Whilst this is very funny, the cynic in my grumbles that even if Purnell has done this, it wouldn’t have been enough: people are going to vote Tory whatever happens now.

As we’re on the subject of fantasy I had a lovely dream last night. I got together with Anna Friel (without paying) and McNulty from The Wire was the best man at our wedding.

Who says TV doesn’t influence people?

On a serious note, do people who are technically in poverty as it’s defined really see themselves as such.

It’s not an identity trait that anyone would want and so I wonder, when politicians talk about people in poverty, whether it goes over the head of those who could most benefit and so don’t vote in their own interests.

The introduction of free childcare for all working parents, one of the advisory panel’s first recommendations, has seen employment levels amongst parents rise even during an economic downturn.

As a working parent this sounds great – who’s paying though? If it’s the Govt, what’s being cut to pay for it? If it’s employers, where are all these parents getting jobs, given that so many small-medium firms will have gone bust tring to pay for it?

Thanks for comments, this is obviously a bit of fun, but for those who are interested, here’s the footnotes:

- “I wonder, when politicians talk about people in poverty, whether it goes over the head of those who could most benefit and so don’t vote in their own interests.”

This is quite correct, particularly when all politicians do is to *talk* about poverty without doing anything. But the idea here is that instead of talking about it, Labour decided to increase the incomes of low income families. With higher child benefit, tax credits and particularly free childcare, a lot of people would be substantially better off – up to £100/week. It is not that fanciful to assume that this would make them more likely to go and support Labour.

(By way of comparison, when falling interest rates led to people with a mortgage increasing their disposable income in the second half of last year, Labour closed the gap on the Tories to just a few points in the opinion polls).

- “As a working parent this [free childcare] sounds great – who’s paying though? If it’s the Govt, what’s being cut to pay for it?”

There were some savings (e.g. childcare tax credits which are bureaucratic and have relatively low take up were scrapped as unnecessary), and the government decided not to continue the VAT cut to help raise the money for its introduction. But actually, the greater economic activity from higher productivity and more parents being able to work meant that the overall net cost was lower than many people anticipated.

LOL.
180 degrees from the direction he took though, and he took that decision willingly and purposefully. You might as well write about a George W. Bush who after 9/11 reached out to the Arab world with friendship and aid, or a Gordon Brown who was wary of the City and mega-corps, and who insisted all Govt finances were on the books and transparent…

@5 *sigh* – Gordon Brown *did* insist that all government finances were on the books and transparent. He forced all government departments to adopt first GAAP and then IFRS (the latter of which also accounts for PFI appropriately), and has generally presided over the widest expansion in the availability of government financial information in modern history.

[fact that norra lorra people know: Tube PFI debt was on the government books from day one of the partnership]

@ john b, are you maintaining that Brown as Chancellor and as PM hasn’t used off-balance sheet instruments? Okay, some PFI liabilities are on some books, but not in the main accounts as it were, which they most definitely should be, given their scale.
C’mon, what rational reason is there for his pursuit of PFIs for everything, seemingly regardless of value (and witness the now ludicrous position of the State bailing out PFIs, i.e. loaning money for it then to be loaned back at a higher rate…)?

The government did not adopt IFRS until 2008 and for the NHS a year later – until then more than half of PFI liabilities were off the books. If the purpose of PFI was not to keep the borrowing off the books then I’m buggered if I can think of another justification.

@7,8 the logic behind PFI was that the efficiency gains would offset the slightly higher borrowing costs. In a time of unprecedentedly cheap private borrowing, this was sometimes even true. Agreed that now, it isn’t.

“But actually, the greater economic activity from higher productivity”

I suspect that you don’t actually know what “higher productivity” means.

Adding currently unemployed labour to the extant capital and technological stock doesn’t in fact improve labour productivity. It reduces it.

“Higher production” you might get away with assuming, higher productivity probably not.

“10 – I suspect that you don’t actually know what “higher productivity” means.”

Do you object to the wiki definition – http://en.wikipedia.org/wiki/Labour_productivity ?

“Adding currently unemployed labour to the extant capital and technological stock doesn’t in fact improve labour productivity. It reduces it.”

But free childcare doesn’t just add currently unemployed labour, it also reduces the amount of time lost to child care problems (e.g. workers having to take time off, leave work early, not finish tasks etc.) Which would increase productivity, no?

I guess the overall aggregate effect depends on whether these productivity gains outweigh reductions in productivity from currently unemployed workers entering the labour market.

