I have a new article out in The Week, discussing the phenomenon of "bullshit jobs", as postulated by David Graeber. Excerpts:
Back in August, the anthropologist and anarchist David Graeber wrote an article for Strike!Magazine entitled "Bullshit Jobs." Graeber asked why we were still working so hard, despite being so much richer than in ages past. Where was the utopia of leisure that we were promised?...As you might expect, Graeber's article was thoroughly panned by most of the economists who even paid attention. But Graeber is on to something. Though I heavily doubt that many of our jobs represent a diabolic plot by our overlords to keep us in chains, it seems clear that many Americans no longer understand how their work creates value...
According to Econ 101, people are supposed to get paid for the exact value they create....[But w]hat if your employer itself isn't adding value?...I suspect that many Americans these days wonder how much of their paycheck comes from value-added work, and how much comes from "rent."...
Finance takes up fully 8 percent of our economy, up from less than 3 percent in 1950. But is our finance industry giving us anything now that it wasn't back then?...
If finance is big, health care is gargantuan. The health-care sector takes up nearly one-fifth of our entire economy — far more than in other countries — and this share is climbing fast, as costs continue to rise. But despite this orgy of spending, we have little to show in the way of actual health...
Finally, we have the education sector, which at 5.7 percent of GDP is also a big deal...Does college really train students with the skills and life experiences they need to be productive? Or is it just a hideously expensive way of proving to potential employers that you're smart and hard-working?...
Together, just these three industries — finance, health care, and education — represent almost a third of America's economy...
Obviously, we need all of them in some form: Without a finance industry, businesses couldn't launch or expand; without a health-care industry, we'd live horrible lives; and without education, we'd be unsuited for modern work. But the question is whether these industries, as a whole, create enough value to justify the huge amounts we spend on them. Because if they don't, then every American who works in finance or health care or education has to wonder whether his or her job is a "BS job."
Read the whole thing here!
I prefer to assume that the "Image Hosted by Tripod" image is intentional.
ReplyDeleteIt would be interesting to see some survey data, but I assume people in finance, health care, and education are among those workers who least believe that their labor does not produce value.
ReplyDeleteFinance is populated by Atlases who create jobs and hold up the sky for the rest of us.
In health care and education, people work directly with patients and students. So they see the people they help directly, and see the improvement with their own eyes. The fact that somewhere else, under some other system, people are similarly helped more efficiently is something that is out of sight and out of mind. Given people's ability for rationalization and self-serving bias (see previous paragraph), I doubt they even believe it very much when pointed out.
that's why using QE to try to achieve full employment is stupid, since most jobs generated by QE is necessarily bullshit. A combination of deflation and social safety net is superior to asset price inflation.
ReplyDeleteIn a sense Graeber is right. Where is the utopia?
ReplyDeleteProductivity has expanded dramatically over the last few decades but real median incomes have not kept up.
Productivity compared to Real Median Income
For the "Utopia" scenario to be realized incomes have to track productivity growth so that workers share in the benefits of the increased output of their work.
Looking carefully at the graph above we can see that the two started to diverge in 1971. Which led me to look for a major economic event that occurred in that year. The huge event in economics and finance that year was the withdrawal of the US from the Bretton Woods currency exchange system and the shift to a floating currency. I believe that this one event explains the graph and much of the income disparity that has occurred in the intervening decades.
The chief change was that the dollar was no longer pegged to a commodity of real value. During Bretton Woods trading partners could, in principle and in practice, have trade deficits settled in gold. Any action to increase the money supply was countered by the reality of the value of the gold commodity. By letting the dollar float the value, and the production of dollars, was controlled by the financial community. Dollars could now be created against financial instruments that had no direct relation to real commodities. And those new dollars flowed into the financial economy rather than into the real economy. The growth of debt and money in the financial economy greatly exceeded that in the real economy. Thus the wealth of the financial economy outgrew the real one and the benefits went to the financial sector rather than to wages.
In my haste I forgot the other important aspect of the repeal of Bretton Woods. That of lack of settlement of trade. That is, under Bretton Woods trade imbalances were settled by transferring gold from the deficit nation's vault to the surplus nation's vault, thus the deficit was eliminated. It's as if the deficit goods and services were traded for the gold. Now we merely accrue an unsettled trade debt.
ReplyDeleteMore details at: Trade Settlement
You don't think the US being forced to cede control of the oil price to OPEC had anything to do with it, then?
DeleteNo, OPEC had nothing to do with it. The oil shock in the 1973 was a result of OPEC retaliating for the US support of Israel in the Yom Kippur war. This was a couple years after the effects from the withdrawal from Bretton Woods started to occur. The trade in oil is like any other trade; they have a good, oil in this case, for which we want to trade. The real difference was as a result of the lack of settlement after Bretton Woods. We, as had all, paid for oil in USD. The OPEC nations did not however, buy more US goods, so the cash accrued. Instead, they bought US bonds, which only kicked the can of settlement down the road and made it worse.
DeleteWe never had control of the price of oil, per se. Rather long term price contracts were in place that was started by FDR's deal with the Saudis. (Why should the Brits have all the control of mid-East oil?)
Here is a simple example to see what I mean. Let's say a country sells a barrel of oil in the US for $100. Ultimately, that money needs to be spent in the US on some goods, but not for now. Instead, they buy a US bond that pays 5%. So, at the end of the first year they have ~$105, and the second ~$110, etc. The amount of unsettled trade just increases, as this money is due to the same barrel of oil!
