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Friday 21 August 2015

Zombies and Luddites

One of the defining features of political economy since 2008 has been the persistence of ideas that were discredited by the global financial crisis. Paul Krugman popularised the term "zombie" to describe them, prompting the title of John Quiggin's 2012 book, Zombie Economics, which examined "how market liberalism depends on ideas that have failed", such as the Great Moderation, the Efficient Markets Hypothesis and DSGE. Quiggin starts by acknowledging both Krugman and Keynes, which shows that the zombie trope has a long pedigree. His epigraph is one of Keynes's more famous quotes: "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back".

It's worth extending the quote, as Keynes then defines the problem more mundanely in terms of institutional conservatism - i.e. people in positions of power are usually middle-aged and have adopted much of the existing orthodoxy during their ascent: "I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil". The coda suggests that good ideas will triumph in the end, which in turn implies that vested interests have little staying-power (Keynes ended up in the House of Lords, which suggests otherwise). Paul Krugman is essentially battling to reinstate ideas that came to the fore as far back as the 1930s (e.g. the Hicks-Hansen IS-LM Model), so he appears to be up against more than just a generational lag.

Insofar as wrong ideas live on until they are refuted, the high percentage of zombies in the field of economics reflects the nature of a social science whose theories are not easily falsifiable. Much the same is true of history, though there the zombies tend to be myths, which are perhaps better thought of as ghosts - i.e. claims that are easily disproved but survive because we like a good story. A real zombie idea in history is usually a claim about process that can be abstracted as a general rule from a specific historical event. For example, in a routine bleat about the ethical decline occasioned by social media, Rafael Behr claims: "It has been said many times that the communications revolution we are experiencing is analogous to the disruption of old European authorities caused by the invention of the printing press. The capacity to knock out thousands of pamphlets in vernacular German and English broke the monopoly of the Latin-writing class on interpretations of scripture and law". In other words, technology directly triggers social upheaval, which is naive determinism.


The suggestion that Latin went into decline among the clergy and lawyers after the mid-15th century is obviously nonsense, as is the implication that the vernacular was excluded from political life before then. English supplanted Latin (and more importantly French) in most areas of public life a hundred years prior to the first printing press. Chaucer preceded Caxton. It was the Renaissance that saw the wider adoption of Latin as a technical and literary language, a process that was accelerated by the dissemination of classical texts in printed form. Behr is pushing the zombie idea that the Reformation was essentially the product of the printing of vernacular bibles, though he is using the idea to emphasise the distorting power of technology as a caution against the enthusiasms of social media (i.e. Corbyn-mania). He ignores both the possibility that the Reformation may have had other causes and the role of vernacular printing in the Counter-Reformation.

Zombie ideas are not merely myths, or the sort of pseudo-science favoured by dictatorships, such as Lysenkoism, far less the tenacious conspiracy theories that mutate over time from The Protocols of the Elders of Zion to black helicopters. A prime-cut zombie idea has the flavour of a natural law, and is often supported by explanatory parables. Thus naive technological determinism (which ignores the social determination of technological development and assumes that progress is the uniform advance of knowledge) is proven by the printing press dethroning Latin. The persistence of a zombie idea, in the sense of it being taken seriously and having an influence on public policy, is the product of the ruling ideology. This is why most zombie ideas appear to emanate from the political right. For example, the Laffer Curve is obviously a reflection of the interests of the elite, even down to the story that Art Laffer sketched it on a napkin, proving both its simplicity and revealing its social context (rich people enjoying lunch).

In fact, Zombie ideas are to be found across the political spectrum. An example of a lefty zombie in mainstream economics would be the job guarantee, an idea that should have been buried in the 1970s as structural unemployment took hold. The idea is kept alive mainly by Modern Monetary Theory (MMT) advocates, who believe that the state can employ a "buffer-stock" of workers to control rates of both unemployment and inflation. Jeremy Corbyn's proposal for "People's QE", whereby the Bank of England buys the bonds of a national investment bank that in turn funds infrastructure projects, is a variant on this. The most persistent zombies are those that are commonly advanced by both left (i.e. respectable centre-left) and right (i.e. non-lunatic right). Naive technological determinism is one example, which in turn reflects the breadth of neoliberal ideology and the power of its supporting parables of progress, disinterested science and the marketplace for ideas. A classic ecumenical zombie, that never appears to lose it charm, is the Lump of Labour Fallacy and in particular its supporting parable, the Luddite Fallacy.


