Keynes is Ignored, Final Segment of Main Text!

Part Four: A Summary
We have constant unemployment, despite governmental efforts to spur the economy. Some economists tell us that in the long run the economy will automatically correct itself, because of the marginal utility principle. (See §3.02 Capital.) What they fail to understand is that a market economy is not self-correcting as to unemployment. This is because the marginal utility principle applies to consumer and capital goods, but not to labor. The marginal utility principle works on a pass-fail basis. Entrepreneurs will tend to use a parcel of land for its most profitable use. If they realize it can’t be used profitably, they will withdraw it from production. Money will be invested in machinery or other capital goods only if the investor believes the revenues it produces will exceed the revenue from lending that money. That’s standard economic theory. Most workers, however, now have extra time to give to work, which would cost them little, so the marginal utility principle doesn’t apply to labor. Legislation is needed to counteract the effects of labor saving devices.
Other economists say that to reduce unemployment we must stimulate the entire economy by means such as deficit spending. In 1945, John Maynard Keynes suggested a thirty-five hour workweek is better for achieving full employment than is encouraging investment, as noted in §1.01. But today subsidizing early retirement is a better way to reduce the average work life, for the reasons given in §1.01.
If there’s only enough work to provide an average of thirty hours of work a week for all who want to work, it’s not the best allocation of resources to give many people forty hours a week and some ten hours or none. Workers suffer from too much time in which they can work and not enough demand for their labor. As more and more labor saving devices came about their situation becomes worse, and the disparity between the rich and the poor becomes greater. History shows us that a nation with such a disparity is inherently weak.
If we do not reduce the standard work life the economy runs like a poorly irrigated field. When parts are overly dry, merely adding more water could saturate the parts of the field that are already wet more than it moistens the dry parts. Artificial stimulation of the economy can lead to pollution and inflation.
Part Five: Answers to some arguments that might be brought against these proposals
5.01 Unthinking people advanced the notion that if we deported “them” (minorities that are considered to be chronologically unemployed) and severely limit immigration we could solve the unemployment problem and other problems. Constitutional issues aside (for purposes of discussion, only), to the extent that such remarks are based on the assumption that expelling the jobless will solve unemployment they are based on an economic fallacy. . [endnote 18] Even if we were to apply a Hitler-like final solution. [endnote 19] we would not solve our unemployment problem. Unemployment results from adhering to the 92,000-hour work life fallacy defined in Part l--Overview. Unemployment hits hardest those considered least desirable by prospective employers (whether for rational or irrational reasons). If these people were removed from the country while retaining the public policy based on that fallacy, we would merely substitute a different group of unemployed for the people we have now.
5.02 Some say education is the key to ending unemployment because unemployment is highest among those who are undereducated. Although it is true that there is little or no unemployment among physicians, that is because so few people are able to become physicians compared to the demand for their services. If the number of physicians increased sufficiently because of expansion of medical education there would be unemployment among physicians during times of general unemployment. Unemployment is caused by the factors described in Part 3 and the failure of government to counteract these factors. Said failure is due in part, at least, to the 92,000-hour work life fallacy. Education partly determines who is unemployed, not whether or not there is unemployment. Education is very important, but it cannot cure the unemployment problem.
5.03 Therapy of work: Just as younger people can be frustrated by the failure to earn a living, some older people will be frustrated by the inactivity of retirement. This frustration is also a social loss, but a lesser one. Some can avoid this frustration through recreation or volunteering. Those who wish to continue in remunerative work can decline retirement. If their employers have involuntary retirement they can seek employment with employers who have no upper age limitation. Some activity isalways possible. It would be good if society provided counseling services for retirees in addition to economic benefits.
5.04 Idle Factories: Some owners of capital would complain if work life reduction goes in effect, since it can reduce unemployment but not idleness of plants. However, we will always have idleness of plants as long as we have fluctuation of demand (plants built when demand for its output is high will be idle at the time that demand falls) and miscalculations in which investors overestimate the profitability of a product. Artificially stimulating the economy (instead of work life reduction) will not end idleness of capital goods. It merely makes possible a higher amount of total capital goods. [endnote 20] .
Part Six: Some refinements and some miscellaneous points
6.01 Psychological effects of unemployment: I consider unemployment before retirement age to be the worst. Many of the people it hits have children to support. It heightens the effect of biases of all kinds, most obviously biases of race and gender. I know of no objective way to measure the psychological effects of unemployment, so I’ll mention a few works of fiction that discuss it. Steinbeck’s “The Grapes of Wrath” is a classic that comes readily to mind. . [endnote 21] A point is verbalized by a character in the television series “Thirty Something” saying that looking for work is harder than work because it’s so humiliating.
