[lbo-talk] Brad DeLong's dubious view of layoff restrictions

[Jim Devine]

I can't speak for BDL (or for OBL or anyone else...) but the basic
idea of "efficiency" in economics typically looks at everything from
the individual point of view. A market is efficient if the price
correctly reflects the costs (and benefits) to the individuals
involved. Even though officially markets are not always efficient, in
practice,  it's not "man" that's the "measure of all things," it's the
market. In this brave new neo-liberal world of ours, it's generally
assumed that labor markets are efficient if there are no unions or
minimum wages or similar interferences. Labor-market flexibility
(i.e., the employer's power) is seen as _prima facie_ efficient. To my
mind these attitudes reflects the class war against labor...

If "free" labor markets are presumed to be efficient, then any public
effort to create jobs would be inefficient. The market is doing a
damned good job, thank you, so the government isn't needed.

Sometimes, economists posit a "social welfare function" which
aggregates individual preferences. By the standards of this function,
the market could fail, even the labor market. However, such
aggregation can't be done on the blackboard or in the economics book
(for reasons akin to the voters' paradox). So economists tend to fall
back on individual preferences alone.

To my mind, the only "social" standard would be what people want as
expressed through democratic institutions. But most economists don't
like democracy, except in a very limited way.

By the way, if we're going to push for increased government employment
of labor, the best way is to link it to the long-term supply-side
growth of the economy (e.g., rebuilding the levees in New Orleans).
Rather than having government workers dig holes in order to fill them
in again, have them do something that the so-called "private" sector
won't do, because it isn't profitable, but is needed.

On 4/3/06, Jerry Monaco <monacojerry at gmail.com> wrote:
> All of the above, from Wojtek, Jim, Dennis, is interesting....
>
> Question:  Let us say that the government in Germany employed people
> directly ... from social work to make work .. giving every teacher a paid
> teacher's assistant, building extra schools so that elementary schools had
> only 10 kids per class room, crossing guards instead of stop lights,
> employing people to build and plant roof gardens,  ... no one doubt that
> unemployment would go down ...  but as far as DeLong is concerned this would
> not say anything about the efficiency or inefficiency of "the market."
> There would be a decline in "labor flexibility" and thus all of this social
> work-make work and rooftop gardening would be by definition inefficient?
>
> Somebody explain to me how this works?  Perhaps my question isn't even
> coherent?
--
Jim Devine / "There can be no real individual freedom in the presence
of economic insecurity." -- Chester Bowles