Katie Allen in the Guardian gave us a textbook run-through this week in an article entitled "Technology has created more jobs than it has destroyed, says 140 years of data". This turns out to be the work of "economists at Deloitte" who have analysed the job titles reported in UK census data since 1871. There are some obvious methodological issues with this, chief being that the normalised index of occupations encodes assumptions and that these change over time. The modern era has seen not only job title inflation (e.g. "manager") but occupational ambiguity (e.g. the application of "analyst" to a raft of clerical roles). Allen starts with the stock parable: "In the 1800s it was the Luddites smashing weaving machines. These days retail staff worry about automatic checkouts. Sooner or later taxi drivers will be fretting over self-driving cars. The battle between man and machines goes back centuries. Are they taking our jobs? Or are they merely easing our workload?"

The Luddites did not fear that they would be replaced by weaving machines, but that the new technology would be used to de-skill their job and thus force down wages. They were motivated by the falling returns to skill rather than technophobia. The broader imputation is that workers instinctively subscribe to the Lump of Labour Fallacy, the belief that there is a fixed amount of work in the economy, so that if technology (capital) directly substitutes for labour, this will reduce the demand for workers. Both the Lump of Labour Fallacy and the Luddite Fallacy are strawmen - i.e. their critics are many while their advocates are largely mythical. Ironically, the true believers in the idea of a fixed amount of work were the proto-capitalists of the 17th century, who were influenced by both mercantilism (the idea that there is a fixed amount of trade in the world, justifying state power to seize and secure it) and the debates on poor relief that started after the dissolution of the monasteries (notably the fear that outdoor relief would deprive others of work, which lives on today in that other zombie, the public sector "crowding out" the private sector).

By the late nineteenth century, the Lump of Labour Fallacy had been refashioned to resist demands for a reduction in working hours, the new strawman being the claim that a general reduction in work-time would require more workers to be employed. In fact, the agitation for reduced hours reflected the understanding of workers that increases in productivity both justified and were a consequence of reduced hours. Pressure for a reduction in work hours continued through the twentieth century, but by the 1960s the priority of organised labour was increased wages (and overtime), which reflected the profusion of commodities. During the neoliberal era, debt has increasingly substituted for wages and systemic under-employment (i.e. involuntary reductions in work hours) has grown. The strawmen have now been repositioned in support of creative destruction and technological disruption: the robots will do the shit jobs and we'll be freed up for creative and caring roles. The common feature throughout this history is the reluctance to address what the changing composition of roles means in terms of power, and specifically the impact on wages - the Luddites original concern.


Allen exhibited the ability to hold (or at least report) conflicting views on the subject the following day, when she penned a piece on the falling returns to education: "UK graduates are wasting degrees in lower-skilled jobs - Over-qualification has reached saturation point". Larry Elliott helpfully glossed this with a reference to the economics canon: "So much for Say's Law. The expansion of higher education in Britain has been based on the law espoused by the famous French economist that supply creates its own demand. So increasing the number of graduates should increase the jobs that need a degree". This implies that there is a fixed number of graduate jobs, which is no less daft than supposing that the total number of jobs in the economy is fixed. This is an example of (to borrow Keynes's term) a vested interest. The middle classes are conditioned to believe that society and economy are inescapably constrained, necessitating competition and sharp elbows for limited school places and nice homes. This constraint now extends to graduate jobs, with scare stories about unpaid internships jostling in the media with the trusty standby of property prices.

While the tribunes of the middle classes would never concede the lump of labour theory for the economy as a whole (they'll still insist the poor should accept that crap wages and insufficient hours are the price we must pay for progress, while the unemployed will be told that there is always work to do), they will accept that there is a fixed amount of material success in society and this should be reserved for those who have invested in their human capital. The concern over "graduate saturation" looks like a harbinger of a further shift in the political wind towards the pricing-out of lower class students (to "maintain standards"), which will probably be effected by fully commercialising student debts, limiting means-tested state support, and allowing universities to balance the books by removing the cap on course fees. In other words, we'll end up much like the USA. To judge from the steeply rising cost of student digs, this process is already well under way. The zombie shuffles on.

