So, now that I think I understand what these folks were thinking about, thanks to Thomas Sowell's On Classical Economics, let me describe the sort of scenario I believe that they had in mind.
Imagine Bob Murphy, Silas Barta and I are living on a desert island. First Bob and I set Silas adrift at sea on a small raft while he's sleeping. (Just kidding, Silas! We love you, man.) Then we set about catching fish from the island's lagoon with our rough-hewn spears. In three hours a day, we each catch about five or six fish, enough to feed us well. Then we spend the rest of the day discussing teleology.
One day, Silas says, "Guys, we don't work that much. We could really increase our productivity if we worked six hours a day." Bob and I reluctantly go along. That day, we each catch a dozen fish, but are too tired to discuss teleology.
We each eat six of the fish and feel decently full. We eat three more each, and now we're stuffed. We take our last three and bury them in the sand, thinking perhaps they'll make the soil more fertile. Then we talk about the increased work load, and all decide, "Man, that just wasn't worth it! It was better when we had more leisure time to discuss teleology."
We just had a general glut. Now, according to Sowell, Malthus and Sismondi understood that we could get rid of all of our production at some price, for instance, the "price" we receive in more fertile soil for burying some of the fish, i.e., we sold our all of our product, but at a loss. The problem is that price isn't sufficient to prompt us to continue that level of production. They also both realized that with better technology, a new production possibilities frontier would emerge, and what once represented a glut would no longer do so. (For instance, if Bob, Silas and I had pans for extracting sea salt from the ocean through evaporation, we might have salted four or five of the fish we caught, and eaten our preserved catch later when we spent a day making fishing nets instead of fishing.)
Does this really happen in an advanced economy? Good question. But, at the least, it's now clear to me that Malthus and Sismondi were not talking theoretical nonsense, as Mill and later Rothbard contended. A general glut, as they defined it, is certainly a theoretical possibility.
What you say here makes sense, and if you want to call that "a general glut," I can't stop you. But I'm not sure that's what they had in mind.
ReplyDeleteAt the very least, I am pretty sure that James Mill said a general glut was impossible, but then John Stuart Mill said it was possible, if you exclude money as one of the goods. I.e. you can have an excess quantity supplied of every (non-monetary) good and service, because their prices are too high quoted in terms of money.
So the way to restore equilibrium is for the money-price of everything to come down, which might not happen for some reason.
But this doesn't seem to be what you are talking about. You seem to be saying people regret having exchanged so much of their leisure for physical product.
Strictly speaking, from one point of view that's not a general glut; the problem is that we overproduced fish and underproduced leisure.
But I suppose you could say leisure doesn't count, just like JSM said money doesn't count as one of the "goods" when we ask, "Could there be an oversupply of *EVERY* good?"
(Note that in your example, leisure is undersupplied, while in the more common one, money is undersupplied.)
Anyway I don't really like fish.
"At the very least, I am pretty sure that James Mill said a general glut was impossible, but then John Stuart Mill said it was possible, if you exclude money as one of the goods."
ReplyDeleteYes -- Sowell points out that, while JS Mill mocked Malthus and Sismondi, he reached generally same conclusion that they did! (As Sowell notes, "Because he never bothered to go back and read them.")
By the way, I have it on good authority that when Bob lays on the living couch for several days and Rachael tells him, "Why dont get off your butt and do something?" he tells her, "But honey, I've been very busily producing leisure right here!"
ReplyDeleteMy wife speaks with proper punctuation.
ReplyDeleteGood points, except that you should have specified that your love for me is strictly platonic...
ReplyDeleteWhen you bring up the issue of a general glut, is this the same general glut worried about in modern economic discourse, and where many economists insist we must somehow engineer things so that producers can unload their stuff at the previous prices, despite it being worthless?
I ask because most discussion of Say's Law (and the liquidity trap) seems to be locked on the idea that it's such a horrible thing for producers to have to eat (er, endure) a price cut for something they made that no one wants, even though this is exactly what needs to happen -- and by preventing this, we're just setting ourselves up for more unsustainable production.
That is, modern critics of Say's Law don't bring up the general glut to say, "well, yup, looks like prices are going to have to drop!"; they do it to say, "We've got to make people buy junk!"
"Good points, except that you should have specified that your love for me is strictly platonic..."
ReplyDeleteOr so you hope.
"When you bring up the issue of a general glut, is this the same general glut worried about in modern economic discourse..."
Well, it's certainly similar. As far as what could /should be done about it, I'm thinking that through.
I don't get it. Food was overproduced relative to leisure time, i.e. scarce resources were exhausted producing a good worth less than the next best alternative. This does not seem to me anything like a "general glut", and if Malthus and Sismondi used the term in this manner, then they did so very misleadingly.
ReplyDeleteOverproducing a good reduces income below what it otherwise could have been. But in the intermibale long-run income and consumption are equal, so there cannot be overproduction relative to consumption, by definition.
Well, Lee, people in the 19th century were not yet so daft as to call doing nothing "producing leisure." The question on their minds was, "Is it possible to have a general glut of economic goods?"
ReplyDeleteNow, you can certainly make Say's Law into a tautology, but then, "So what?" is the right response, not "See, the market always works!"
The fact that Malthus and Sismondi in the end convinced Say himself might indicate that you "don't get it" because you haven't thought it through, mightn't it?
And you might see Bob's post on this as well, Lee.
ReplyDeleteI don't think it is daft to say that people "produce leisure time." For example, time is scarce resource that people spend, and it seems quite sensible to say that it can be spent to produce an opportunity to consume leisure.
ReplyDeleteIn an important economic sense, one cannot "do nothing" (as Mises adamantly asserted), because one is always acting to pursue some end, i.e. to produce some future state as opposed to another -- whether one is laying bricks or watching TV is irrelevent.
If one good is overproduced relative to another, then income is less than it would otherwise be. Since income and consumption are equal in the long run, it follows that overproduction is impossible relative to consumption. The value of what is consumed is merely less than it would have been without the overproduction of less valued goods.
This may appear like a "general glut", especially when the overproduced good is something tangible (like fish) and the underproduced good is not (like leisure time), but to call it such seems highly misleading.
This point may be tautological in form ("analytic" is a better description), but that is merely a consequence of the way it is expressed. Whether these concepts and relative correctly describe anything in the real world is a seperate matter. In a informal sense, that something has a tautological form doesn't mean it has to be true.
Well, fine, Lee. Rather than actually engaging the discussion that Malthus, Sismondi, Say, Mill, Ricardo, Mill, etc. were having, you are altering the meaning the terms had for them and then saying, "Presto chang-o, problem gone!"
ReplyDeleteOne can always define a problem away; just don't expect others to be impressed.
I am sorry, but after I read in one of Sowell's books that England conquered Scotland (and here he is referring to the period AFTER Robert the Bruce) I just cannot take any of his historical accounts seriously. Sowell qua economist fine, but Sowell qua historian...let's just say that the principle of caveat emptor should be applied a wee bit more vigorously than usual. I mean, come on, King James was James the Sixth of Scotland long before he also became James the First of England. I learned that in junior high school, in ENGLAND. I haven't read the book, but based on what I have skimmed in it and on some reviews of it that I have read,I wonder if the title of his book "Black Rednecks, White Liberals" should be changed to, "Scotsmen Bad, Nazis Good."
ReplyDeleteI am sorry, but the fact that Sowell was wrong about some event he was casually commenting upon in military history says nothing about his worth as an historian of economic thought. There is absolutely no need to take Sowell's word for this, even in the book -- he documents his contention with very extensive quotation.
ReplyDeleteI am sorry, dumb objection.