at least some “minorities” from competing against a ruling class, e.g., South Africa during Apartheid — and more recently Israel believe. Likewise, prior to the institution of minimum wage laws, African Americans found a great deal more opportunities in the railroad industry but were priced out of entry into that industry as those laws took effect. At a lower wage, less educated and less skilled labor may very well be able to compete against more skilled labor — but a high minimum wage removes that opportunity. The ability to price your competition out of the market — whose labor is at least partially substitutable for your own and might otherwise undersell you — is also one the reasons why the more powerful labor unions have tended to support raising the minimum wage in the past.

    However, the extent to which raising the minimum wage affects employment will depend upon a variety of factors. The most important will be the elasticity of demand for labor — as it exists in the relevant industries — which itself will be dependent upon the elasticity of demand for the products of those industries. If the demand is relatively inelastic (over the short-term) then the higher wages will largely be passed on as higher costs to the consumers — but to the extent that this happens, consumers will have that much less to spend on other things — unless you inflate the money supply, either in terms of actual currency or credit. To the extent that it is the former, you may actually reduce employment among other groups. To the extent that it is the latter, you haven’t really raised wages in the first place — not in terms of actual purchasing power. However, these will have other effects. For example, artificially inflating the credit supply temporarily lowers the interest rate, making long-term investments appear more profitable relative to short-term investments, resulting in malinvestment where in essence one starts laying the foundation for a hundred story building when in fact one has supplies for building something that will be only fifty stories tall. As interest rates rise back to their natural level, the malinvestment is uncovered for what it is and will tend to have recessionary effects.

    *

    Tenney Naumer wrote in 183:

    However, there is another thing that is affecting the profits of large companies — the ever-increasing and ridiculous salaries paid to low-performing CEOs. These salaries were already out of hand more than 20 years ago. Nowadays there are hardly words available to describe their absurdity.

    Well, lets look at something fairly recent so that we have at least some idea as to the magnitude of the compensation we are talking about…

    Let’s try:

    The heads of America’s 500 biggest companies received an aggregate 8% pay raise last year; as a group their total compensation amounted to $3.3 billion versus $3.1 billion in fiscal 2002. We define total compensation as salary and bonus; ‘other’ compensation includes vested restricted stock grants, and ‘stock gains,’ the value realized from exercising stock options during the just-concluded fiscal year.

    CEO Compensation
    Forbes staff, 04.23.04, 7:00 AM ET
    http://www.forbes.com/2004/04/21/04ceoland.html

    The average yearly compensation for the CEOs of America’s 500 biggest “companies” (actually conglomerates in most cases) comes to 6.6 million dollars. That’s a lot of money — to people like you and me. But the collective compensation of all 500 CEOs taken together also comes to around $10 dollars per year when spread out over the entire US population. Not much to raise the wages with, I believe, assuming you were to confiscate it and evenly distribute it.

    Now of course, even if someone is working sixty hours a week, I would find it extremely difficult to personally justify paying them anything upwards of a million dollars. But then again I don’t really have much of an idea of what it is that these individuals do. And neither do you. But presumably those who agree to paying them this much see things a little differently. And maybe they are in a better position to know. Regardless, it doesn’t make much sense to compare these incomes to what you or I make — or at least myself as I am living hand to mouth at best — as a great deal of it is in stock and greater share of the rest is no doubt invested in whatever opportunities they see (much of which no doubt results in the creation of jobs) rather than on personal consumption.

  44. 194
    Jess says:

    @Barton –

    No, you needn’t know everything but I offer that one of the most “efficient” markets out there — the US Stock market — is loaded with regulations governing who has what information and when. That’s why you go to jail for insider trading and get fined by the SEC for withholding information material to investors’ decisions.

    In the labor market, I don’t even have the elementary information I would have buying a stock. It isn’t about planning, it’s just about whether I can ever engage in a transaction on terms that don’t almost always favor the buyer of labor.

    In the stock market I can look up a company’s earnings and all that related data to decide whether and how much I will bid. In the labor market I have nowhere near that. If I could read minds I would know exactly how much others were paid for the same job and could adjust my offer accordingly (like in the stock market where I can see what loads of others are paying for the stock, and adjust the bid/ask). But I can’t.

    Then there’s the coercion factor. If nobody really needed a job, I offer that only then would we know what people were willing to offer as labor for what pay. Similar to iPods. Nobody needs one. But it is precisely because nobody needs one that we know what people are really willing to pay — you come into that transaction more or less as an equal, because you can make the free market decision NOT to buy.

    In reverse, the problem with labor is that in most places you need a job to live. So one person in the transaction has almost no pricing power.

    For climate problems we have a similar issue. The kind of information and incentives that transmit well in market systems simply don’t lend themselves to solving climate problems. That’s because it involves taking another path than assuming growth is infinite.