But anyone who has experience of being a working parent, of working with parents or employing them will know how good quality, reliable and affordable childcare can improve productivity.

Ah, Tim Worstall arrives. Ever keen to derride others with lofty sounding economic soundbites.

But whilst he might be right in this case at root or at some level, let’s pause and consider what he’s written and check if he’s entitled to dismiss somebody else’s argument so arrogantly (with the words “I suspect that you don’t actually know what “higher productivity” means”, no less)

Tim writes:

“Adding currently unemployed labour to the extant capital and technological stock doesn’t in fact improve labour productivity. It reduces it.”

But is this true?

Maybe it is – for example if the situation under consideration is one at which productivity is already being maximised by combining extant capital and technological stock with a present determined labour level. In such a case, adding labour would reduce productivity (for example, if the hypothetical factory is producing at highest possible productive capacity, adding in new workers will lower productivity because the workers will get in each others’ way and make the production process less efficient).

But what right has Tim to assume that this is already and everywhere the case? What right has he to assume that adding in labour to extant capital and technological stock will always (as he seems to be implying) reduce productivity?

To be entitled to such a conclusion, Tim would have to know at least one thing:
1. that production is being maximised as things stand
And also be justified in assuming at least one other thing:
2. Adding in more labour will decrease producton (and not increase it, or leave it the same)

Yet how can Tim know these things, in all cases?

Surely it is not the case that *every* industry, or factory, or commercial operation or whatever at present in the UK is combining extant capital with technological stock with the ideal level of labour to maximise production? Surely *some* processes of production are not optimised, and perhaps in those cases increasing the labour input will increase productivity. That would mean “higher productivity”.

Of course, it’s going to vary from case to case. This now becomes an empirical question of surveying productive process and identifying those which would benefit from increased labour or would suffer from an increase in this variable, and making decisions accordingly as to whether to increase or leave alone the variable in question.

The point for present purposes is that nobody is entitled to make a grand, sweeping generalisation that adding labour to extant capital and technological stocl necessarily reduces productivity, unless one knows that in every process of production currently taking place, production is being optimised with the ideal labour input, and adding labour would only decrese productivity.

Does Tim know such a thing? I’d be most impressed if he does…for such knowledge of the intimate workings of an economy at all levels of production *plus* knowledge of the idealised capacity of each level of production regardless of whether it has or has not been achieved would be almost god-like in its enormity and depth.

In conclusion, I wouldn’t mind so much if TIm’s point had been “hold on a minute, sometimes adding more labour can reduce productivity, not improve it, so you need to be more careful”.

But Tim said something else. He accussed another person of not knowing what they were talking about, and made a general statement that heavily implied that adding more labour *always* reduces productivity. That looks a little hard to sustain when subjected to some rational scrutiny…and it calls into quesiton Tim’s right to be so rude to others.

But what right has Tim to assume that this is already and everywhere the case? What right has he to assume that adding in labour to extant capital and technological stock will always (as he seems to be implying) reduce productivity?

To be entitled to such a conclusion, Tim would have to know at least one thing:
1. that production is being maximised as things stand
And also be justified in assuming at least one other thing:
2. Adding in more labour will decrease producton (and not increase it, or leave it the same)

Yet how can Tim know these things, in all cases?

Tim can, obviously, speak for himself here, but his point isn’t that production would fall (in fact, he says ‘“Higher production” you might get away with assuming’). But in economic theory terms, those people who are currently unemployed will be, by definition, less marginally productive than those in employment (that is one reason that they are unemployed…). Accordingly, adding less productive employees to the workforce will tend to reduce overall (ie average) labour productivity. It’s a long time since my economics A-levels, but theoretically that looks sound.

On the other hand, the idea that subsidised/free childcare for employed parents might increase their productivity to such an extent that overall productivity does rise would counteract this. I have a feeling that, so far as employers are concerned, if providing free childcare for their employees paid for itself through increased productivity, then we’d see more firms doing it already.

“amount of goods and services that a labourer produces in a given amount of time”

From that wiki definition. So reducing the amount of time lost to child care issues does not increase productivity, no. For we are measuring productivity as the production in a given amount of time (usually, but not always, per hour).

As I say, “production” might well (probably would) rise, but productivity probably not.

Higher production is indeed greater economic activity and yes, there would be a higher tax take which might well pay for the costs of more childcare (actually, I doubt that but it’s an empirical question which neither of us has the time of the math to do ).

