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Understanding the California economy

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Apparently Jerry Brown, who is running for governor of California, is on record as seriously believing, quote, "we need more welfare and fewer jobs."


Given he's been governor of California before, this explains a lot that I previously didn't understand about the California economy!

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On October 21st, 2010 05:20 am (UTC), izmirian commented:
I'm going to play devil's advocate here and say that Jerry Brown may have a good point, though he got a little carried away by saying that we "need" fewer jobs. But imagine that you had a highly automated society where all of the basic needs could be met with only a small fraction of the population working. Presumably there would still be high-paying jobs for the people who develop and improve the automation as well as people with skills in areas that can't easily be automated. But it might be very hard for everyone else to make any money. The overall GDP could be very high even with a large fraction of the population operating in subsistence mode. I don't know whether that is where we are heading but it's worth considering what the right approach might be in that case. Giving Jerry Brown the benefit of the doubt, I think that might be what he's talking about.
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On October 21st, 2010 06:38 am (UTC), psychohist replied:
Brown might have an argument in the imaginary situation where housing and medical care were highly automated - though I'd still be inclined to give everyone more leisure and a shorter work week rather than forcing a small minority to work for the benefit of others.

He seems to be under the delusion that it's not imaginary, though. What's more, the situation with regard to a lot of things in California - welfare, auto insurance, electricity, the state's budget - seems to indicate that he's convinced much of the rest of the state as well.

Edited at 2010-10-21 06:39 am (UTC)
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On October 21st, 2010 07:45 am (UTC), izmirian replied:
Well, obviously the automation of some industries will occur before others and medical may be one of the later ones though apparently there's a huge number of medical transcription employees who are currently losing their jobs to improved voice recognition. But if you look at the historical income inequality in the US it's been going up pretty steadily for the past four decades. Who knows whether that trend will continue but if it does then Jerry Brown is talking about an important issue.
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On October 21st, 2010 02:24 pm (UTC), psychohist replied:
Throwing people out of jobs and onto welfare as Brown suggests would certainly have the effect of increasing income inequality, I suppose.

Edited at 2010-10-21 02:24 pm (UTC)
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On October 21st, 2010 05:37 pm (UTC), izmirian replied:
Actually, it looks like the point he was trying to make is that we can't solve everything by using jobs programs. Although he technically said that we "need fewer jobs", in the previous sentence he was talking about jobs programs. In that case his point is probably that we can't solve everything by having more and more jobs programs. The people he is talking about are probably going to have a subsistence living whether they are in a jobs program or on welfare. I suspect he was just trying to be dramatic by making his comment about "needing fewer jobs". But the basic idea is that if the income inequality in the US continues increasing (possibly due to increasing automation) then you may end up with a large group of people that are living in a subsistence manner, whether it is through a jobs program or on welfare. If that happens, what would you recommend that we do about it, if anything?
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On October 22nd, 2010 01:33 am (UTC), treptoplax replied:
if the income inequality in the US continues increasing (possibly due to increasing automation)

Nah. That's the labor-lump fallacy. Automation makes a great boogey-man, but it's no different from any other improvement in efficiency, be it cargo containers or power tools or compilers. At the turn of the century, there were editorials in the newspapers calling for steam-shovels to be banned, because all the ditch-diggers would be put out of work and we'd have Irishmen starving all over the country.

If I had to guess, I'd say the problem is a combination of calcifying labor markets (for various reasons) and a (hopefully temporary) imbalance caused by a vast influx of rural China into the world economy. On a global scale, I suspect income inequality is dropping like a rock.
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On October 22nd, 2010 07:47 am (UTC), izmirian replied:
On a global scale, I suspect income inequality is dropping like a rock. I suspect that's the case as well and it's pretty encouraging. You could argue that the cost of lifting several hundred million Chinese peasants out of poverty is the unemployment of a few million Americans and that that might be a worthwhile trade-off.

a (hopefully temporary) imbalance caused by a vast influx of rural China into the world economy That's probably a big factor, potentially larger than automation. However in the long run the transformation of developing countries will presumably run its course but the automation factor will presumably continue.

calcifying labor markets I'm not so convinced about this one. My anecdotal impression from Silicon Valley is that there are plenty of high-tech companies looking for employees and plenty of unemployed manual laborers who have no chance of being retrained for the high-tech jobs. It's not really a calcified labor market issue. Automation, or at least the shift towards a knowledge-based economy requiring a higher level of education, seems to be a more likely explanation.

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On October 22nd, 2010 02:19 pm (UTC), psychohist replied:
I would recommend we figure out what the problem rather than trying to reason backwards from Jerry's "fewer jobs" recommendation. If anything, we're going in the opposite direction: the fact that there are a tremendous number of jobs in California that can only be filled by illegal immigrants tends to indicate that there's a shortage, not a surplus, of legal labor.

I do think that there are things we could do to ease the transition from an industrial economy to a service economy, but that's a subject for a more serious post.
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On October 22nd, 2010 05:04 pm (UTC), izmirian replied:
Sure, a separate post on structural shifts in the economy would be great.

I think it's much bigger than could be explained by illegal immigration. I suspect that you would find the same kind of shift in income inequality in states with very little immigration.
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