Unemployment as a Factor in Early Retirement Decisions

Abstract . Is retiring early a way for older workers to cope with the stigma and discouragement of unemployment? A regression analysis using the National Longitudinal Survey sample of American men age 52–64 in 1973 shows that weeks of previous unemployment is significantly related to early retirement for both Black and White males. This relationship holds when controlling for social security and pension eligibility, assets, health limitations, family responsibilities, occupation, changes in the unemployment rate and urban residence. The results suggest that social policy concerning retirement prior to age 65 should take into account the important role of unemployment in pushing workers out of the labor force into early retirement.     

HOW DID PAUL KRUGMAN GET IT SO WRONG?1

This article is a response to Paul Krugman's New York Times Magazine article, ‘How Did Economists Get It So Wrong?’ Krugman's attack on modern economics – and many adhominem attacks on modern economists – display a deep and highly politicised ignorance of what economics and finance is really all about, and a striking emptiness of useful ideas.     

Hysteresis in Unemployment

After two decades of ratcheting unemployment in Europe, most economists agree that structural changes associated with higher equilibrium rates of unemployment have occurred. But the direction of causality is a matter of controversy: Have the structural changes caused the long-lasting increases in actual unemployment? Or have the increases in actual unemployment caused the structural changes? The latter possibility is often referred to as hysteresis. During the past decade, a distinct research program has evolved around the idea that equilibrium employment tracks actual unemployment. This survey reviews the various hysteretic explanations offered in the literature and evaluates their empirical standing.     

On Schumpeter, Services and Economic Change

Abstract . Joseph A. Schumpeter, the Austrian-American economist, worried about “Can capitalism survive” a generation ago, and so far it has. But his work poses these questions: How do growth and change take place in a free enterprise economy? Can his model for expansion through innovation and creative destruction through the competitive process be a basis for understanding present day industrial economies? He emphasized that capitalism was an evolutionary system and that the very need for newness or rejuventation should insure continual change in it. With respect to declining industries and firms the task of economics was to turn what might have been a rout into orderly retreat. And so he gave a limited blessing to certain monopoly practices deriving from a broader strategy, risk avoidance. Schumpeter's entrepreneurs have disappeared but innovative ability still is exercised, largely through issue-specific consulting services in the burgeoning service sector, services that foster stability as well as change     

Some Alternative Definitions of Youth Unemployment: A Means for Improved Understanding and Policy Formulation

Abstract . Current definitions of unemployment are inadequate for analyzing and understanding the problem of youth unemployment in the United States. By focusing on alternative definitions of youth unemployment, this study seeks to better understand the nature of the problem. Alternative rates of unemployment using data disaggregated by age, race, and gender from 1971 to 1983 are presented. Some findings: (1) all of the rates taken together provide a much better understanding of the youth unemployment problem; and (2) more effort should be devoted to developing, analyzing, and applying alternative concepts of satisfactory or unsatisfactory status for young people. Further, detailed studies of the activities, needs, and goals of a diverse population of young people and of societal preferences are clearly warranted. Without such efforts, youth unemployment policies will most likely be misdirected.     

Proposition 4, Tax Reduction Mirage: An Exploratory Note on Its Potential Spending and Tax Impacts

Abstract . What would the true government expenditure and tax-burden impacts of California's Proposition 4 likely be if it (or its equivalent) were enacted in all states? What happened to actual state plus local government expenditures per capita over the period FY 1970 - FY 1976 is examined. Next, we examine what would have happened to such expenditures (per capita) if Proposition 4 had been in effect over the same period. Comparing the results reveals that Proposition 4 would have exercised no significant impact over per capita state plus local spending levels. This implies that such legislation would not have resulted in significant tax reductions.     

