medium-length thoughts about economics

1)my textbook is trying to kill me. I nearly fell of my chair when I read the following paragraph:

Our discussion of resource pricing is the cornerstone of the controversial view that fairness and economic justice are one of the outcomes of a competitive capitalist economy. Table 12.7 demonstrates, in effect, that workers receive income payments (wages) equal to the marginal contributions they make to their employers’ outputs and revenues. In other words, workers are paid according to the value of the labor services that they contribute to production

It does no such thing.

That Table 12.7 is only showing that given two resources, their price, their productivity, and the resulting profit, you can calculate the least expensive and most profitable combination of the two resources, which indeed tends to fall in the area where marginal revenue of adding a unit of a resource = marginal cost or adding a unit of a resource. Which has fuck all to do with real markets. Because in real markets, a hell of a lot of the necessary information is impossible to come by (for example, accurately calculating marginal revenue from a unit of labor is near impossible. seriously, how does one calculate the marginal revenue of CEO A over the marginal revenue of CEO B? one doesn’t, and can’t considering their pay is established a priori, before they’ve had a chance to create any marginal revenue at all); plus, they disappeared the ever-necessary ceteris paribus that accompanies such mathematical games with very limited variables. What may be true for a mathematical game with only a few variables will not be true in a real-world situation with fuckloads of variables, including human error and human biology.

2)And not only is the content of the textbook trying to kill me, so is their language-abuse:

It is no coincidence that the service occupations dominate the list [of 10-fastest growing US occupations for 2006-2016]. In general, the demand for service workers in the US is rapidly outpacing the demand for manufacturing, construction, and mining workers.

well, no, it’s certainly not a coincidence. That’s because you can’t have a coincidence with only one variable. You need at least two, so that they can, you know, coincide. Of course, it could be that the paragraph meant to say “it’s no coincidence that service occupations dominate the list while the demand for service workers is rapidly outpacing…”, but that would be so blatantly obvious, it would not be worth the paper it’s printed on. I’m thinking the word they were looking for here was “surprise”, as in “It’s no surprise that the service occupations dominate the list.”

3)Unrelated to my text-book, I’ve found the term for a phenomenon I’ve been observing in people who talk and write about economic issues: goal displacement.
Goal displacement is when the means to achieve a goal either become the goal, or become more important than the goal. So, when I read articles about the Chinese economy were the writer says that China needs to get its population to save much much less of its income to increase consumer-spending to improve the economy, I know that the writer is suffering from goal displacement: a healthy economy is a means by which the well-being of people is to be accomplished. to diminish the well-being of people to make an “improve” the economy is turning the means of achieving something into a goal unto itself.

10 comments on “medium-length thoughts about economics

  1. David Marjanović says:

    That Table 12.7 is only showing that given two resources, their price, their productivity, and the resulting profit, you can calculate the least expensive and most profitable combination of the two resources

    Given the resulting profit?

    In advance?

    Is perfect knowledge of the market being assumed? If so, why?

  2. Jadehawk says:

    Is perfect knowledge of the market being assumed? If so, why?

    because without that, you can’t even do the math, and this book is all about the math

  3. Paul says:

    I hope you’re quote-mining #2, because it makes no sense. There’s a sentence before or after that explains why service work is on the rise, and why it’s a sign of the glorious benefit of capitalism, right? And they mention that it’s because it’s ok to outsource background issues like materials requisition and manufacture to third world slave children on the cheap, whereas they can’t hire 5 year old Ethiopian children for a pittance to work their storefronts because people demand to be greeted by unaccented white folks that at least demand minimum wage?

    Is perfect knowledge of the market being assumed? If so, why?

    Having not read her economic book, that is my general assumption. Aside from it being required to do the math, most economic texts make so many assumptions (rational actors, etc) that they are completely divorced from real situations. They’re trying to dazzle with charts and propagandize, not inform.

  4. Jadehawk says:

    no, it’s not a quotemine. it’s really a completely meaningless statement. the entire paragraph reads as follows:

    Table 12.5 lists the 10 fastest-growing U.S. occupations for 2006 to 2016, as measured by percentage changes and projected by the Bureau of Labor Statistics. It is no coincidence that the service occupations dominate the list. In general, the demand for service workers in the United States is rapidly outpacing the demand for manufacturing, construction, and mining workers

  5. jemand says:

    so they are admitting their view is “controversial” but they are presenting it as authoritative in a text book? Did I get the right impression?

  6. Jadehawk says:

    Did I get the right impression?

    when they’re saying “controversial”, they seem to mean “truth is a harsh mistress, so suck it up, sociologists”. they do mention two criticisms of their view, but they’re not criticisms of the economics, but rather of the social side-effects. They’re most definitely not admitting that there might be something wrong with their economics, only that “life is cruel”.

  7. Jadehawk says:

    actually, I lied. what they do is present two “criticisms” of their theory: inequalities (including inheritance) that mean that some people are in fact making more than their social contribution, and market imperfections, which amounts to saying that “if we had a competitive market in everything, everything would be fine, but we don’t, so it’s not.”

    but like I said, there’s no hint that the mathematical games are in any way not reflective of real markets

  8. 'Tis Himself says:

    Sorry about not getting to this more promptly but I’ve been goofing off otherwise occupied.

    The first quote covers production workers, the folks who turn junque into widgets. CEOs and other executives are overhead (along with a bunch of other employees like accountants, janitors, and secretaries). Overhead affects profits (paying a CEO a bazillion dollars per year means profits are shorted a bazillion dollars) but doesn’t directly affect production.

    A generation or two ago most Westerners were employed in manufacturing. Manufacturing has continued in North America, Europe, etc. BUT there are a lot fewer workers doing those jobs. Robotics and outsourcing have replaced many Western workers. As a result, service jobs, most of which cannot be outsourced and must be done by humans, have replaced manufacturing employment. The problem with this is that service jobs pay a lot less than manufacturing jobs. A waitress makes much less than a welder.

  9. An attorney or doctor makes much more than a welder.

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