16 comments:

  1. Sure PQE is not a zombie, as it has never lived ...

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  2. I am missing something in Larry Elliott's comment? Surely the number of jobs that claim to need a degree has risen, and precisely due to the fact that there are so many more graduates and so many more degree courses? These days are are degrees in medical, dental and veterinary nursing for example. The specification for my job states that a degree is desirable, yet I could have done it when I was 10.

    I think the situation with the 'deskilling' of graduates is potentially a source of radicalisation among working-class people, who are more likely to find their social mobility blocked and their potential restricted by the shortage of fulfilling labour. I speak as one myself! This group could be mobilised by plans to increase self-determination at work, but would mainly benefit from a reduction in working hours and introduction of a basic income, coupled with more opportunities to gain intellectual and moral fulfillment outside work. I sense that many of this group are supporting the Corbyn campaign, and I think they could have much to offer given their combination of relative intelligence and genuine socio-economic grievance.

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    1. Elliot's point is that the demand for graduates has not kept pace with their supply, despite the inflation in qualifications required. However, this in turn rests on an assumption about what a "real" graduate job is, the implication being that demand cannot grow to meet supply because there is a limit to how many jobs we can legitimately categorise as graduate-level (this is the lump fallacy).

      But this categorisation is socially-determined, as the inflation in requirements shows, rather than being a reflection of any intrinsic "skill" (as an aside, it's interesting how that word has been recuperated under neoliberalism to provide a common scale of merit, so jobs that are about privileged access to knowledge - accountancy, law etc - are now defined as "high-skill").

      The reason we haven't redefined half the entry-level jobs on the market as graduate-only (and thereby matched demand to supply) is due to resistance by those who would prefer to return to a world in which only 10% of kids go to university, rather than half of them (see this Telegraph piece for a clear articulation of this prejudice).

      The wider implication of this supply-demand mismatch is that the neoliberal preference for supply-side reform, whether investing in education or reducing contraints on "job-creators", has been a failure. Build it and they will come has proved no more successful than being business-friendly.

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    2. I agree that the issue isn't really anything to do with skills, and in many ways this has always been the case- even when university students comprised a tiny fraction of the population there must have been a vast chunk of them that were not involved in acquiring tangible 'skills'.
      I suspect that the political impact will deter governments from reducing university entry to fewer teenagers and/or making student finance even more adverse. Where I think things are more likely to change is in an increased emphasis on 'soft skills', where the best university places and the best 'unskilled' graduate jobs are restricted even more to those possessing the Queen's English, clubbability or the captaincy of their school's rugger team. More plebian graduates can make do with jobs stacking shelves at Sainsbury's, or seek elocution lessons.
      As I said on my previous comment, this could be advantageous if working-class graduates make common cause with their 'less educated' colleagues.

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  3. Herbie Kills Children23 August 2015 at 10:46

    Journalism used to require 5 'o' levels at grades A to C. Now you need a degree. This in turn has led to a bias towards the well spoken and well presented middle classes.

    New Labour believed that increasing university numbers and raising the bar to certain professions would all triangulate (apologies for that word) nicely. But all we have seen is ever more middle class monopolising.

    My belief is that the education system is less about matching skills to the division of labour (though that must play a part) and is more an ideological control mechanism.

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  4. David
    Would you expand on your structural unemployment point in regard to the Job Guarentee. If we designate; lump of labour, necessary underemployment, get on your bike etc as all being zombies, and surely NAIRU must be there too, then what's the beef with JG?
    Thanks for another great post.

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    1. Some zombies, like the Luddite fallacy, were undead from day one. They were never true. The JG (or, more precisely, the idea of the state as the employer of last resort) is an example of an idea that was once alive but has since died and become a zombie. The reason for this is that structural changes in the economy have rendered it irrelevant.

      There are two key economic justifications for the JG. First, that the creation of a buffer-stock of public sector jobs will act as an automatic stabiliser for aggregate demand. In a recession, the state increases spending on public sector wages and private sector goods for JG-manned projects that then stimulate the economy.
      Second, that the buffer-stock acts to weaken aggregate wage inflation because it lowers the mean wage in the economy.

