Hi Alex, so this is the post I accidently commented on :). Yes, even here I have my doubts given the profound things I've recently read in what are practically ancient texts at this point.
Using the Beveridge curve to compare the labor markets of contemporary America with the Old Republic may very well produce to flawed interpretations due to the huge differences in governance and economic structures between these periods. The Old Republic's design and fundamental nature was that of a highly decentralized system where local and state governments had immense autonomy, reflecting a far more republican form of governance. This decentralized nature allowed for a wide variety of economic and labor policies tailored to local conditions, which had a huge potential to deeply affect the relationship between job vacancies and unemployment differently across regions. While contemporary America features a far more centralized economic interventions and a uniform approach to labor market regulations across states, a near absence of states and cities ability to engage in meaningful economic of fiscal policy, and, at the high level, a large degree of private sector central planning, which could make the Beveridge curve's insights less applicable when retroactively applied at the national level to a period with such distinct and varied governance. So I guess that using this curve to draw direct comparisons might obscure the unique dynamics of each era's labor market.
Thanks for the cool post, it was well written and informative.
When exactly was the "Old Republic". None of my comparisons are from before WW II. I would guess you are referring to further back than WW II, I made no comparisons to such early times.
The point my comparison was to show how the "huge differences in (business) governance and economic structures" have affected labor markets so that wage growth for ordinary people is very difficult to achieve. I represent business governance and economic structures as part of business/economic *culture* which I characterize as a mix of two archetypes, shareholder primacy (SP) and stakeholder capitalism (SC). See my paper for more:
Well WW2 would technically be in the phase spaces as the OR was transitioned away from between 1933 and 1961*, however, my point was about and specific reference you made but rather in reference to our interaction yesterday. I mentioned it in regards to the other post and I guess mistakenly responded to this one, I mentioned that I figured I would feel the same way regardless, and so I went to check this post to make sure that Beveridge curves were what I thought they were at first glance, and just wanted to affirm that I do indeed feel that way.
*There was a few hold over, with the biggest example being the local governance of Chicago that held on until at least the 80s
thank you for that really clear explanation of the Beveridge curve, not something I was previously familiar with. Also, nice job with pin pointing a major source of economic disaffection, and explaining why understaffing continues to be such a problem.
My view on political economics and the business culture it shapes is that there has been nowhere near the foundational level thinking required to create an ethos of mutually beneficial and sustainable growth. We need a radical rethink in order to meet the needs of the 21st Century and stakeholder capitalism simply isn't going to cut it.
Why? Because it doesn't seek to define the good bits of economic disruption versus the bad bits. First, labour elimination is generally good, provided it's genuine, rather than a sneaky way to encourage workers to 'peddle harder'. The agricultural reforms of nearly two centuries ago were doubtless painful for the workers and caused all manner of social upheaval, but at the same time, the fact that the percentage of the workforce deployed to agriculture has shrunk from 50% of the population to 1% or 2% of the working age population in the modern age is ultimately a good thing, because it's made all of us a good deal permanently wealthier, with children in workhouses no longer forced to fight for the rotten marrow within bones destined for agricultural uses. Similarly, in the electrical good markets, prices don't always (or even often) fall as a result of systemic labour elimination, but few could argue that it's a bad thing that manufacturers and innovators choose to reinvest said labour elimination in making televisions better in almost every way than a few years ago, for roughly comparable prices.
But at the same time, there is a culture within many corporations to keep low wage jobs low, regardless of productivity gains and efficiency savings, even when many of those productivity gains can be accessed by harnessing incentives and the economic interests of workers. Most employers seem to think they do well or at least considerably better than average in attaining high productivity from their workers, despite all evidence to the contrary and a preference for the flat rates pay guaranteed to achieve piss poor productivity. Decades ago, an old British Standards Institute study showed that the average of piece rates or other proportional productivity related pay systems performed 50% better than the average of flat-rate systems or incentivised pay systems designed to slowly ratchet up the pressure by occasionally shifting the goal posts in favour of management.
The social contract of worker and employer should be simple and defined by two rules. 1) Don't be surprised when we eliminate your buddies jobs. It may seem ruthless, but similar labour elimination in the past is exactly the force which raised us all out of the gut-wrenching and malnourished poverty which typified 95% of humanity pre-industrialisation. 2) In the meantime, we will treat you well. Pay will be as good as economic constraints and competition will allow, whilst allowing for the types of post-tax and inflation net profits which make businesses sustainable over decades. We will treat you with dignity. And if you want more pay in your current job, become more productive. It's a system which worked relatively well in Germany's export surplus economy until the German government began to screw up their manufacturing economy with the high energy prices all but guaranteed by an energy sector with a substantial composition of 'green' energy.
Stakeholder capitalism (SC) is simply the name I give to the business/economic culture prevalent during the 1940-73 period when income inequality (the proxy I use to represent the amount of SC vs SP culture in the economy) was low or falling. It has to do with executive beliefs and behavior.
Everything you are talking about is stuff SC managers do. You write "Similarly, in the electrical good markets, prices don't always (or even often) fall as a result of systemic labour elimination, but few could argue that it's a bad thing that manufacturers and innovators choose to reinvest said labour elimination in making televisions better in almost every way than a few years ago, for roughly comparable prices."