    Jared Diamond has a great chapter on this when he talks about one group of islanders that managed to stay within the carrying capacity of their home. They got rid of the pigs. That was a collective decision and if any one person had kept pigs — a symbol of success and wealth in that culture — the whole project would have been for naught. The market — allowing people to raise pigs and hoping that the island would retain its capacity, on the off chance that someone came up with something else, would simply put have ended their civilization.

    Sometimes you need to make those kinds of decisions. Just because there is a market for something doesn’t make relying on the markets to self-regulate a good decision-making process. I mean, there is a market for selling mercuric oxide to cure hunger pangs in Mexico, but saying that the market would work itself out because the sellers have no incentive to kill their customers is simply silly. In that case, the buyer (usually someone poor and uneducated) has no way to evaluate whether they want to buy the cure or not. Information asymmetry.

    Climate problems have a similar information asymmetry. There’s a lot we don’t know. But the problem is what we don’t know may kill us all. We don’t know how much abuse the environment can take, or which species is critical for certain areas to thrive. But if we randomly kill off species enough sooner or later we’ll hit it. markets have no realistic way of evaluating this kind of stuff.

    For instance, there is a small but nonzero chance that acidifying the oceans could destroy the food chain entirely. Then it’s all over for our civilization. BAU scenarios wouldn’t address this at all. Since there’s no “market” for a non-acidified ocean, there’s no incentive to prevent it.

  45. 195
    Rod B says:

    CL says (180), “…Capitalism is a primary cause of most of the problems we face, not a wise solution that secures a sustainable future…” and in (182), “…USA caused the overthrow of 75 democratically elected governments since WW2.” Where on earth (or the moon maybe) are you coming up with this stuff?? Quick back-of-the-napkin says we overthrew 1.2 democratically elected governments every year from 1945 to date. My! MY! My!

    On trade, you make a valid point. I was simply pointing out the theory underlying the benefits of trade as taught in Econ101. Practice does not always go that route, and I agree can look nonsensical, at least on the surface.

  46. 196
    Rod B says:

    FurryCatHerder (184) You said in part, “…No, market forces are not. What we lack is regulations…” You are saying exactly what I said, or at least tried to say. We’re in full agreement on the process here.

    I agree with your assessment of our actions in Cuba. (btw, I was in Havana July 1959 listening to Castro’s official victory speech.) Minor point — Cuba was not a democracy under Bastista, who btw also could have cared less about his own Cuban’s liberty or well-being. In any case I was lambasting the statement, “…the US tried to destroy any [every] democratic country that had anything valuable…” which, as the man said, is so incorrect it’s not even wrong.

    re “full disclosure”: I was responding to a post by stating one of the fundemental precepts of capitalism/free private enterprise is everyone having complete knowledge of what everyone else is doing. No one is going to enter the widget business if he has no idea what the current widget makers are earning. In practice this lack (which will always exist) is harder on labor because there is no mechanism for a farmhand in Iowa to know what a cabinet maker in N. Carolina is earning, or how fast he progressed, or what it cost to start. So the theory that if jobs are lost, the laborer simply goes off and gets another job misses a whole lot in practice, in great part because of the lack of information. (And also the cost of the transition — changing jobs — that is not in capitalistic theory.) But I am not refuting other hardships as you mention.

  47. 197
    Bill Pickett says:

    I wish people would leave out comments like \ridiculous\, \silly\, \duh\. I don’t think these words are helpful when we should be having a dialogue.

  48. 198
    Mark says:

    Bill #137, it’s called “conversation”.

    “Dialogue” indeed!

    Yeuch!

  49. 199
    Mark says:

    timothy, yes CEO’s bonuses may work out to be $10 per US citizen. However, the US citizen is on average taking a huge pay CUT.

    Bah!

  50. 200
    Timothy Chase says:

    Jess wrote in 194:

    In the labor market, I don’t even have the elementary information I would have buying a stock. It isn’t about planning, it’s just about whether I can ever engage in a transaction on terms that don’t almost always favor the buyer of labor.

    I believe you mentioned earlier that it took you quite a few years before you were able to negotiate a higher salary. However, I would argue that if there is more than one potential employer of your labor where one is offering a higher “price” (wage) for that labor, then the issue of whether or not you negotiate a wage is a largely a non-issue. On the otherhand, it is easier to negotiate a higher wage if you have more than one job to pick from or are already employed — simply by bringing up your other options when dealing with a potential employer. Not something which I have made much use of — I knew about it abstractly but hadn’t ever really tried — but which I happened on inadvertently in my own experience just recently — when mentioning what I was already making and making it clear that I didn’t simply want to abandon my current contract for no reason if it got extended.

    Jess wrote in 194:

    In the stock market I can look up a company’s earnings and all that related data to decide whether and how much I will bid. In the labor market I have nowhere near that. If I could read minds I would know exactly how much others were paid for the same job and could adjust my offer accordingly (like in the stock market where I can see what loads of others are paying for the stock, and adjust the bid/ask). But I can’t.

    That is why you should shop around — and try to have several positions which you can choose from. But that is easier to do when you already have a job.

