Vacant Lots, Seen and Unseen

When I lived in Philadelphia briefly in the late 90s, the city had gone through a dramatic drop in population.

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Everywhere you went in North Philly, you’d see vacant lots; some places you could stand in the middle of one of America’s biggest cities and feel like you were standing in a field in the Great Plains.

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Some friends lived in 10,000 feet of warehouse space for which they paid a couple hundred bucks (it seemed like a fire trap, but it was, I suppose, artsy and cool.) The community service program I worked for took over an enormous abandoned middle school, one floor out of which we used for a school book redistribution program, but the other three floors were just empty, unused auditoriums and classrooms, gradually growing dustier and danker over time but not clearly something that should be condemned or torn down, at least at that time- it’s had a couple more decades to disintegrate since then:

img_6597 Most of the United States continues to grow in population, of course; even Philly has had something of a rebound in recent years, and you won’t find an unused school building in New York, for example, for blood nor money, which has made the charter/district school battles much more cutthroat.

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But places like Philadelphia in the late 90s (or Detroit up through today) are a reminder that underutilized resources create their own problems. One day, when I was working for the community service program, SEPTA assigned us to clean up a vacant lot near a North Philadelphia transit station; the fairly small lot was filled not only with garbage and drug vials but, somewhat more enigmatically, with over a dozen dead cats.

 

The concept of “human capital” has its flaws, of course, but it’s not the case, I don’t believe, that underutilized human capital is less a problem than underutilized physical capital. As the old teachers’ aphorism goes, if you don’t have a plan for your students, they most definitely have a plan for you. If the society doesn’t take a care- beyond merely keeping them fed and minimally housed but unemployed and unwanted as more than consumers- for its less educated citizenry, it seems likely that that citizenry will force that care upon the society at large. You may not be interested in the dialectic, in Trotsky’s phrase, but the dialectic is interested in you.

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Joe Wiesenthal argued recently that the big problem with Trump building a wall along the Mexican border is not that it will “waste money” but that it will waste real resources, especially human resources:

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Are we in a state of overutilizing our real human resources? To me, this doesn’t look like that’s the case:

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Some of that is due to students and retirees, but if you zoom in only on 25-54 year olds, it looks like there’s still a big problem, especially among less educated men.

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There are composition effects happening there, no doubt- as more and more men pursue college, those left in the the “high school or less category” are negatively selected. But note on the other hand that these civilian labor force participation rates don’t even account for the huge growth in the incarcerated population over the same time:

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Or for divergence between citizen and noncitizen workforce participation rates.

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Just zooming onto the population that supported Trump most vociferously, non-college educated white men, there has been an even more striking decline in employment rates, and a growing gap with the population at large:

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There has been a similarly marked decline in labor force participation among black men- who obviously have been particularly affected by the rise in incarceration, which again is omitted here:

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And a spike since 1994 in the proportion of young men who are NEETs– not in any kind of employment, education, or training:

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Along with the expected decline in very young men’s employment rates relative to young women’s, even as more women pursue education:

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There are undoubtedly good arguments against building an enormous border wall, but the idea that we are using too many low-education workers currently- that our human capital, particularly among native-born men with less education, is presently overused- is probably not one of them.

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There is a longer version of Wiesenthal’s argument made in Frederic Bastiat’s classic 1848 essay on political economy, What is Seen and What is Not Seen, where the proto-libertarian Bastiat argues that any government expenditure on behalf of “employment” must weigh its goals against the much more sensibly and productively allocated employment that the same men would be engaged in elsewhere. A question is whether these matters have changed substantially since 1848:

A nation is in the same case as a man. When a man wishes to give himself a satisfaction, he has to see whether it is worth what it costs. For a nation, security is the greatest of blessings. If, to acquire it, a hundred thousand men must be mobilized, and a hundred million francs spent, I have nothing to say. It is an enjoyment bought at the price of a sacrifice.

1.23

Let there be no misunderstanding, then, about the point I wish to make in what I have to say on this subject.

1.24

A legislator proposes to discharge a hundred thousand men, which will relieve the taxpayers of a hundred million francs in taxes.

1.25

Suppose we confine ourselves to replying to him: “These one hundred thousand men and these one hundred million francs are indispensable to our national security. It is a sacrifice; but without this sacrifice France would be torn by internal factions or invaded from without.” I have no objection here to this argument, which may be true or false as the case may be, but which theoretically does not constitute any economic heresy. The heresy begins when the sacrifice itself is represented as an advantage, because it brings profit to someone.