Apologies for sounding especially snot nosed about this but I’m a pendant, as is well known. I’m also a tad sensitive to exactly this confusion: a recent paper from the nef (Hapy Planet v.2.0)makes the disturbing accusation that we’re too focused on rising productivity: what they mean of course is in raising production (ie, economic output). The latter is true for a certain set of arguments, the former is simply a foolish complaint.

Of course we want rising productivity (of whatever factor of production) for it means we get more for our limited amount of whatever it is.

“To be entitled to such a conclusion, Tim would have to know at least one thing:
1. that production is being maximised as things stand
And also be justified in assuming at least one other thing:
2. Adding in more labour will decrease producton (and not increase it, or leave it the same)”

No, you’re making exactly the mistake I am being pendantic about. Raising production and raising productivity are not the same thing.

umm Paul, still crossed-wires I think – in Tim’s usage (the economist’s jargon), productivity = “unit of output per units of inputs” so getting more people to work is unlikely to increase productivity in that sense – that is, increase output per person. I can’t see why it would – possibly if workers were less distracted by child care obligations, but I’d be amazed if that was quantitatively significant in aggregate. The idea that adding extra workers to existing stocks of capital will decrease productivity in the per unit sense comes from the idea of diminishing marginal returns, so turning currently unemployed into employed will reduce average per unit productivity across the economy. This is quite compatible with the idea that reducing unemployment will increase productivity in the sense I think you are using it – meaning increasing the total quantity of output produced. Yes that would happen almost for sure, but I don’t think Tim would dispute that.

on PFI a quick, rarely appreciated point on financing costs – private sector finance costs include risk of default, government doesn’t, so comparing interest rates is not comparing apples with apples – you can’t look at interest rates paid by govt on its debt and what private sector on its debt and say “this project could be financed more cheaply by the govt”. In private sector, if things go tits up, part of the cost of the project gets born by the lender, who loses money and is not repaid, and “real” measures of financing cost would account for that. I probably haven’t succeeded in explaining this, but if you don’t like PFI because it (used to) hides debts off the balance sheet, then you also oughtn’t be happy with looking at financing cost measure that hide the cost of risk, which is a real thing (on average, projects will go wrong and those costs will be made real). Of course things are complicated by the govt sometimes bailing out failed PFI projects too.

Don,

I’m not sure if any of your wish-list actions by Purnell would have helped reduce unemployment in the midst of the recession – free childcare might increase the supply of workers, but there’s not shortage of them right now and it wouldn’t increase the supply of jobs. Job centres already offer “support” and welfare reform plans include extra “support” don’t they?

What might have been nice is if we’d had a “Ministry of Works” with some pre-planned, labour intensive, public investment projects (new infrastructure, maintenance etc.) that it could have hit the button on and started recruiting workers for to soak up unemployment, and perhaps even arrest the vicious cycle of people cutting spending because they are losing jobs and people losing jobs because spending is being cut.

Tim W would love a world where there were 144,000 people, all in automated production facilities, from farming to sewage to growing crops – everyone living in a central city racking in the moolah!

Adam Smith is the new Jesus and capitalism has never cause one problem in this world. Of course, if we all lived to the sound, capitalist ethos of all being of equal education, equal thought, equal opportunity. Fucking robots in other words.

In Tim’s world we are all units of production – and as that is the case we must all be 100% productive or we are a waste of space.

I think.

To Don – great piece but I said my piece on the other Purnell thread – he should be thrown out of NuLab even for what he did – but he made Mail readers happy so NuLab is happy.

Will: What?

“In Tim’s world we are all units of production – and as that is the case we must all be 100% productive or we are a waste of space.”

Eh? I regularly point out that what we’re actually interested in is utility, not production (or consumption particularly). In fact it’s at the heart of my adherence to and promotion of a market system. That’s the only system that can have any possibilty of coping with the fact that we all put entirely different values (ie, individually, utility varies) upon different things and experiences.

Indeed, rather than our all being units of production I take exactly the opposite view, that we’re all really interested in being units of consumption: and desired consumption goods vary tremendously, from enjoyment of a decent sunset through listing to the happy laughter of children and the driving of a Buggatti Veryon. Which of those you enjoy the most, desire, lust after, is entirely up to you and damn good luck to you in getting there.

I would vastly prefer a world in which none of us “had” to produce anything at all: imagine a dream world in which everything which can be produced (as that sunset and the happy laughter are difficult to do, that motor car easier) simply by pressing the tit of one great big machine. Sounds great to me actually, none of us “has to be” productive, we can all enjoy that rather Marxist goal of enjoying the cornucopia of physically produced goods and services while doing as we wish.