    Jess wrote in 194:

    Then there’s the coercion factor. If nobody really needed a job, I offer that only then would we know what people were willing to offer as labor for what pay. Similar to iPods. Nobody needs one. But it is precisely because nobody needs one that we know what people are really willing to pay — you come into that transaction more or less as an equal, because you can make the free market decision NOT to buy.

    In reverse, the problem with labor is that in most places you need a job to live. So one person in the transaction has almost no pricing power.

    But you don’t have to take the first job that is offered to you. That is part of the beauty of a decentralized economy — there is more than one potential buyer or seller from which to choose. And as long as some people aren’t desperate — waiting until the last moment so that they have to take the first job that is offered them — the free market will tend to set wages in accordance with the marginal productivity of the labor. And think about it: if offering someone a paying job were truly a coercive act somehow equivilent to slavery, why would any employer ever offer more than minimum wage? But there are a great many jobs out there with different salaries and different wages well above minimum wage — even though the good majority of them involved no actual haggling over who would get paid how much — any more than you sat down with the store manager at your grocery store to discuss what products and brands his store would carry. And yet you have to eat.

    *

    Jess wrote in 194:

    For climate problems we have a similar issue. The kind of information and incentives that transmit well in market systems simply don’t lend themselves to solving climate problems. That’s because it involves taking another path than assuming growth is infinite.

    Free markets are good at growth, but the law of supply and demand and largely non-articulated coordination of the economy by the pricing system aren’t predicated on this. What makes the free market less than satisfactory in dealing with ecological and climatological issues are market externalities. If we could somehow section off the atmosphere and oceans, precisely defining the associated property rights and require those who inject carbon dioxide into the atmosphere to pay for all of the unintended consequences incurred by others, then perhaps things would be different. But unfortunately this isn’t the way that the world works. The carbon dioxide emitted by the United States and Europe over the past several decades is resulting in drought and famine in parts of Africa today, and the coal plants brought online in China over the next several decades will be affecting people throughout much of the world for centuries to come. Which is why we need some mechanism external to the free market to limit the carbon entering the atmosphere, either in terms of carbon caps or a carbon tax.

    Jess wrote in 194:

    Jared Diamond has a great chapter on this when he talks about one group of islanders that managed to stay within the carrying capacity of their home. They got rid of the pigs. That was a collective decision and if any one person had kept pigs — a symbol of success and wealth in that culture — the whole project would have been for naught. The market — allowing people to raise pigs and hoping that the island would retain its capacity, on the off chance that someone came up with something else, would simply put have ended their civilization.

    Meat is carbon intensive — but presumably it could be dealt with the same way as other carbon intensive products. However, this brings up another market externality that I take an interest in — with our use of antibiotics to increase the weight of livestock — where the antibiotics are resulting in superbugs making their way into food supply — and where antibiotic resistance is subject to lateral gene transfer — with phages (for example) carrying antibiotic resistance between different populations and even different species of bacteria. The market is powerful — but it clearly has its limits.

    *

    Jess wrote in 194:

    Sometimes you need to make those kinds of decisions. Just because there is a market for something doesn’t make relying on the markets to self-regulate a good decision-making process. I mean, there is a market for selling mercuric oxide to cure hunger pangs in Mexico, but saying that the market would work itself out because the sellers have no incentive to kill their customers is simply silly. In that case, the buyer (usually someone poor and uneducated) has no way to evaluate whether they want to buy the cure or not. Information asymmetry.

    Then of course there is the old standard of cigarettes, which includes secondhand smoke. I might also include psychic surgery — where people claim to be able to reach inside your body and remove tumors — but which results in people dying of cancer forgoeing other treatments until it is too late. James Randi has exposed such charlatans before. Or there may be certain risks (such as in mining) where people aren’t fully aware of what they are signing up for — but with regard to wages at least things are fairly transparent.

    Jess wrote in 194:

    Climate problems have a similar information asymmetry. There’s a lot we don’t know. But the problem is what we don’t know may kill us all. We don’t know how much abuse the environment can take, or which species is critical for certain areas to thrive. But if we randomly kill off species enough sooner or later we’ll hit it. markets have no realistic way of evaluating this kind of stuff.

    This isn’t information asymmetry — since there is a lot even the experts don’t know. Information asymmetry (e.g., between buyer and seller, such as in the case of used cars) assumes someone has the information and that someone else does not.

    Jess wrote in 194:

    For instance, there is a small but nonzero chance that acidifying the oceans could destroy the food chain entirely. Then it’s all over for our civilization. BAU scenarios wouldn’t address this at all. Since there’s no “market” for a non-acidified ocean, there’s no incentive to prevent it.

    Once again, I would argue that this is a market externality. But you are correct that the market isn’t very good at dealing with this sort of issue. Something more will be required. However, insofar as it will have to involve some sort of regulation of the market, I believe it is best if we understand what the free market is and how it works — as well as why it fails to work by itself in certain contexts — if we wish to improve upon it rather unintentionally make things worse.

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