Michael Etchison writes in reply to me:
Shall we go through the WSJ together to see which companies have
recently announced cuts in dividends, and observe the traditional plummet
in stock prices immediately following (affecting not only option-holding
executives but pension funds and small investors, as well as the ability
of the companies to raise money for such things as better equipment for
its workers to work with)?
Implicit in this reply is the view that the stock market accurately or
efficiently values a company's assets. In fact, recent research from
the United Kingdom indicates that the stock market systematically
undervalues longer-term returns on equity investment (5 years) by
40 percent; see D. Miles, 'Testing for Short-Termism in the UK Stock
Market' in _Economic Journal_ November 1993. If companies are forced
by the market for 'corporate control' and high dividends to support
their share price by paying big dividends, this is often at the cost
of cutting back on longer-term investment, research and development,
training and other outlays which do not show up in the nano-second
time horizon of many stock market participants. Needless to say, this
can have a seriously adverse effect on long-term rates of
productivity growth, leading to poor company performance and more
lay-offs down the line.
Shall we calculate the net receipts of, say, each AT&T worker if the
president of the company simply split up his income among them, rather
than downsize (if I recall, it was something under $5 a month)? Shall we
consider the possibility that it is not easy to actually run a very large
corporation, and that there is no particular reason for a very good
executive to donate his services (when he could either go elsewhere or
voluntarily under-employ himself through sustained x-inefficiency)?
Recent research shows that US executives are
much more highly paid than their foreign
counterparts both absolutely and relative to
their employees, and that executive compensation
bears hardly any relation to company
performance, has more to do with company size,
and has most of all to do with nothing
particularly relevant to efficiency or merit at
all. Can anyone else supply the reference to
the study containing these results which was
reported some weeks back in the New York Times
business section?
[irrelevant stuff deleted]
Is there such a thing as involuntary unemployment? Indeed there is --
even the tenured may find their job or department eliminated.
Maintaining a welfare state -- cost unspecified -- could, at least in
apparent ways, reduce the attendant inconvenience as he suggests. One
may suspect, however -- again, I confess to my own experience also --
that some "involuntary" employment _becomes_ voluntary unemployment,
thanks to such welfare-state measures as the dole. And that being on the
dole is bad for you, for your spirit, your morals, and your morale.
So you're in favour of adopting a national full
employment policy then, are you? What's it to
be, Mr Etchison, full employment policy or the
dole? Or would you be happier with just plain
old destitution, misery and death?
Back when I was a criminal defense lawyer, I regularly gave the advice
to my clients, who believed themselves to be unemployed through the fault
only of others, that one strategy would be to regard looking-for-a-job as
a job -- start at 8, work hard until lunch, work hard until 5.
I don't know of any who did that. Some combination of sponging,
welfare, and crime got them through the day. I stopped doing criminal
defense work.
Here we come to the crux of the issue. A free
market economy, even in a highly industrialized
and technologically advanced society such as the
United States, will not provide all with
sufficient employment, income, and other basic
services such as adequate health-care,
education, child-care, etc (even if available in
private markets--the poor simply couldn't afford
them, or could only afford an inferior quality
of such services.)--sufficient, that is, for a
modestly dignified frugal life. (Try living on
Los Angeles' county's 'home relief' benefit or
even the minimum wage at 60 hours of work a
week). Mr Etchison blames the victims of this
fact. I prefer to blame the fact. I do not
share his naive confidence that rugged
individualism and self-reliance will do the
trick. Millions of people die every year from
avoidable hunger and disease. Does Mr Etchison
believes that this is due to those people's
fecklessness? If he does, he is an even
scummier individual than I thought.
"In earlier chapters I argued that 'getting
prices right' is very much a desirable
objective. I also argued that it is the
singular responsibility of the State to ensure
that positive-rights goods, such as health care
and primary and secondary education, are within
the reach of all; and it was shown that the
market mechanism on its own is far from capable
of ensuring this. It was also argued that
natural monopolies, such as infrastructure,
ought not to be left to the market mechanism.
But we are now going beyond this. Even if
prices were to be got right in a poor economy,
the market mechanism, unless acting upon a
reasonable distribution of productive assets,
can be relied upon to be an unmitigated
disaster." AN INQUIRY INTO WELL-BEING AND
DESTITUTION, by Partha Dasgupta (Oxford
University Press, 1993), p. 498.
Peter
[EMAIL PROTECTED]
