Archive for March, 2009

The problem of unemployment

March 31, 2009

To a planner, the problem of unemployment looks very solvable.

There is a sum total of social labour necessary in a given year to produce the conventional bundle of goods and services to be consumed by the population in that year.

So divide the total labour applicable by the number of adults in the workforce, and you will have the per-head-of-work-force annual labour necessary.

But it does not work that way in real life.

Why does it not work that way in real life?

In University of Bombay I read a book on the Soviet gold industry. This was a book written by an American mining engineer who was instrumental in setting up the industry. Apparently, Stalin had read stories of the Californian Gold rushes with avidity, and was taken up with the thought of the civilizing effects of a major discovery of gold. He pushed the nomadic populations of the Russian steppes out of their traditional way of life into becoming work forces for gold mining in Russia. I can’t remember the names of the fields, and don’t know where they are geographically today. But the point I’m trying to make here is that the employment problem was in a way solved by fiat.

The signals the markets send out are more subtle, and there is no central database of jobs available and a matching service to the best of my knowledge. The internet perhaps aspires to this ideal.

What is money

March 30, 2009

An interesting post on What is Money on Warren Mosler’s blog here

More on the fishing tribe

March 30, 2009

Some more on the fishing tribe model.

A fishing tribe finds itself fortuitously on the banks of a river well endowed with fish.

Someone in the tribe, with the help of like minded individuals, can lay claim to the banks of the river and its produce, and enforce this claim by main force.

Now we have to remember that the ultimate force in this setup is wielded by the collective force of all adults in the tribe.

Somehow, the self appointed “king” with the assistance of his henchmen, can lay claim to sole usage of the productive resources, and can exact tribute from the rest of the tribe. What he can do is allocate a set of people to fishing, who will turn over their entire produce to him as tribute. He will then share his tribute with his henchmen, thus keeping them happy. This is the tributary model of economic activity.

Rosa Luxemburg in her book “The Accumulation of Capital” sends us to the ethnological research of Francis James Gillen (1855-1912) on aboriginal tribes in Australia. It would be interesting to learn how early hunter gatherer societies were politically organised, and how with settlement in neolithic agricultural modes, class distinctions crept in. This is on the to do list.

Animals I met on the campus

March 28, 2009

The animals I met on the campus were: the dog, the crow, the rabbit, the monkey, the crab, the frog, and the snake.

The dogs I’ve known and loved the best. Anand A was found sitting alone on one of the benches in the lecture complex, and said he wasn’t alone. He was sitting with the dog. “There is always the dog”, he said.

I’ve seen dogs vying for the bitch in heat. I’ve seen the “king” get displaced by an even bigger dog. I learned a lot by watching the dogs interact.

The crow I was taught a lesson about by one of the chaps who used to hang around permanently on campus: He had a piece of bread, and told me that when he would throw it to the crow, it would first caw to tell everyone it had found food.

The monkey: the other chap showed me how, if you attack one monkey, they will all gang up to avenge themselves on you.

What I remember most about the rabbit were its red eyes.

The crabs used to walk sideways.

The Cosmic Joker

March 27, 2009

From: Mysteries of Time & Space, Orbis Publishing Limited 1997

In one, from the Daily Telegraph of 3 June 1982, a duck farmer in Lincolnshire found he had employed two people called Crow, four called Robbins, a Sparrow, a Gosling, and a Dickie Bird.

Money is a veil

March 26, 2009

Apropos the fishing tribe mentioned below, some explanatory comments. The idea of positing an economy without money is to show that the categories of saving, investment, and capital cut across modes of production. That is, these categories exist even in moneyless economies. I think that the classical and neoclassical economists have always treated of the real economy. Income in such a framework is the sum total of utilities and psychic satisfactions that accrue to an individual over time. Thus, distributional questions fall outside the domain of economic analysis because the subjective element of income can’t be measured. There is something faintly unsatisfactory with such an understanding of income.

In a fiat money economy, money is not a veil. Advances of money by banks to entrepreneurs, allows them a claim on current resources, which can be diverted as capital to further increase production. These advances made may fructify in enhanced production. On the other hand, the resources levied by the entrepreneur may be simply frittered away, not increasing productive capacity or future production in any way. Money advanced as loans by banks can be used in current consumption.

Just like heaven

March 26, 2009

The best version of Just Like Heaven that Katie Melua has done is on an appearance on Davina, a clip of which is used to be on You Tube but is no more. Here is another.

Here is the original song by The Cure


March 25, 2009

William Ernest Henley. 1849–1903


OUT of the night that covers me,
Black as the Pit from pole to pole,
I thank whatever gods may be
For my unconquerable soul.

In the fell clutch of circumstance
I have not winced nor cried aloud.
Under the bludgeonings of chance
My head is bloody, but unbowed.

Beyond this place of wrath and tears
Looms but the Horror of the shade,
And yet the menace of the years
Finds, and shall find, me unafraid.

It matters not how strait the gate,
How charged with punishments the scroll,
I am the master of my fate:
I am the captain of my soul.

Parable of the fishing tribe

March 24, 2009

Consider a fishing tribe, who fortuitously find themselves living on the banks of a virgin river.

They are living by spear fishing.  The adults in the group catch enough fish every day to feed themselves and their dependents.  There being no refrigerators, in a day, they catch as much fish as the combined stomachs of the tribe can accomodate in a day.  They have thus two sources of income (that which gives utility) viz. fish and leisure.  The economy is in steady state, with the rate of extraction of fish equal to the rate at which it is consumed.  Growth of population happens over a time scale much larger than the time unit we have chosen (say, a month).

Now we introduce technical change.  Say one guy has an idea (from a dream perhaps) of building a fishing net from the vines of the trees surrounding the tribal settlement.

Now he will have to devote some time while he constructs the fishing net, and will have to be supported while he does so.  This can happen in many ways.

First, he can devote some of his leisure hours to constructing the net, while he still catches his quota of fish for a day.

Second, if all waking hours of the work force are taken up in spear fishing to feed the entire tribe, our net maker can fast for a week while he constructs the net.  This is called “abstinence” by Nassau Senior and other classical economists.

Third, he can be fed by the others in the tribe, while he is constructing the net.  Let us take two cases here:  One, the productivity data is such that all waking hours of the work force are taken up just to produce what the tribe needs to continue its existence and reproduce over time.  Since one guy is dropping out of the workforce, the others will have to make some sacrifice (abstinence) to provide for him while he constructs the net.  Two, there is an increase in production possible if the-work-force-reduced-by-one, works for slightly longer waking hours.  This is a temporary increase in the length of the working day to produce the surplus needed to support our net maker.  Some leisure of the tribe is traded for more fish produced per head of the work force.

Anyhow, however the extra fish are produced, the net maker is allowed to continue with his task of making the net.

He works for a week, at the end of which there is a net.  This is a roundabout means of production.  Time and energy have gone into creating “produced means of production”.  “Produced means of production” in Economics, are also called “Capital”.  Production has become more “capitalistic”.

The tribe discovers that fishing with the net produces more fish per head of the work force.  They can either work less waking hours to remain at the same level of total utility as before when they were spear fishing (and thus enjoy more leisure).  Alternatively, the net maker can say “It was my idea to make the net, and I fasted for it, so all the extra production is mine”.  He gets more fish than he can eat in a day, but it is wasted.

The matter of disposal of the surplus is a tricky one, and will have to wait till another post.

This one was about getting at the meaning of capital.

Satie’s music

March 23, 2009