That people are paid according to the value they create is an economist's credo. Sociologists would assume (on far better empirical evidence) that people pay depends largely on status and bargaining power.
ReplyDeleteThe health and education sectors illustrate this - most of the increase in positions has been in admin, and the higher pay flows to either those who can have status and can exert power (medical specialists and higher admin).
There are two other big things that create "BS" jobs, or jobs which create few, or negative, societal utils:
ReplyDelete1) The pink elephant of economics, positional externalites, absolutely enormous. Position/context/prestige creates trillions per year in relatively little sum, zero sum, or negative sum, games. For a good short article on this by Cornell economist Robert Frank, see:
http://www.robert-h-frank.com/PDFs/WP.1.24.99.pdf
I've had some posts on this in Mark Thoma's links. Here's one:
http://richardhserlin.blogspot.com/2010/08/positionalcontextprestige-externalities.html
2) Extreme income inequality. And this is related to (1), as the richer a person gets the more what he purchases is positional. But basically, marginal utility per dollar plummets per million or billion. So you have a lot of people doing enormous work to create just a few more utils for the rich and superrich.
Noah,
ReplyDeleteYou should have begun with defense industry, including the spying game. Over $8T remains unaccounted for but the BS continues.
it stimulates the economy
DeleteLike sex, for 15 minutes!
DeleteWith all of you econ bloggers, none of you have blogged the Minneapolis Fed incident?
ReplyDeleteDone.
DeleteNow, on Noah's post, what I'm missing here is some standard economics. Start by thinking about how we measure GDP, and what we might be missing. For example, why shouldn't we include the activity of thieves in GDP. Well, that's clear - they're not producing anything. It's just a transfer. We also don't include government transfers as part of GDP. I pay my taxes and the government gives that to a social security recipient. No value added. We could think of some of what goes on in the financial industry as theft. Some people are going to a lot of effort to hide what they are doing or make it hard to understand. Or they're using up resources to lobby the government - another form of waste. In the health industry, how much of what is going on is pure transfer? Through various means, doctors and pharmaceutical companies have managed to inflate the prices of the goods and services they sell, and to convince people they should have goods and services they don't really need. In education, some of what is going on is pure signalling. Students may not be learning anything - we're just certifying that some students are smart and some are stupid. Is that useful or not. Pretty interesting, and important questions involved.
Thanks, Steve!
DeleteWe do however count the people who *administer* the government transfers, though not the transfers themselves in GDP. Same thing with the financial transactions. We don't count the ownership transfer of stock but we do count the income of people who facilitated that transfer. As we should.
DeleteWhy does the word "lawyers" not appear here nor in the article?
ReplyDeleteNot enough space.
DeleteI don't think this is true: "If you offer to sell me a stock for $100, doesn't that mean you think it's worth less than $100?"
ReplyDeleteEven if I think the stock should be worth $120, maybe I prefer to have $100 cash immediately than some speculative amount later. I think it's silly to assume that every security sold is done so by someone pursuing the "greater fool" strategy.
Yeah that was a silly line Noah had there. If you offer to sell me an apple for 1$ doesn't that mean you think it's worth less than a 1$? Of course you do. If I offer to buy an apple for 1$ doesn't that mean I think it's worth more than a 1$? Of course I do. And?
DeleteNo, it simply means are you willing to trade the apple for $1 in that moment. You may think it's worth more than a $1, less than $1, or exactly $1.
DeleteIt's beyond a silly line for someone. Noah aren't you supposed to be, like, an expert on this stuff?
All in all, this whole article is pretty silly.
Kiddos, this was a quick and dirty way of explaining that financial markets have a lot of adverse selection problems. Liquidity risk is all about adverse selection, and it's a huge hot topic in finance right now.
DeleteRead Milgrom and Stokey for a more rigorous treatment: http://www.stanford.edu/~milgrom/publishedarticles/Information%20Trade%20and%20Common%20Knowledge.pdf
Nate: Sure, there are "liquidity traders".
YouNotSneaky: Sometimes people on opposite sides of a financial trade have different preferences, but not usually. Usually they just have different beliefs.
Anonymous: No, YOU SILLY.
I may be silly, but nowhere as silly as the article. I don't think you would accept an article like this as a submission from your students.
DeleteI'm not saying there isn't something in the article that could be worth discussing - but you've glossed over so many things, almost every line in it begs the question.
Just on the subheading: "Many Americans no longer understand the results of their labor" - Do they? How many? Have you spoken to them? If they don't understand the results, does that mean they feel the results have no value? How do they define value? Do they think they add value but do so inefficiently?
Seriously the reason that article bugs me so much is that you can't read it and come out smarter. You can come out dumber, however, having reinforced stereotypes, and the belief that a whole 1/3 of the economy is money stolen from my pocket by the 1%. Helpful.
Unhelpful fluff, sorry Noah you should do better.
I think you could have been a little more detailed on the causes of high health care spending. You mention the right-wing tropes -- regulation, government spending -- yet other countries that spend less with better outcomes have a lot of regulation and a lot of government involvement. Of course, I'm ignoring the death panels they must have ;-)
ReplyDeleteInformation problems is most likely a big reason also, but then again, other systems seem to handle this reasonably well.
We sure have managed to cobble together the worst possible set of policies leading to bad outcomes, though. And some of us seem to be pretty militant about not changing a darn thing.........