      The assumptions here are that aggregate demand is essentially an issue of domestic demand, and that inflation is largely a product of wage demands. In other words, this proceeds from a pre-1980 paradigm. Essentially, it's fighting the last war.

      Globalisation means that aggregate demand is now more influenced by external factors, such as trade, global commodity deflation and capital flows. Financialisation, the increase in credit (personal debt) and property values (personal asset wealth), means that demand is also more heavily influenced by non-wage factors.

      Growing inequality and job polarisation, together with globalisation, mean that wage inflation doesn't proceed uniformly across the economy any more. The ability of a growing buffer-stock to restrain inflation is weakened when so many private sector workers will be on the minimum wage already. To work, the JG wage would have to be significantly below the NMW and significantly above benefits, but there isn't the room.

      The growth of precariousness and "portfolio careers" has invalidated the JG vision of a simple to-and-fro between 35-hour-a-week jobs in the private and public sectors. Many people today are struggling not with the lack of a job but with the lack of adequate hours, or they may be trying to juggle multiple jobs to make up the hours.

      The biggest problem is structural, i.e. long-term, unemployment, particularly in areas that have been deindustrialised. Because the private sector has not been able to create sufficient jobs in these regions since the early-80s, JG jobs would be permanent for many, creating an employed underclass. This undermines the social benefits, such as maintaining self-esteem during downturns, as well as the supply-side benefits, such as keeping work-skills up-to-date. It also implies a costly bureaucracy and increasingly coercive management - i.e. workfare on steroids.

      We also know that there has been an increase in hidden structural un- and under-employment across all regions, which is implied by the number seeking work but not registered as unemployed, the glut of graduates in non-grduate jobs, and the growing number of pensioners seeking marginal work. The problem is not a temporary failure of the private sector to provide sufficent jobs, but a permanent inability to do so.

      See here for a comparison of the job guarantee and the basic income.

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  5. Thanks for this, and the link where you swat the Morgan Warstler troll.
    If I may attempt to paraphrase your objection to the JG; under a traditional monetary production political economy, only now reaching post-scarcity, distributional inequality will worsen as technology makes labour structurally redundant. JG reinforces this inequality whereas BI could mitigate it by helping us to a less feudal future.

    That may one day be true, but Its all in that word 'structural' and I don't feel that we are really at that point yet. I look around at our rotting infra, crap housing, carbon dependance, threadbare social care for kids and the old, all crying out for renewal while we buy proto land fill from Argos on credit and imagine we're back in Eden. JG doesn't have to be labour battalions but a more politically viable way of training up and paying for a better social base line. Also it provides a tool against inequality by getting some inflation back through allowing govt to act as price setter for labour. As the man said, 'you can afford what you can do'.

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    1. I'm not averse to the state investing in productive infrastructure, or addressing social ills, thereby creating jobs. I just don't think the JG is an efficient or effective way of going about it. In fact, "putting our people to work" is a poor justification for investment. It's really a second-order benefit, not a primary goal, with the bulk of new, lasting employment being the product of the infrastructure rather than the build project.

      Unfortunately, infrastructure investment still tends to be seen in terms of the 1930s. In other words, we imagine unskilled labour can be put to use. But modern infrastructure (which includes healthcare as well as roads) doesn't need much unskiled labour, it needs skilled. Obviously the state could train some of the unskilled to meet this need, but it would be folly to create an over-supply of engineers that the private sector could not mop up come recovery. That's just raising the tone of structural unemployment. It would be equal folly to retain them in the public sector and build unnecessary infrastructure.

      Our pressing problem is a surplus of capital (currently rushing madly between property and equity markets), more than a surplus of labour. We see unemployment as a waste (i.e. the failure to extract value from labour), but the greater waste is the diversion of capital (historic labour-value) to anti-social purposes (asset bubbles, conspicuous consumption etc). We need to start to reduce the rate of labour exploitation, which in turn means redistributing historic capital, not just from the private sector but from the public sector too. The JG would be an impediment to this change.

