Albania is bad sure but partly because it had most of its social capital drained out by the Soviet Union, leaving some seething ethnic tensions that just begged for some local strongmen to come into the vacuum. Tough for any society to dig there way out of there, as the on-going problems in parts of Italy and Northern Ireland attest. But there have been some pretty good successes too. Poland, Estonia, Slovakia et al – all more prosperous and without all that many mafiosi either. They had secret police too, presumably they are doing less harmful occupations these days. Whats the alternative? Keep paying thugs to do thuggish things?

And there’s nothing that special about Albanians. Many of the entrepreneurs I have met would prefer to be mafiosi, it’s just that – to date – in Britain the coercive apparatus of the state has been too strong for them.

No I think this is wrong. What this boils down to is never seeing your kids and eating take-away pizza every day because you’re too stressed and knackered from long hours at work in the market.

I’d happily spend two hours cooking a decent meal. It’s fun. But two hours in the kitchen at Pizza Hut? I’d rather chew my own arms off…”

I’ve not done Pizza Hut but I have Shakey’s (and Arby’s, Denny’s etc) and I absolutely hate cooking at home and think DIY is entirely the Devil’s spawn. I would much rather sdo the two hours work, buy a fry up (Good grief, no, of course I don’t actually eat at either Arby’s or Pizza Hut) and have change than I would do the cooking.

But then of course it is different preferences that make up a market.

It means the objective (that ‘solves’ the model and generates its predictions) in most* neoclassical economic models is to maximize the welfare of households, which may be many and varied but simple models often use a representative household, and welfare depends on the wages, leisure and income from assets. More generally, neoclassical economics is based on maximising the welfare of the people who populate the economy – there’s just no way you can say it treats workers as means to the end of enriching capitalists.

* perhaps it’s a mistake to say most. depends what the question under consideration is.

You talk about people in Europe having “one option, longer market working hours, closed off to them” but you could equally say that de facto most Americans have the option of more paid holidays closed off to them. It’s just not on offer. You are not really biting on the possible reasons why the labour market might not be the unproblematic expression of people’s desires you like to think. Maybe I’m just a chronic ditherer, but that (I think) unfounded confidence looks like ideology at work to me. But hey ho, you can probably level the same accusation at me.

Isn’t the problem with these calculations that ‘home production’ consists primarily of enjoyable leisure activities like cooking and DIY, whereas comparable work-for-pay is unremittingly miserable and horrific?

I’d happily spend two hours cooking a decent meal. It’s fun. But two hours in the kitchen at Pizza Hut? I’d rather chew my own arms off…

They’re called “time use surveys”. They exist for all industrialised nations.

It’s an extremely important concept if you want to talk about such things as the “work/life balance” and so on: including such things as vacations.

We all do certain things which only we can do for ourselves: eat, sleep, wash etc. Most of us also do work for pay out in the market. And just about all of us do work in the home: “home production”. The usual definition is things which we could hire somene to do but choose to do ourselves without pay (this has problems, ie with things like sex, but it’s an agreed definition everywhere).

Thus sending the kids out to childcare is purchasing that service in the market. Being the bird at the kindergarden is performing that task in the market. Doing it yourself at home is home production. Sending out for a pizza is market: making one at home is home production.

There are also more sterotypically male versions: repairing the car, cleaning leaves out of the gutter and so on.

The balance left over after personal activities, market work and home production is by definition leisure.

So we can note that, for example, women’s working hours have risen in recent decades. But also that women’s leisure hours have risen. Personal activities haven’t changed to account for it. What has? A reduction of hours in home production.

Similarly, male home production hours have fallen. Thus both sexes are working shorter hours (it’s actually quite a large amount. 8 hours a week less for US men over recent decades) entirely contrary to the usual moans about “ever longer working hours”.

Similarly we find that male and female leisure hours in the UK are just about equal…a few minutes a day one way or the other.

Where it gets interesting is across countries. Typically, Europeans spend more hours in home production than Americans, less in market production. But the net is usually (but not always) that Europeans have fewer leisure hours. So taking total working hours as our measure, we might actually say that Americans work less than Europeans. Not what we’re used to hearing, for sure, but if they work more market hours and purchase more of the services which can be substituted for by home production then why is that so wrong? Or worse (or even better?) than the European solution?

This is a point made very strongly in the Stiglitz/Sen thing they just did on alternatives to GDP for Sarkozy. And it might be one of the reasons you’ve not seen people falling over themselves to praise the report after people read beyond the Exec summary. For the implication is that (not expressly spelt out, but the implication is there) a greater proportion of market hours as opposed to non market (ie, the US rather than European) leads to greater wealth.