1.26

Now, if I am not mistaken, no sooner will the author of the proposal have descended from the platform, than an orator will rush up and say:

1.27

“Discharge a hundred thousand men! What are you thinking of? What will become of them? What will they live on? On their earnings? But do you not know that there is unemployment everywhere? That all occupations are oversupplied? Do you wish to throw them on the market to increase the competition and to depress wage rates? Just at the moment when it is difficult to earn a meager living, is it not fortunate that the state is giving bread to a hundred thousand individuals? Consider further that the army consumes wine, clothes, and weapons, that it thus spreads business to the factories and the garrison towns, and that it is nothing less than a godsend to its innumerable suppliers. Do you not tremble at the idea of bringing this immense industrial activity to an end?”

1.28

This speech, we see, concludes in favor of maintaining a hundred thousand soldiers, not because of the nation’s need for the services rendered by the army, but for economic reasons. It is these considerations alone that I propose to refute.

1.29

A hundred thousand men, costing the taxpayers a hundred million francs, live as well and provide as good a living for their suppliers as a hundred million francs will allow: that is what is seen.

1.30

But a hundred million francs, coming from the pockets of the taxpayers, ceases to provide a living for these taxpayers and their suppliers, to the extent of a hundred million francs: that is what is not seen. Calculate, figure, and tell me where there is any profit for the mass of the people.

1.31

I will, for my part, tell you where the loss is, and to simplify things, instead of speaking of a hundred thousand men and a hundred million francs, let us talk about one man and a thousand francs.

1.32

Here we are in the village of A. The recruiters make the rounds and muster one man. The tax collectors make their rounds also and raise a thousand francs. The man and the sum are transported to Metz, the one destined to keep the other alive for a year without doing anything. If you look only at Metz, yes, you are right a hundred times; the procedure is very advantageous. But if you turn your eyes to the village of A, you will judge otherwise, for, unless you are blind, you will see that this village has lost a laborer and the thousand francs that would remunerate his labor, and the business which, through the spending of these thousand francs, he would spread about him.

1.33

At first glance it seems as if the loss is compensated. What took place at the village now takes place at Metz, and that is all there is to it. But here is where the loss is. In the village a man dug and labored: he was a worker; at Metz he goes through “Right dress!” and “Left dress!”: he is a soldier. The money involved and its circulation are the same in both cases: but in one there were three hundred days of productive labor; in the other there are three hundreds days of unproductive labor, on the supposition, of course, that a part of the army is not indispensable to public security.

1.34

Now comes demobilization. You point out to me a surplus of a hundred thousand workers, intensified competition and the pressure that it exerts on wage rates. That is what you see.

1.35

But here is what you do not see. You do not see that to send home a hundred thousand soldiers is not to do away with a hundred million francs, but to return that money to the taxpayers. You do not see that to throw a hundred thousand workers on the market in this way is to throw in at the same time the hundred million francs destined to pay for their labor; that, as a consequence, the same measure that increases the supply of workers also increases the demand; from which it follows that your lowering of wages is illusory. You do not see that before, as well as after, the demobilization there are a hundred million francs corresponding to the hundred thousand men; that the whole difference consists in this: that before, the country gives the hundred million francs to the hundred thousand men for doing nothing; afterwards, it gives them the money for working. Finally, you do not see that when a taxpayer gives his money, whether to a soldier in exchange for nothing or to a worker in exchange for something, all the more remote consequences of the circulation of this money are the same in both cases: only, in the second case the taxpayer receives something; in the first he receives nothing. Result: a dead loss for the nation.

1.36

The sophism that I am attacking here cannot withstand the test of extended application, which is the touchstone of all theoretical principles. If, all things considered, there is a national profit in increasing the size of the army, why not call the whole male population of the country to the colors?

9 thoughts on “Vacant Lots, Seen and Unseen

  1. And then there is the admirable goal of equality. Its good. It’s also expensive. As far as the ‘wall’ … why not just pay Mexican’s to build it from their side? But the point is do we want to increase GDP per capita or just GDP. In the later case, there is is plenty of unskilled non citizen labor, willing to work for very unequal wages.
    SSDI comes out of payroll taxes. To hire a $10 entry level or unskilled employee in a city costs around $15/hour. And that’s without any real benefits. Just payroll taxes, workers comp, unemployment insurance and other costs I can’t just rattle off.

