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November 13, 2011

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Video: Roubini Diagnoses the Euro Zone

Posted: 13 Nov 2011 12:24 AM PST

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Posted: 13 Nov 2011 12:06 AM PST

Cowen: Whatever Happened to Discipline and Hard Work?

Posted: 12 Nov 2011 02:34 PM PST

Tyler Cowen:

Whatever Happened to Discipline and Hard Work?, by Tyler Cowen, Commentary, NY Times: ...The United States has always had a culture with a high regard for those able to rise from poverty to riches. It has had a strong work ethic and entrepreneurial spirit and has attracted ambitious immigrants, many of whom were drawn here by the possibility of acquiring wealth. ...
In short, the traditional, pro-wealth cultural vision has a great appeal for me. But I must admit that it is showing some wear and tear, which may partly be why the criticisms made by the demonstrators at Zuccotti Park have so much resonance.
The first problem is that higher status for the wealthy can easily lead to crony capitalism. ...
The second problem is that many conservatives have become so attached to their cultural vision that they have ceded sound, technocratic reasoning to the left and center. For instance there is a common willingness among conservatives to defend the Bush tax cuts, even though the evidence does not show much of an economic payoff. ...
The third problem is that the pro-wealth cultural vision may be overly optimistic about human willingness to embrace the idea of responsibility. ...
The counterintuitive tragedy is this: modern conservative thought is relying increasingly on social engineering through economic policy, by hoping that a weaker social welfare state will somehow promote individual responsibility. Maybe it won't.
For one thing, today's elites are so wedded to permissive values — in part for their own pleasure and convenience — that a new conservative cultural revolution may have little chance of succeeding. Lax child-rearing and relatively easy divorce may be preferred by some high earners, but would conservatives wish them on society at large, including the poor and new immigrants? Probably not, but that's often what we are getting.
In the future, complaints about income inequality are likely to grow and ... higher income inequality will increase the appeal of traditional mores — of discipline and hard work — because they bolster one's chances of advancing economically. That means more people and especially more parents will yearn for a tough, pro-discipline and pro-wealth cultural revolution. And so they should.
It remains to be seen how many of us are up to its demands.

I am not a sure as he is that as inequality continues to increase, people will adopt conservative values rather than wondering why the playing field needed for those conservative values to express themselves has become increasingly unfair. And if they do conclude it's unfairness rather than values that is at the root of the growth in inequality, their reaction may be different.

(Also, my view of what is behind society's problems is also quite different from Tyler's. I suppose this makes me one of the "academics on the left" who "seem more comfortable focusing on the very real offenses of plutocrats and selfish elites," but I'll note that Tyler seems quite comfortable focusing on the problems posed by "today's elites" himself, i.e. the impediment they pose to the cultural values he'd like to see take hold. The comments on wealth and crony capitalism are also not far from complaints about plutocracy. We on the left have values that we believe in every bit as much as conservatives, but those values differ from those held by conservatives in important ways and that will naturally lead us to focus on different aspects of these problems. The fact that we talk about issues such as crony capitalism and powerful elites does not mean we have abandoned those values any more than it means Tyler has abandoned his values when he raises these issues himself. All it says is that the path to reach these values differs from the path preferred by conservatives.)

"Would Cracking Down on Illegal Immigration Really Cut Unemployment?"

Posted: 12 Nov 2011 09:09 AM PST

Daniel Indiviglio says that eliminating illegal immigration won't do much to create jobs:

Would Cracking Down on Illegal Immigration Really Cut Unemployment?, by Daniel Indiviglio: Americans don't want many of these jobs anyway and aren't desperate enough to settle

"And here is something else that we have to do that will help the economy. We have to build the fence on America's southern border and get a grip on dealing with our immigration problem." This was one of the responses from Rep. Michelle Bachmann during Wednesday night's Republican Presidential Debate when asked how she would create jobs as quickly as possible. This is a sentiment shared by many Americans...

Elizabeth Dwoskin at Bloomberg wrote a very thought-provoking article on this topic... She found that Americans don't want many of those jobs that illegal immigrants have. She shows this through a sort of case study of Alabama. The state recently passed a law that allows the police to question people they suspect are in the U.S. illegally. As you might guess, illegal immigrants are fleeing the state.

But the expected boost for unemployed Americans isn't materializing: they aren't rushing to take the jobs those illegal immigrants are leaving behind. Dwoskin writes:

In their wake are thousands of vacant positions and hundreds of angry business owners staring at unpicked tomatoes, uncleaned fish, and unmade beds. "Somebody has to figure this out. The immigrants aren't coming back to Alabama--they're gone," Rhodes says. "I have 158 jobs, and I need to give them to somebody."

There's no shortage of people he could give those jobs to. In Alabama, some 211,000 people are out of work. In rural Perry County, where Harvest Select is located, the unemployment rate is 18.2 percent, twice the national average. One of the big selling points of the immigration law was that it would free up jobs that Republican Governor Robert Bentley said immigrants had stolen from recession-battered Americans. Yet native Alabamians have not come running to fill these newly liberated positions. Many employers think the law is ludicrous and fought to stop it. Immigrants aren't stealing anything from anyone, they say. Businesses turned to foreign labor only because they couldn't find enough Americans to take the work they were offering.