This is an SC behavior. I would point out that US companies do not make TVs and consumer electronics anymore. Those went away here long ago, though not in Japan (or at least not as fast) because the money saved by cutting costs here (under SP) went to boosting profits and share price, whereas it goes into investment into the business in places which are still SC.
Check out average earnings, dividends and buybacks for the firms in the S&P 500 for the 2018-2023 period (values in $billions).:
ERN: 1301 DIV 515 BUY 776. The sum of the dividends and buybacks is 1291.
99.2% of profits when into the stock market, leaving essentially nothing for reinvestment. This is SP capitalism, there is no reinvestment of savings into better products. Savings achieved by downsizing, or from tax cuts are just pumped into the stock market, growing the financial bubble every bigger as shown by the rising trend in the Buffet ratio:
Thanks for the Buffet Indicator source! You wouldn't believe how many arguments I've had with Conservatives over surplus capital. They get fractional reserve lending, they understand that QE tends to end up in areas like the stock market and real estate (leading to asset bubbles). What they won't concede it that sometimes too much capital in a system can lead to some very unhealthy forms of investment and business practices.
In my youth I spent a good deal of time trying to work out the Nazi phenomenon. Of course, there was the obvious layer of ideological pathology. But more than that, I wanted to know exactly how a relatively small country could require almost an entire hemispheres resources and efforts to defeat.
The answer was it wasn't the Nazis. It was Bismarck and most neglected aspect of Welfare Capitalism- the legal requirement for continuous education in the workplace. No other policy has ever done to much to propel any culture to the technological and cultural forefront of advanced economies. Apart from anything else, it broke down class barriers- allowing for the most powerful form of diversity available- SES diversity.
No mention of a Job Guarantee policy? Because "tight" and "slack" here are only applicable when government does not either, (i) hire all the unemployed that Its tax liabilities created in the first place, or (ii) lower the tax liabilities so no one is involuntarily unemployed, or a combo of (i) and (ii). Unemployment defined as "people seeking to exchange their labour for tax credits", not as "people not in paid employment."
There is no good reason to have any involuntary unemployment, as just defined. No matter what the private sector job vacancy ratio.
I was describing the Beveridge curve, which was new to me and relating them to the economic culture system I write about. It is an informational post, not a policy advice post.
Hi Alex, so this is the post I accidently commented on :). Yes, even here I have my doubts given the profound things I've recently read in what are practically ancient texts at this point.
Using the Beveridge curve to compare the labor markets of contemporary America with the Old Republic may very well produce to flawed interpretations due to the huge differences in governance and economic structures between these periods. The Old Republic's design and fundamental nature was that of a highly decentralized system where local and state governments had immense autonomy, reflecting a far more republican form of governance. This decentralized nature allowed for a wide variety of economic and labor policies tailored to local conditions, which had a huge potential to deeply affect the relationship between job vacancies and unemployment differently across regions. While contemporary America features a far more centralized economic interventions and a uniform approach to labor market regulations across states, a near absence of states and cities ability to engage in meaningful economic of fiscal policy, and, at the high level, a large degree of private sector central planning, which could make the Beveridge curve's insights less applicable when retroactively applied at the national level to a period with such distinct and varied governance. So I guess that using this curve to draw direct comparisons might obscure the unique dynamics of each era's labor market.
Thanks for the cool post, it was well written and informative.
I hope your having a nice weekend!
---Mike
When exactly was the "Old Republic". None of my comparisons are from before WW II. I would guess you are referring to further back than WW II, I made no comparisons to such early times.
The point my comparison was to show how the "huge differences in (business) governance and economic structures" have affected labor markets so that wage growth for ordinary people is very difficult to achieve. I represent business governance and economic structures as part of business/economic *culture* which I characterize as a mix of two archetypes, shareholder primacy (SP) and stakeholder capitalism (SC). See my paper for more:
https://escholarship.org/uc/item/9x36913k
Well WW2 would technically be in the phase spaces as the OR was transitioned away from between 1933 and 1961*, however, my point was about and specific reference you made but rather in reference to our interaction yesterday. I mentioned it in regards to the other post and I guess mistakenly responded to this one, I mentioned that I figured I would feel the same way regardless, and so I went to check this post to make sure that Beveridge curves were what I thought they were at first glance, and just wanted to affirm that I do indeed feel that way.
*There was a few hold over, with the biggest example being the local governance of Chicago that held on until at least the 80s
thank you for that really clear explanation of the Beveridge curve, not something I was previously familiar with. Also, nice job with pin pointing a major source of economic disaffection, and explaining why understaffing continues to be such a problem.
My view on political economics and the business culture it shapes is that there has been nowhere near the foundational level thinking required to create an ethos of mutually beneficial and sustainable growth. We need a radical rethink in order to meet the needs of the 21st Century and stakeholder capitalism simply isn't going to cut it.