True, I might disagree with Marxists about how we get from here to there…..

Tim W – then you agree that the Marxist theory of adopting and utilising technology rather than utilising humans in (slave(ish)) labour is the betterment of all humanity?

Odd that ‘market’ thinkers still insist that humans must be as near perfect in productivity as possible. And with that not taking into account that when the machines make all the goods, in stead of the profit going to the company it must be distributed to the people in some form so they can drive that electric powered, environmentally friendly Jag (my preference).

So let us all hold hands and walk into the future of machines making our goods and free markets paying our bills.

Yet, I still feel, somewhere in the back of my mind that companies will still want their pound of flesh.

“then you agree that the Marxist theory of adopting and utilising technology rather than utilising humans in (slave(ish)) labour is the betterment of all humanity?”

Don’t think it’s solely a Marxist idea there you know. There are some things within Marxism which are common to many schools of thought.

But clearly, yes, if we can build a machine that can do the scut work, freeing up human labour to do something else more interesting then (with certain limitations, like the costs of the machine and of the labour we’re replacing) sure, build the machine.

Note the “more interesting” too. Building machines to build roads rather than using navvies, those navvies then going on to build other things, or take increased leisure, or start a male voice choir, wipe babies bottoms or absolutely anything else they damn well desire to do is just fine. It’s the increase in perceived utility of the navvies (and of all labour right across the economy, perceived of course by the navvies and the labour, not anyone else) we’re trying to maximise, not production.

Indeed, several impeccably free market thinkers have pointed out that we advance when we work out how to mechanise a task and then actually do mechanise it. Threshing machines being a damn site better than groups of threshers, as an example.

“Odd that ‘market’ thinkers still insist that humans must be as near perfect in productivity as possible.”

No, that’s not quite it. It’s that the produtivity per labour hour is the upper limit of what someone can be paid for that labour hour. Increasing productivity means that labour compensation can rise (not must, for there are systems where this will not happen but free market ones, ie especially no monopsonistic purchaser of labour, do this pretty well).

“in stead of the profit going to the company”

??????

Profit goes to the suppliers of capital, not the company. As capital is simply the saved labour of earlier periods I don’t see this as a problem, either.

Tim m’dear – we’ll get that socialist out of you one day!

Whether capital goes one way or another is, at this juncture, irrelevant – we know that it comes from somewhere and goes somewhere, that we can agree on, yes?

So, we now have – lets say 95% of the population are navvies, just because it’s easier and fun. So we now have all these machines making our roads so we have all those navvies out of work, apocalyptic “unemployment”.

If we assume that companies make those machines that make the machine which build our roads – and everything else, we have our humans doing what they want – yet as humans we have to eat, sleep and drink. So to pay for that the capital will have to come from somewhere so we can eat and drink.

Do we levy that capital with taxation so people can live or simply allow the population die off so the machines can make money for the 1% of the population that pushes the ‘on’ button?

The other 4% are totally incapable of work – or pushing the ‘on’ button – because they are near death or in a coma of boredom.

If the machines can build everything we need, presumably we’d then be living in a post-scarcity society so no need for money.

Not sure why the 4% would be bored, there would remain plenty of things to do.

Tsk:

“So we now have all these machines making our roads so we have all those navvies out of work, apocalyptic “unemployment”. ”

Lump of labour fallacy.

I agree, Tim – is it ‘under-employment’, or jobless, or some other thing that Purnell would have mouthed management-speak.

I get so confused with the right.

Not sure why the 4% would be bored, there would remain plenty of things to do.

I’m sure waiting for death is something to do – yet not desirable.

The rest would be those in our society who will be bored even if all escape from that boredom was given to them. The chuckle effect would be like those on, say, facebook who type in a new status of: ‘i;m booooooooooooooooooorrrrrrrrrrrrrrrrrrrrrrrrrrddddddddddd!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1111′

Not sure what to do with the resolutely bored.

But there are so many things to learn, so many things to entertain oneself with, such an amazing world and myriad cultures to experience.

music, art, architecture, languages, games, act, read, write, invent, create, sport, maths, science, travel, build

…lecturing people on blogs about economics.

Why would Gordon Brown resign a year after winning the election?????

agree, Tim – is it ‘under-employment’, or jobless, or some other thing that Purnell would have mouthed management-speak.

No, the ‘lump of labour fallacy’ explains why 30% of the population aren’t unemployed farm labourers as a result of the agricultural revolution.