At a moment when the country is relentless focused on unemployment, there are still jobs that often go unfilled. These are difficult, dirty, exhausting jobs that, for previous generations, were the first rickety step on the ladder to prosperity. They still are--just not for Americans.

This point may seem intuitively obvious, but it's nice to see a reporter provide a clear, cohesive example of why illegal immigrants aren't a significant causal force of the high rate of unemployment. The problem isn't merely that there aren't enough jobs -- there aren't enough of the right sort of jobs.

Perhaps if the U.S. didn't have unemployment insurance programs in place, things would be different. If jobless Americans couldn't collect checks for 99 weeks, then they might feel a greater sense of urgency to settle for any job that they could get -- they would then be more willing to pick tomatoes, gut fish, and make beds. But if they can continue to look for something better while just scraping by on the money they get from the government, then that's a better option.

Is the answer, then, to both deport illegal immigrants and end unemployment insurance? ... But would its decline really imply that the nation was much better off? Remember, most of the job openings that would result would be among the least desirable out there. They would pay poorly and result in a pay cut for many of those Americans. ...

So would cracking down on illegal immigration make the U.S. labor market much better off? Reading Dwoskin's article, it's hard to see how. For the U.S. economy to flourish again, the private sector needs to add millions of good-paying jobs that help to build a skill set, which will rebuild the U.S. middle class. You don't get many of those jobs by merely cracking down on illegal immigration.

There is a wage at which US citizens will take these jobs. If the business owner interviewed above were to offer me a million dollars a day to do one of the unfilled jobs, I'd be on the next plane to the job site. So the idea that Americans won't do this type of work is wrong, but you do have to offer a wage that is high to compensate people for the nature of the work they will be asked to do.

Ah, you say, but this is a sign that our social insurance programs are too good. If people were as poor as they are in Mexico, and faced a similar life outlook, surely they'd be willing to take these jobs too. Yes, probably true. It's also true that if we lived in a dictatorship, someone could force me to do this job at whatever pay they wanted to give. The motivation would be to prevent physical pain -- to, say, stop myself from getting beaten for refusing to take the job rather than starvation -- but the effect would be the same.

But I don't want to live in a society so poor that people take jobs out of desperation to survive -- poverty can take away choices -- and I'd rather not have choices made for me by a dictatorial form of government. So what this indicates to me is that there are people in the world, some of whom live close by, so in need of work just to survive that they will take work at exploitive wages. The conditions where they live are so bad, and the available social services so poor, that they have no choice but to do things like leave their families for months or years, head north, and do whatever they can just to get by (even private sector institutions such as soup kitchens are much more scarce than in the US). And much of what they are asked to do is very, very unpleasant work.

The business owners will complain, of course, that if they pay the wages needed to attract Americans to these jobs -- basically to keep them out of soup kitchens -- then they won't be able to make a profit. That may or may not be true, but assume it is. What does it really mean? It means that the product they are selling is not viable unless people are forced by their circumstances to work at wages below what would be acceptable if even the barest of social services were available.

The fact that Americans "continue to look for something better while just scraping by on the money they get from the government" is a sign that we still have some hope left, that people think there is a chance they won't have to resort to working at exploitative wages that unjustly benefit business owners (and those who think that our social service programs are too kind should try living on them for a year or two). I am glad that we don't put people in the position of having to accept these kinds of jobs at very, very low wages just to prevent starvation.

If these jobs remain open, one of two things will happen. Either wages will rise to a level that will attract workers, or if the wage required is too high to make a profit the firm will go out of business. That's just the free market at work, and cries from business owners that the inability to hire illegal workers is forcing them out of business is no more compelling than a cry that the inability to do something illegal such as pollute is forcing them to close their doors. The question is whether they are profitable when forced to internalize all costs, and pay the above-board market price for the resources they use.

But I am also very favorably inclined toward immigration, and believe our doors ought to be much more open than they are. I grew up in an area where illegal immigration was very high, and I have no doubt at all that these workers are exploited by those who hire them. We would never tolerate this type of treatment for our own citizens, but somehow we look away when it is illegal workers from Mexico. In times when work is plentiful, I would have no problem at all with programs that bring workers to the U.S. legally to do this type of work. We could then do a much better job of monitoring how these workers are treated, and so on, and ensure that business owners aren't getting rich through the exploitation of illegal immigrants. Again, this would mean that some business owners wouldn't survive -- those that depend upon paying very low wages to workers who can't complain -- but that's no different than what happens to businesses across the US every day. Not every business is viable, and when costs are too high firms go out of business -- these firms are no different. In times like the present when work is scarce, I would cut back on these programs (though not fully eliminate them) and hope that the improved conditions and higher wages that would result from bringing the formerly illegal workers out into the open would mean some of these jobs would be more likely to be filled by US citizens.

The cry that "Americans don't want many of these jobs" is really an admission that the wages being offered are too low. There are Americans who will do these jobs, and do them very well, but not for wages that barely keep them out of soup kitchens. If business owners want workers, there are plenty available. All they have to do is offer a decent wage.

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