Tuesday, July 8, 2008

Responding to Comments

A previous post concerning the government's report of a 40 percent increase in overtime hours in the first quarter of this year over the same period last year elicited the following two comments:

"... Whether or not this increase can be imputed to the detaxation of overtime is a question that will have to be sorted out by econometricians... "

At a time when the economy is anemic,
can you think of another cause for it ?...

and

Indeed, the question in itself is almost funny. Of course the detaxation has effects.


To which I respond, Gentlemen, you are too easily satisfied. The problem with the government's good news is that it is too good. The economy has indeed been "anemic," with growth in aggregate demand around 2 percent, if that, so what could account for a 40 percent jump in overtime? The theory of the detaxation was that growth was inhibited by supply-side restrictions in the labor market. It was too expensive for an employer to offer additional hours of labor to meet increased demand, so the solution was to reduce the expense. But there has been no increased output. So if more overtime hours have been added, it is plausible to think that firms have decided to meet existing demand with fewer workers working longer hours, which is now an economically viable alternative. Indeed, this was one of the predicted possible consequences of the detaxation proposal. The contention is not about whether "detaxation has effects." The question is whether those effects are benign or perverse (that is, is overtime being substituted for additional employment). So I reiterate: the proof has yet to be given. The sheer number, 40 percent, even if accurate, doesn't tell us what we want to know, and the claim that it does is sheer ideology, because, after all, the actual goal of detaxation is not to increase overtime hours but to increase output.

Of course it is perfectly possible that the workers earning overtime wages will increase demand in subsequent quarters by spending their earnings. But that is a separate issue from the question of whether supply-side rigidities were responsible for a suboptimal allocation of resources given current demand.

Lassitude

Irony seems to be gnawing at the edges of the Betancourt aureole within days of her deliverance (see, for one of countless examples, here). I can't help but compare the French hoopla with the low-key reception of the American hostages. It's not that we don't know how to perpetrate such media extravaganzas in the United States: think of the rescue of Pvt. Jessica Lynch. Indeed, I think we pioneered the genre. Is it simply that, in this case, the only "white woman in the hands of bloodthirsty savages" was not American? No, it was clearly more than that. The Betancourt phenomenon has exceeded even the Aubenas phenomenon, perhaps because Aubenas, once freed, insisted on returning to la vie ordinaire, while Betancourt, even before her capture, led a life that was not quite ordinary and, since her capture, has seemed to revel in her quasi-apotheosis. She had been iconized during her captivity, so that it seemed only natural that she should present herself as a living icon now that she is free. Yet there is an inherent contradiction between the status of icon, as the focal image of an enduring cult, and the status of media idol, which endures only until the next idol comes along (Warhol's "fifteen minutes of fame"). Betancourt survived her captivity, but will she survive her inevitable twilight of the idol? Doubt is permissible.

Nettled

The sharp criticism of the defense white paper by a group of military officers who signed themselves "Surcouf" appears to have nettled the Élysée. An investigation has been launched to ferret out the identity of the dissenting officers. Personal computers have been searched.

The investigation, which is being pursued by defense minister Hervé Morin but resisted by army chief of staff Georgelin, has been justified in the name of the devoir de réserve incumbent upon military officers and civil servants. One doesn't want a politicized and insubordinate military, of course, but one doesn't want an abject groveling military either. The "Surcouf critique" seemed to me a reasonable exercise of the right to dissent concerning matters upon which the writers claimed professional expertise (though of course it is difficult to judge the expertise of writers who must remain anonymous). In any case, the response strikes me as excessive.

Obamania Comes to Paris

Barack Obama will be in Paris on July 25 and will meet Nicolas Sarkozy at the Elysée. (In an unrelated development, I, too, will be in Paris on July 25, but I don't expect to meet with either Obama or Sarkozy. The blog will very likely be in hiatus from July 18 to August 6, however. Paradoxical as it may seem, I will be spending my time in France listening rather than opining, unless the itch to find a keyboard becomes overwhelming.)