Why? Because it doesn't seek to define the good bits of economic disruption versus the bad bits. First, labour elimination is generally good, provided it's genuine, rather than a sneaky way to encourage workers to 'peddle harder'. The agricultural reforms of nearly two centuries ago were doubtless painful for the workers and caused all manner of social upheaval, but at the same time, the fact that the percentage of the workforce deployed to agriculture has shrunk from 50% of the population to 1% or 2% of the working age population in the modern age is ultimately a good thing, because it's made all of us a good deal permanently wealthier, with children in workhouses no longer forced to fight for the rotten marrow within bones destined for agricultural uses. Similarly, in the electrical good markets, prices don't always (or even often) fall as a result of systemic labour elimination, but few could argue that it's a bad thing that manufacturers and innovators choose to reinvest said labour elimination in making televisions better in almost every way than a few years ago, for roughly comparable prices.
But at the same time, there is a culture within many corporations to keep low wage jobs low, regardless of productivity gains and efficiency savings, even when many of those productivity gains can be accessed by harnessing incentives and the economic interests of workers. Most employers seem to think they do well or at least considerably better than average in attaining high productivity from their workers, despite all evidence to the contrary and a preference for the flat rates pay guaranteed to achieve piss poor productivity. Decades ago, an old British Standards Institute study showed that the average of piece rates or other proportional productivity related pay systems performed 50% better than the average of flat-rate systems or incentivised pay systems designed to slowly ratchet up the pressure by occasionally shifting the goal posts in favour of management.
The social contract of worker and employer should be simple and defined by two rules. 1) Don't be surprised when we eliminate your buddies jobs. It may seem ruthless, but similar labour elimination in the past is exactly the force which raised us all out of the gut-wrenching and malnourished poverty which typified 95% of humanity pre-industrialisation. 2) In the meantime, we will treat you well. Pay will be as good as economic constraints and competition will allow, whilst allowing for the types of post-tax and inflation net profits which make businesses sustainable over decades. We will treat you with dignity. And if you want more pay in your current job, become more productive. It's a system which worked relatively well in Germany's export surplus economy until the German government began to screw up their manufacturing economy with the high energy prices all but guaranteed by an energy sector with a substantial composition of 'green' energy.
Stakeholder capitalism (SC) is simply the name I give to the business/economic culture prevalent during the 1940-73 period when income inequality (the proxy I use to represent the amount of SC vs SP culture in the economy) was low or falling. It has to do with executive beliefs and behavior.
Everything you are talking about is stuff SC managers do. You write "Similarly, in the electrical good markets, prices don't always (or even often) fall as a result of systemic labour elimination, but few could argue that it's a bad thing that manufacturers and innovators choose to reinvest said labour elimination in making televisions better in almost every way than a few years ago, for roughly comparable prices."
This is an SC behavior. I would point out that US companies do not make TVs and consumer electronics anymore. Those went away here long ago, though not in Japan (or at least not as fast) because the money saved by cutting costs here (under SP) went to boosting profits and share price, whereas it goes into investment into the business in places which are still SC.
Check out average earnings, dividends and buybacks for the firms in the S&P 500 for the 2018-2023 period (values in $billions).:
ERN: 1301 DIV 515 BUY 776. The sum of the dividends and buybacks is 1291.
99.2% of profits when into the stock market, leaving essentially nothing for reinvestment. This is SP capitalism, there is no reinvestment of savings into better products. Savings achieved by downsizing, or from tax cuts are just pumped into the stock market, growing the financial bubble every bigger as shown by the rising trend in the Buffet ratio:
https://www.currentmarketvaluation.com/models/buffett-indicator.php
The German system is a European version of SC capitalism. See my paper here:
https://escholarship.org/uc/item/9x36913k
Thanks for the Buffet Indicator source! You wouldn't believe how many arguments I've had with Conservatives over surplus capital. They get fractional reserve lending, they understand that QE tends to end up in areas like the stock market and real estate (leading to asset bubbles). What they won't concede it that sometimes too much capital in a system can lead to some very unhealthy forms of investment and business practices.
In my youth I spent a good deal of time trying to work out the Nazi phenomenon. Of course, there was the obvious layer of ideological pathology. But more than that, I wanted to know exactly how a relatively small country could require almost an entire hemispheres resources and efforts to defeat.
The answer was it wasn't the Nazis. It was Bismarck and most neglected aspect of Welfare Capitalism- the legal requirement for continuous education in the workplace. No other policy has ever done to much to propel any culture to the technological and cultural forefront of advanced economies. Apart from anything else, it broke down class barriers- allowing for the most powerful form of diversity available- SES diversity.
No mention of a Job Guarantee policy? Because "tight" and "slack" here are only applicable when government does not either, (i) hire all the unemployed that Its tax liabilities created in the first place, or (ii) lower the tax liabilities so no one is involuntarily unemployed, or a combo of (i) and (ii). Unemployment defined as "people seeking to exchange their labour for tax credits", not as "people not in paid employment."
There is no good reason to have any involuntary unemployment, as just defined. No matter what the private sector job vacancy ratio.
I was describing the Beveridge curve, which was new to me and relating them to the economic culture system I write about. It is an informational post, not a policy advice post.
Fair enough.