    I suppose my major beef with low skill immigration is that it there is a class of labor jobs that can’t be ‘globalized’. Like construction. These jobs need to pay enough for an American Citizen with access to the social safety net to feel like they are being compensated for the relatively harsh conditions that go with the jobs. Harsh by today’s standards, anyway. Exposed to cold and heat. For anyone that has ever had one, the number of hours where all the office workers really wish they could be outdoors, soaking up the fresh air, is a modest fraction of the total. Even nice days are cold at 6am or hot at 3 pm. Plus, its dusty and your get your hands dirty and stuff is heavy and the job has to get done, which requires physical labor.

    I don’t really care if textiles move to the the lowest rung of the global economic system, where ’emerging’ is simply a euphemism. And the same with other sorts of industry that exited the US decades ago. We have bona fide trade beefs. And we also have trade deals where we win, in the sense of exporting the highest value goods and services and import the lowest value.

    There is a broad development path that is well defined. Agriculture to manufacturing to services. We still manufacture a lot of value, but without so many people. People are expensive to hire — in part because they pay for those that aren’t working.

    The problem with US Trade policies is that we have powerful support for exports, but also broad support for imports. This is going on right now. Boeing is lined up against Walmart. But the states are the wrong color.

    Longer term, people have to face up to the end of the mythical 50’s, union scale factory job. It existed while the remainder of the globe rebuild after they destroyed themselves during WW 2. With the US, of course, applying the finishing touches with a bit of strategic bombing.

    An early example of the development of a service is that of the quasi profession, Realitor. Sales has always been an activity and when practiced full time, an occupation. It has tried to turn itself into a profession, and not without some success. What it isn’t is a generic job. Moderate but not high barrier to entry. They don’t ‘get a job’ … they create their own. I don’t want to sound either overly positive or negative about it. Although ‘positive’ in the sense that it is a service, that it can be well paid, and we may have enough now, and that it may be eroded by internet driven sales models, it isn’t going to fold up like print journalism.

    People have to find ways to make themselves valuable — to provide a service that fits into the current economy. And know there isn’t a default, unskilled, factory labor option. So what are these services? I don’t know — but look at the newly emerging field of boutique farming. Farming is at the bottom of the hierarchy, but ‘farm to table’ is something people are willing to pay for. A ate somewhere that had – believe it or not – a staff forager. This works for the well to do, to some extent. Only the wealthy can afford custom, bespoke, boutique food and objects. What I see is the traditional field of ‘service’ … like in servant. But a newer type. That brings unique stills at a plausible price, on a hourly or daily basis. And the skills to add enough value to create demand.

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  2. This post is a bit scattershot. Still, let me re-apply the broken windows fallacy to the concept of the wall. You’re only looking at the cost of the wall, not what we have to spend because we don’t have good border security. And while I’m admittedly conflating illegal and legal immigration here, they are in the wagon, not pulling it. “A comparison of taxes paid and government spending on these families showed that immigrants created an annual fiscal shortfall of $43 billion to $299 billion.” While your standard immigrant works hard and pays his taxes, the immigrant’s family is on the dole for a generation or two (and the immigrant mostly likely gets the Earned Income Tax Credit, etc). The savings from decreased immigration, legal and illegal, would mean a lot of money going elsewhere that we don’t see.

    The wall, if it works as advertised, would pay for itself due to savings in other expenditures. Think of America as a house with poor insulation, if you spend a lot of money to insulate it up front, you make up the savings in energy bills over time.

    Frankly, Mexico should pay for it, perhaps by a tax on remittances, as they’ve been exporting their poor rather than investing in their human capital. Remittances are about 2% of their GDP to the tune of about $20 billion. Imagine if for 20 years America had a policy like the Mariel Boatlift, to send the poor from our inner cities and Appalachia into Canada, then letting Mexicans and South American’s pass unhindered through as long as their ultimate destination was somewhere north of the Montana.

    The source for my quote:
    https://mobile.nytimes.com/2017/02/27/opinion/the-immigration-debate-we-need.html?_r=0&referer=http://m.facebook.com

    CBO on Remittances: https://www.cbo.gov/publication/22012#section0

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    1. Sometimes, I think I’ve approved a comment when really I read it without remembering to approve. I hardly ever don’t approve comments, but since I’ve gotten a slight increase in spam I’m reluctant to just turn moderation off.

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  3. Instead of a wall it would be much cheaper and more realistic to have a biometric Social Security Card in place of the current one, which, absurdly enough, is made out of cardboard. This new card would in effect be a national ID and would be required to open a bank account, use a credit card, cash a check, etc.. That plus biometric visas are the true answers if we really want to enforce our immigration laws. So forget e-verify and stop expecting employers to voluntarily stop hiring illegals.

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