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    2. I fully accept your identification of surplus capital over surplus labour as the correct framing issue, or rather its concentration. From that perspective, with a 'capital is the fruit of labour' definition of capital, BI appears to have the better redistributive effect. But I think you yourself employ the word capital differently depending upon your target at least as far as money capital is concerned, for example in twenty five years a slave you take a credit/future income view, rather than a reified contractual past claim view, or in this case more Marxian commodity/loanable fund approach. My understanding of MMT is that, being neo-chartalists, money for them in no way embodies any kind of labour. It is always a real resource today issue. Capital's a game for a few to play, it's not really needed to mobilise anything, but is welcome to come along for the ride if it can do a better job. It certainly shouldn't be allowed to threaten anyone with deprivation.
      We may have left the fruit to rot on the tree in the past, hence the structural unemployment issue, but that's no reason to add more to the pile. Nor I hope does that quite mean 'putting our people to work'. The trick must be to change the prestige levels of different kinds of work first by thinking widely about what work really is. Maybe the old Athenian distinction between work and labour is helpful (citizens and slaves). It's the prestige part where BI runs into difficulties as it has no wider social commitment element, that I have seen, yet.

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  6. Herbie Kills Children25 August 2015 at 20:25

    "traditional monetary production political economy, only now reaching post-scarcity"

    I actually subscribe to the view that political economy only became a subject in itself due to agricultural abundance and I reject the idea that economics is how society decides to allocate scarce resources. I would say it was more a response to ever rising wealth and the creation of settled communities who didn't have to forage.

    So I don't think we are in a post scarcity society because I think scarcity is a manufactured phenomena and a mental construction. (obviously we have periodic periods of drought).

    I also think post scarcity assumes that we now have no barriers to production, but we have barriers from the accumulation process, compound growth and more importantly environmental constraints. Socialism will fix 2 of those 3 but it won't equate to post scarcity.

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    1. I agree with you there in that scarcity is effectively a creation of capitalist ideology. I think it might be best to simply declare that we live in a society of abundance. On that note I will quote Andre Gorz:

      "The only things worthy of each are those which are good for all; the only things worthy of being produced are those which neither privilege or diminish anyone; it is possible to be happier with less affluence, for in a society without privilege no one will be poor."

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    2. Agree that scarcity is a slippery idea. I wasn't asserting we are /are not post scarce, but picking up part of the meme in the thread on labour being surplus to the requirements of production. If you're saying there's enough for everyone; I think so too, it's just is JG or BI the best way to share it.

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  7. Hugo,

    In 25 Years a Slave I was talking about the fictitious capital represented by a mortgage (i.e. that element of the price in excess of the actual labour required to produce a house), noting that this was similar to slavery in the sense that the price (as with other forms of fictitious captal, such as shares) represents a claim on the future - i.e. the future labour of the slave or the mortgagee. Real capital, money capital and fictitious capital are quite distinct.

    MMT is, as you say, a critique of the management of money capital, but it remains "orthodox" in its treatement of real capital. Though Marx's theory of labour value is disputed (essentially on the technical grounds of how value is transformed into prices), pretty much all economists accept that capital is the surplus of historic production, though there are differences over the share of credit among the factors (e.g. labour vs entrepreneurship).

    Because we destroy only a fraction of what we produce (environmental degradation is overwhelmingly the result of extraction rather than waste), capital accumulates. That capital in turn makes production ever more efficient (automation), which means we need less and less labour to continue to grow capital stocks. But capital also inescapably expands its markets, which in turn grows the stock of labour and causes structural unemployment because capital is more mobile than labour (globalisation).

    When I say we "need to start to reduce the rate of labour exploitation", I mean we need to reduce working-time. The BI is a means to that end, the JG is not. Our challenge is not to mobilise labour but to demobilise it. The Athenian analogue would be the concept of schole (or what the Romans called otium), as distinct from work or slave labour. A universal BI underpins social commitment because it enables more time to be freed-up for pro-social activities.

    Whether true post-scarcity is possible or not, we have clearly increased material abudance, as Igor notes, and the process is continuing. What has stopped is the downward trend in working time. It is this that we need to restore. Establishing the "prestige" of the BI is therefore dependent on finally dismantling the Lump of Labour and Luddite strawmen.

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    1. David
      Thank you very much for taking the time to answer me so fully. I admit you're winning me round. May I ask as an aside, is there a particular text on the labour theory of value / price transformation problem that you would recommend?

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    2. You could do worse than start with Wikipedia.

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