Henry George and the Ethics of Economics

Abstract . Henry George's Progress and Poverty (1879) is a great ethical masterpiece. Its moral tone distinguishes the book. More than an economics test, it is a philosophic quest for justice, an impassioned declaration of the rule of natural law. Indignantly attacking the contention that economics has no place for natural law or ethics, George exclaims: “She [economics] has been degraded and shackled; her truths dislocated; her harmonies ignored.” On the contrary, George stresses, political economy (economics) is a science, and like all sciences, is governed by natural law. Furthermore, it is basically “moral.” Science must, of necessity, always lead to ethics. Natural law must, of necessity, always lead to morality, or justice.“The law of human progress, what is it but the moral law?” George asks. “Unless its foundation be laid in justice the social structure cannot stand.” The social ill that perpetuates poverty and the manifold evils it causes is private ownership of land and the private privilege of collecting its rent. “The fundamental law of nature, that the enjoyment by man shall be consequent upon his exertion, is thus violated.”     

Locke's Contract: would People consent to It?

Abstract . Examination of Locke's theory political obligation suggests some of the difficulties which beset any consent theory. Stress is placed on the need for the state of nature as a real alternative to civil society, if Locke is to maintain that people have consented. It is shown that Locke has precluded a decision to remain in the state of nature and, therefore, people have not consented. This conclusion inspires a reconstruction of Locke's theory wherein people consent hypothetically: they would consent to legitimate government, if they had the opportunity to found government anew. What would they consent to? What are the criteria of legitimate government? The provisions of the Lockeian contract set out and found wanting People, as Locke sees them and living under conditions which he describes, would not consent to his contract.     

On Norms: A Typology with Discussion

There is a lack of consensus in the literature, spanning multiple fields, on what exactly a norm is and furthermore on the characteristics differentiating types of norms. This paper provides definitions and a simple typology of norms with a focus on useful, objective distinctions. It is hoped that such a typology will add to the scientific rigor of communication, modeling, and clarity of thought on norms within economics and possibly other disciplines. The viability of “more complete” typologies, which often suffer from a lack of clear criteria for differentiating types of norms, is questioned. Two main properties of a norm are emphasized: (1) whether or not the behavior is simply what is done or whether it is what one should do, and (2) the source of sanctions for violating a norm, whether oneself, others, both or neither.     

A Critical Review of Homo Economicus from Five Approaches

Neoclassical economics is based on and structured around the notion of homo economicus. The theory of consumer choice, the theory of the firm, industrial organization, and welfare theorems all require the assumption that agents act in accordance with the scheme of individualistic rational optimization. In this context, our contribution is threefold. First, we delimit the notion of homo economicus according to five characteristics or dimensions. Second, we critically review this anthropological scheme from five distinct approaches, namely, behavioral economics, institutional economics, political economy, economic anthropology, and ecological economics. Third, we conclude that the scheme of homo economicus is clearly inadequate and deficient. However, despite its inadequacies, it remains one of the fundamental pillars of the neoclassical paradigm in economics, which allows us to discuss why we have not yet overcome this paradigm.     

John A. Hobson: Economic Heretic

Abstract . John A. Hobson was a self-styled economic heretic who developed and original and remarkably comprehensive system of economic and social thought. This system is based on certain distinctively Hobsonian concepts and theories. Hobson's economic heresies were based on his theory of distribution in which he rejected orthodox marginal productivity theory and developed a theory of economic surplus the distribution of which is determined by economic power. This underlay his theory of under-consumption which in turn was used to explain and analyze economic and social issues such as unemployment, the business cycle, the labor movement, imperialism and taxation. Hobson was also critical of the whole methodology of economic science on the grounds that it abstracted from human welfare in its widest sense. He argued that proper values should be introduced into the study of economic activity so that it could assist in the attainment of the best conditions of human life, both social and individual.     

The New Barbarians: The Continuing Relevance of Henry George*

Abstract . The world's peoples are demanding: who should be the Lords of the Land or—should anyone be? By what right does anyone acquire the privilege of monopolizing that which should be the heritage of all? A century ago Henry George saw the nature of this question, the land question, outlined the solution and foresaw the consequences if we failed to address it. The rioting in the slums, the looting and other crime in the cities and rural areas, the tension of our time, the rising fears, paranoia and greed bear testimony to the legacy George foresaw. Against monopoly and privilege, George raised the banner of Justice and Liberty, achievable only by taxing the land and untaxing labor and its products. The failure to act upon the land question is at the bottom of the threat of a new barbarism. But the Intellectual Revolution fostered by the new computer technology promises to undermine myths that have enslaved the human mind.     

