hard heads soft hearts

a scratch pad for half-formed thoughts by a liberal political junkie who's nobody special. ''Hard Heads, Soft Hearts'' is the title of a book by Princeton economist Alan Blinder, and tends to be a favorite motto of neoliberals, especially liberal economists.

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Wednesday, May 02, 2012
Sasha Said - Reeling From The News.
. . .Remember the job I was telling you about? Nine days of unpaid training and the need to pass a bunch of proficiency tests, after which we were to start a part-time, no-benefits contract job for $9.50 an hour? Today I received a notice congratulating me on passing the final test. Unfortunately, the notice then went on to inform me that the project has been canceled. Just like that. There will be no jobs for anyone. No reason was given.

I’m still reeling from the news. While it may not sound like much, in our current situation, this job was like a lifeline. True, it was a contract job, but the contract period was to be extended indefinitely, and we’re desperate for any kind of steady income. Also, while the pay was low and the hours limited, there was a clear path to advancement, which would have meant better pay and more hours in the future. . .

. . .Meanwhile my partner spent hours creating a custom-tailored resume and killer cover letter to apply for a job that turned out to be a fake. . . In order to sound legit, they’ll ask for a resume and cover letter, sometimes even references or work samples, but their only purpose is to trick job seekers into signing up for some offer or website, so the scammers can earn affiliate income. . .

. . .What exactly are people supposed to do when they can’t find work and aren’t eligible for government assistance? Evaporate into thin air? Are we just supposed to cease to exist because the economy has no use for us?
I guess what I don't understand regarding the sneering tone toward ZMP workers is, what makes these people so sure that their contribution is positive? Surely it's possible that someone who at least tried to prevent the $3 trillion disaster in Iraq has made a more valuable ex ante contribution than an employed middle-class worker who kept his head down and nose clean? I don't begrudge anyone their well-paying job, what I don't get is the certainty that their market income reflects their actual contribution.

Also, it seems worth pointing that your MP can be highly dependent on fairly arbitrary decisions made by the people at the top. For example suppose your CEO is addicted to gambling receptive to active-trading strategies, and decides to hire 100 active managers, all of whom can make a reasonable case that they deserve rich compensation for their market-beating skills. Now suppose a new CEO comes in, who doesn't have a gambling instinct, and takes coldly rational approach that ruthlessly debunks the market-beating claims of the active traders, compared to a passive strategy. Suddenly, there's a very reasonable case that these active traders have an MP of zero, or even less than zero. ZMP workers, if you will.

So whether the active traders have a large positive MP, or negative MP, depends on a big macro decision by the person at the top, and the important point is that this is a type of decision for which leaders are *never* held accountable. Whether a leader chooses an active trading approach, or a passive index approach, the machine will produce large amounts of evidence why the choice of the leader was right/superior/inevitable. Whichever choice the leader makes, it will turn out to have been the right one in the minds of most people, at most times.

I'm not claiming that a benevolent dictator could dictate incomes more fairly and justly. What I'm saying is that market outcomes deserve respect but not reverence. We can believe that there's no better way of generating an initial presumptive allocation of rewards than the market, without believing the market to such an extent that we're willing to let people starve/go homeless because of our alleged certainty in their ZMP.

John Maynard Keynes - Chapter 12. The State of Long-Term Expectation (1936)
. . .The outstanding fact is the extreme precariousness of the basis of knowledge on which our estimates of prospective yield have to be made. Our knowledge of the factors which will govern the yield of an investment some years hence is usually very slight and often negligible. If we speak frankly, we have to admit that our basis of knowledge for estimating the yield ten years hence of a railway, a copper mine, a textile factory, the goodwill of a patent medicine, an Atlantic liner, a building in the City of London amounts to little and sometimes to nothing; or even five years hence. In fact, those who seriously attempt to make any such estimate are often so much in the minority that their behaviour does not govern the market.

In former times, when enterprises were mainly owned by those who undertook them or by their friends and associates, investment depended on a sufficient supply of individuals of sanguine temperament and constructive impulses who embarked on business as a way of life, not really relying on a precise calculation of prospective profit. The affair was partly a lottery, though with the ultimate result largely governed by whether the abilities and character of the managers were above or below the average. Some would fail and some would succeed. But even after the event no one would know whether the average results in terms of the sums invested had exceeded, equalled or fallen short of the prevailing rate of interest; though, if we exclude the exploitation of natural resources and monopolies, it is probable that the actual average results of investments, even during periods of progress and prosperity, have disappointed the hopes which prompted them. Business men play a mixed game of skill and chance, the average results of which to the players are not known by those who take a hand. If human nature felt no temptation to take a chance, no satisfaction (profit apart) in constructing a factory, a railway, a mine or a farm, there might not be much investment merely as a result of cold calculation. . .
John C. Bogle - Don’t Count On It! The Perils of Numeracy (Princeton 10/18/2002)

(Via Sarah Kliff (Wonkblog)) Amy Berman (WapPo) - On living with inflammatory breast cancer

next post: 8/10/2012

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