

"Don't work too hard, or you'll screw up the economy"? - cwan
http://paul.kedrosky.com/archives/2010/02/dude_im_not_sla.html

======
jacoblyles
If anyone is curious, the author of the underlying paper argues that if the
demand curve for labor is vertical (inelastic in the short run) that a sudden
increase in desire for work will shift the supply curve out and cause wages to
fall, reducing inflation. If nominal interest rates are near zero, a fall in
inflation will amount to an increase in real interest rates. Increasing real
interest rates reduces aggregate demand for goods and firms reduce their
demand for workers in response.

Then a bunch of math is thrown in to make it seem sophisticated enough to get
published.

It is an edge-case in a short-run model with carefully tuned parameters.
Interesting, but probably not too important. Good blog fodder, though.

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codexon
This paper describes the one idea that I have repeatedly tried to explain on
HN:

Demand is not unlimited.

When you have a flame-bait title like this, the many die-hard
libertarian/Austrians here will be sure to pull out the "broken window
fallacy" and other knee-jerk retorts as evidenced by the other highly voted
comments here.

~~~
WarDekar
Demand may not be unlimited, but mass-(over)production sure tries to make it
so. It's easy to artificially create demand that wouldn't have otherwise been
there in a free(thinking) market.

~~~
codexon
Demand is still very very far from unlimited, __especially__ when you take
into account mass-production.

[http://www.guardian.co.uk/world/2010/jan/07/h-m-wal-mart-
clo...](http://www.guardian.co.uk/world/2010/jan/07/h-m-wal-mart-clothes-
found)

In this example, if demand scaled along with production, there would be no
need to junk clothes that didn't sell. According to you, they should've been
sold! Instead, H&M is trying to maintain the scarcity/demand of their clothing
by destroying excess products rather than give them to the poor. The people
who have money simply don't need any more cheap clothes!

~~~
WarDekar
My point was, you know, sort of tongue-in-cheek... Of course demand can't be
unlimited, but you're just further proving my point- corporations will produce
and produce and produce far beyond the actual demand, because we aren't living
in an actual free-market where if they get to a certain point they're losing
money and go out of business.

In this case, yes, H&M would go out of business if they just kept producing
and producing, but just take a look at the corn industry in the US for a great
example of production far exceeding what demand would ever be in anything
close to a free market- in fact, we (I say we meaning the US since I'm from
the US, but I obviously don't condone this practice) keep inventing _new_ ways
to use the corn because there's too damn much of it!

Also, it may not be unlimited in the case you mention, but the consumerism
ingrained in our societies is still striving for the goal of making it
"unlimited" (as in bandwidth)- just because they aren't _quite_ successful yet
doesn't mean it's any good.

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nzmsv
This is an excellent excuse! "I'm not wasting time, I'm saving the economy" :)

~~~
pyre
Single-handedly nonetheless.

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InclinedPlane
And in next week's issue of "Gross Misunderstandings of the Very Nature of the
Economy": Hot New Trend: Breaking Your Own Windows to Stimulate the Economy.

~~~
jriddycuz
It really is the broken window fallacy, but in reverse; that working harder
could decrease aggregate employment implies that working less hard (or more
counter-productively) could _increase_ aggregate employment.

This is even more hare-brained than the suggestion that we should all work
less to allow more people to be employed. Increases in productivity (e.g.
working harder) can only be harmful in a closed economy with very fixed
consumption practices. Pretty much any country or region, however, cannot be
said to exist in isolation, nor does it have fixed consumption. When either
world interest rates go to 0% or people become miraculously content with
everything they have, let me know so I can slack off, but until then I'm gonna
keep working.

~~~
fburnaby
>It really is the broken window fallacy, but in reverse; that working harder
could decrease aggregate employment implies that working less hard (or more
counter-productively) could increase aggregate employment.

Not all system responses are reversible. I can start working really hard,
making it feasible for my company to lay someone else off. I could later stop
working so hard, but there's no reason to expect that job to come back.

> This is even more hare-brained than the suggestion that we should all work
> less

Did the article make a suggestion? I think it was more of a scientific
statement that this would happen. Of course in a global competitive market
it's irrational for any single individual to start working less. That in no
way refutes the claim being made. Depoliticize for a second and consider the
claims being made. Your stance is right, but you have no need to defend it
here.

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dustingetz
first of all, its irrelevant, the equilibrium behavior of the masses won't be
affected of a few of us slack off. second, in the macro scheme of things, its
not really possible to run out of value-add opportunities.

------
lionhearted
> The conditions for the paradox to apply are that the short-term nominal
> interest rate is zero and

Things are already broken very badly if free money is being given away. Or if
things aren't broken very badly when the free money starts being given away,
it will be broken very badly very soon.