Fundraising for regional environmental issues: Public perceptions of who is financially responsible for the local environment

Environmental nonprofit organizations attract less than 5 % of total philanthropic giving. Given the seriousness of the environmental challenges facing the globe, it is imperative to identify barriers to and best practices in soliciting environmental giving. Past studies have identified the difficulty in soliciting funding for macro-level environmental concerns or for concerns considered to be public goods; however, little research has been conducted about giving to regional environmental concerns. Our research questions were as follows: (a) from what type of sources do residents believe environmental protection for regional environmental concerns should be funded?; (b) how willing are residents to contribute financially to regional environmental concerns?; and (c) to what extent do residents trust nonprofit organizations to address regional environmental concerns? We surveyed Florida residents (n = 548) about the conservation of the Ocklawaha River and the breaching of the Rodman Reservoir, an area with pressing environmental concerns and heavily frequented for economic and recreational use. Findings suggest that (a) participants believe government agencies, not nonprofits, should fund restoration projects, (b) participants trust nonprofits more than government to accomplish restoration goals, and (c) participants are more interested in contributing via taxes than via donations. Considerations for fundraising are discussed.     

Briefing Paper: What Economists can learn from Game Theory

Game theory is a branch of mathematics which analyses interdependent decision-making. It attempts to explain how decision-makers might take into account the likely response of others in formulating their own decisions. It has long been applied to microeconomics especially to the theory of the firm under oligopoly where the firm, in devising its pricing and production strategy, will take into account the likely reactions of other firms within the industry. More recently it has been appreciated that many situations in macroeconomics can be analysed in terms of game theory. For example, if one country introduces import controls, how will others react? If one country tries to control inflation by adopting a tough monetary policy, or tries to reflate, what will other countries do? How will exchange rate speculators respond to the government's announcement that it will not intervene in currency markets? Will they believe the government or will they adopt actions which will eventually force the government to intervene? How will markets respond if the government changes its macro-economic strategy? In some cases the “players” are the government and the business community, in other cases one government may be playing against another. In this Briefing Paper we introduce some ideas and results from game theory and show how they can be applied to macroeonomics as well as microeconomics.     

Management as a professional discipline*

The nature of management as a discipline is problematic. Drawing on Aristotle’s concepts of poiesis and techne, it can however be seen as one of a class of professional disciplines such as medicine, law, engineering or teaching which are characterized by their instrumentality, contingency and processuality. These three attributes suggest three basic questions (What do managers do? What affects what they do? How do they do it?) which in turn yield a three‐dimensional model. While the contents of the model must be regarded as tentative, its form offers one way in which management can constitute itself as a discipline and re‐position itself within higher education. Questions arise in relation to the nature and status of the model, the segmented nature of management work, its varying internal/external focus and the locus of management decisions. However the model appears to provide a useful, heuristic framework within which practitioners can address specific, concrete problems and decisions.     

How low can U go?

• ? Although there is growing evidence that wage growth is building in response to low and falling unemployment in the advanced economies, there is scope for unemployment rates to fall further without triggering a pay surge.
• ? For a start, current unemployment rates in comparison to past cyclical troughs overstate the tightness of labour markets. Demographic trends associated with the ageing ‘baby boomer’ bulge have pushed down the headline unemployment rate – unemployment rates among older workers are lower than those of younger cohorts. And in a historical context, Europe still has a large pool of involuntary part‐timers.
• ? In addition, rising participation rates mean that demographics are less of a constraint on employment growth than widely assumed. In both 2017 and 2018, had it not been for increased activity rates (mainly for older cohorts), unemployment would have had to fall more sharply to accommodate the same employment increase. We expect rising participation rates to continue to act as a pressure valve for the labour market.
• ? Finally, unemployment rates were generally far lower during the 1950s and 1960s than now. If wages stay low relative to productivity, as was the case during that prior era, employment growth may remain strong, with unemployment falling further. In the post‐war era, low wages were partly a function of a grand bargain in which policy‐makers provided full employment in return for low wage growth.
• ? There is evidence to suggest that many post‐crisis workers have opted for the security of their existing full‐time job and its associated benefits despite lower wage growth, rather than change job and potentially earn more; the rise of the ‘gig economy’ has led some workers to value what they already have more. Put another way, the non‐accelerating inflation rate of unemployment (NAIRU) has fallen. So, the role of labour market tightness in pushing wage growth higher may continue to surprise to the downside.