6.02 International Trade: For a long time it has been commonly said that industry in the United States would better off if it were protected against competition from cheap foreign labor. Lately, there has been added to that the complaint that some foreign industry has advantages of efficiency, better worker motivation, subsidies from their governments, or a combination of these factors. Standard economic theory rightfully shows that this is fallacious (except, perhaps, as to those subsidies.) (See Addendum 1, §4.) There is a factor, however, that can significantly dilute the strength of this standard theory, the labor-intensive factor. Products and services vary in proportions that labor and capital contribute to their value. (Labor contributes a greater percentage of the value to a hand-sewn garment than it does to a machine-sewn garment, for instance.) To the extent that labor contributes a large portion of the value of an item that item is called “labor intensive.” Unemployment is made worse if a country decreases its production of labor intensive goods by importing more of them while exporting more capital intensive goods.
We can also reduce unemployment by alleviating the bad effects of outsourcing. One way concerns the fact that when dollars go to foreigners they might use them to buy pre-existing American capital assets rather than make purchases that create jobs for Americans. The Dow can go up, but so does unemployment. Our laws should prevent this from happening directly, or through corporations. Ninety-nine year leases should be allowed, providing construction begins in ten years. Until we solve our unemploy-ment problems it makes no sense to let foreign investors buy our pre-existing capital assets. There is another disadvantage to allowing foreigners to buy preexisting American capital property. If foreigners own hotels in the United States they would seek to influence the politics here. In the United States money can influence politics through contributions to political campaigns or by making direct political messages. (We should try to reduce this influence, but we cannot eliminate it.) It is better to have residents influence politics in this manner than non-residents.
6.03 How much leisure is one willing to give up for money? It is worth while to examine this question even though, as stated in § 1.04, the suggestions made in Part Two would benefit workers generally, which includes those who don’t desire more leisure. There are those who, on their death beds, finding they’ve more money than they could use, wish they had worked less (or spent more), just as there are people who, desperately short of money, wished they had taken opportunities to work more (or had spent less on relative luxuries.) The main reason for this is the uncertainty of the future needs (especially as to health care) when the initial decisions are made. Since the latter regret is worse than the former one, most people will choose to err in favor of working more (or spending less.) (For many who regret having worked too much, the disappointment of not having lived fuller lives may be softened by the knowledge that their money can pass to relatives, friends, or organizations they choose.) While many people would choose a workweek of forty hours or longer, it should be obvious that many of these would reduce the hours they would choose if they were not uncertain about the future. If laws encourage people to work less, people could reduce their taxes, because welfare costs would go down. Awareness ofthat would lead some more to approve their work reduction. The choice as to WHEN to retire is also affected by uncertainty, mainly as to health needs and inflation. (For those who would want to retire from their job and seek part time work elsewhere there is uncertainty as to future employment opportunities.)
Leisure is most precious to someone who has none. Once one obtains a reasonable amount of it, however, it is probably true, as F.A. Harper, a conservative economist notes, that the higher one’s material living is, the greater is one’s 1iking for 1eisure. . [endnote 22] (It follows that even if the invisible hand discussed in § 3.01 does lead to full employment it is not optimal full employment as long as labor saving devices lead only to increased consumption without increases of leisure.) Thus, as real hourly wages increase over the centuries, the amount of money one would voluntarily surrender for leisure, probably starts high, goes down, and then goes up.
Part Seven: Conclusion. We should do a lot more than we are now to drastically reduce unemployment. UNEMPLOYMENT STINKS. The suggestions given here should be tried.

ENDNOTES

18 It also is based on the factual mistake that substantially all of the unemployed that receive public assistance are members of racial minorities or the biased viewpoint that only white people can be considered meritoriously poor.
19Hitler was willing to expel, rather than kill, those he considered undesirable.
20 When miscalculation has occurred, the unused capacity will drive prices down to the point that the owners won’t replace physically worn out capital goods (or convert them to another use before they wear out.)
21 Unemployment sometimes creates homelessness, so Dreiser’s “Sister Carrie” gives us another vivid picture relevant to the issue (although the economic difficulties of that homeless person were initiated by non-economic causes.) Also, when you can’t get a job with wages you sometimes find you can get a selling job at straight commission or you can buy at wholesale and try to sell to the public. Either can be as frustrating as looking for a job. A poignant example is given in a Saroyan short story about a small boy whose father has him try to sell oranges at a roadside.
22 Writings of F.A. Harper, Vol. 1, p.408, Institute for Humane Studies.