     

The Economists of Tomorrow: The Case for Assertive Pluralism in Economics Education

This article presents the case for “assertive pluralism” in economics education and proposes how to achieve it, illustrating the point with reference to the U.K. Subject Benchmark Statement in Economics (SBSE). It proposes a revision of the benchmark, prioritizing the role of controversy in the teaching of economics, combined with pluralistic principles that uphold and guarantee critical and independent thinking. This reform is a necessary response to what Colander et al. (2009 ) term the “systemic failure” of economics—the inability of the profession, taken as a whole, to anticipate and understand the financial crash and recession of 2008. Failure on this scale testifies to a more deep‐seated weakness in economics than commonly recognized. It arises from what Turner ( Tett 2009 ) terms the regulatory capture of the economics profession by narrow financial interests. The public, and the economics profession, require specific protection against the pressures that have produced this systemic failure. This requires a rethink of the relation of economics to society, founded on a rejection of the idea that the function of economics is to provide a single, unequivocal solution to every problem of policy. Instead, the article explains, good economics should be constrained to evaluate the full range of relevant solutions to any given policy issue, leaving the decisionmakers accountable for the decisions they make on which solution to adopt.     

INSURANCE BY GOVERNMENT OR AGAINST GOVERNMENT? OVERVIEW OF PUBLIC RISK MANAGEMENT POLICIES

In what contexts is it desirable that the government, rather than the private sector, takes on the role of an insurer and helps people reduce risks? Our discussion implies that while in a number of areas individuals benefit from well-designed insurance provided by their government, ill-designed public policies (for example existing pay-as-you-go pension systems) force individuals to insure against their government. It is further discussed how governments could improve their risk managing role in many areas by using income contingent loans, provided the country has high-quality institutions and governance. Such loans to artists, sportspeople, flood victims or collapsing financial institutions would replace the existing nonrepayable transfers, grants, subsidies and bailouts. Using a simple efficiency-equity-sustainability framework for comparing income contingent schemes with conventional public and private insurance policies, we document that this would enable governments to extend their insurance assistance to a greater number of people and institutions – in a way that is not only equitable but also efficient and fiscally sustainable.     

Henry George and the Contemporary Debate over Industrial Protectionism

Abstract . The central question of Henry George's 1886 book. Protection or Free Trade, commemorated now after a century, was: do protectionist policies help or hinder the working man Have George's concerns in 1886 since become outdated or anachronistic? If not, what are some historic trends toward protectionism since that time? Some of the formal arguments for and against protectionism are examined. George contended that protectionism threatens labor unions and reduces workers’wages. An apparent counterexample is provided by the International Ladies’Garment Workers’Union, which now actively lobbies for protectionist legislation. Its arguments have merit when protectionism is viewed instrumentally, but one must recognize that there are substantive objections to protectionism as a comprehensive national policy. George linked protectionism to paternalism; his theory of economic value as well as his model of the rational economic man are derived from basic democratic principles which stand at sharp odds with the implicit paternalism of tariff policies.     

Marginal Workers and Their Decisions to Work or to Quit

Abstract . What motivates the marginal worker to decide to work or to quit and collect unemployment insurance or welfare payments? A study of poultry processing plant workers in Georgia indicates that few quit to obtain more leisure. Dissatisfaction with compensation is only a secondary factor. Primary ones are cumulative dissatisfaction with work and the total work environment. Changes in supervision and in the Job structure are suggested.