For they apply a value to the hours spent in household production: the general undifferentiated rate for labour. That’s how it should be measured in GDP (like) statistics. But that general labour rate is of course lower than the average rate in the market economy. So they are saying that market labour, on average, pays more than home rpoduction: thus you’ll be richer by doing the market work and buying in the subsititutes for home production (this makes sense, as market labour allows division of labour, specialisation and trade which home production generally does not).

Another way of saying the same thing: for any given number of working hours you can enjoy the same standard of living and have more leisure the more of your working hours are in the market, not home, economy.

And back to the point: the US system has this selection of market as opposed to home working hours based on a more market solution than Europe does. Fewer forced (ie statutory) holidays, fewer restictions upon market working hours. I would thus assume (and agree, could be wrong, but would need convincing with real evidence) that the balance decided by people who were free to choose would be better than the balance reached by those who find one option, longer market working hours, closed off to them.

But in order to understand all of this it is, as above, crucial to note that market working hours are not all the work that people do. As Stiglitz and Sen point out, the number we’re actually interested in is the number of leisure hours. And on that basis, the US really isn’t all that different from most of Europe: but they are richer for the same amount of work.

I don’t recognize what you write about market theory supposing “withdrawl” from markets is possible without cost. Your second para looks flat out wrong to me. Neoclassical economics usually proceeds from a household maximization problem, involving wages and leisure (as well as rents from assets – the capitalist bit). The welfare of workers is the end to which their labour is the means.

But there is only one “labour market” so this element of market theory cannot apply. The “theory of the firm” implies that the interests of the firm (i.e. the capitalist) are legitimate whilst those of factors of production are not – they are merely means to an end. Neo-classical economics is nothing other than a way of glorifying the very few (and for no reason – entrepreneurs don’t even create wealth, it’s banks that do that) and abusing the overwhelming majority of humanity.

I don’t know who is right here. Larry, your summation is fair, but tack on the necessary qualifications and Tim’s “market outcomes are right by definition” needn’t be as silly as it sounds. It is possible, that given the choice, people would choose more income and less holiday.

It’s interesting that leisure time isn’t actually too different in the US, if you account for home production (however that’s measured – I don’t really know what it means – there are more stay-at-home ‘moms’?). I have met Americans who complain bitterly about vacation allocations, and say there’s just no real choice…. I wonder why that is. If true, is it compatible with Tim’s benign view of the labour market?

Tim, I don’t see much sign of you responding to possible game-theoretic reasons why “sum of all voluntary [non-cooperative] interactions” can still lead us to an inferior outcome. But on second thoughts, I’m not sure how relevant they are; what would a holiday bargaining game look like? Still, I think you ought to be more cautious about presenting market outcomes – the sum of voluntary interactions – as the best we can do. For a start, as you will know, Pareto optimality still leaves room for legislation “imposed upon the populace” to make us better off.

Here’s a quote from research hereM/a>:

There are good reasons to expect firms to offer fixed hours/wage packages …. that involve steep tradeoffs and to limit variation in … days off. There is abundant evidence that they do so…. Whether minimum vacation laws needlessly restrict choice or solve a failure of the market to provide an efficient level of vacation is an open question.

The argument “but people want longer holidays” doesn’t quite cut it: for we’ve no evidence that people change their behaviour in that manner, to desire greater statutory leisure in return for lower cash incomes.

We do indeed find that people do trade higher incomes for more leisure: leisure time has been increasing for a couple of centuries now. But that isn’t an argument in favour of more statutory holiday. In fact, the American v. European (in so far as there actually is a “Europe” experience) numbers seem to stack up in that Americans take less such “vacation time” but use their higher incomes to buy in more of what in Europe would be home production.

And when you do look at leisure time (rather than “vacation” time) you find that total leisure time in the two places are not really all that different. Indeed, for certain groups, (American women as against German for example) US leisure time is higher. But it is the US which has gone the market route to find out what the people want and Europe the statutory route. Giveng us different methods of reaching the same thing, the trade off between leisure and work.

Now, having added all those caveats, do I think that the American, market, solution is the better one? Yes, for it’s the one that has not been imposed upon the populace, it’s the one that people have themselves reached: expressing their desires by their actions.

Luis: How do you know it’s best?

Time: Because that’s what the market delivers.

Fair summary?

what sort of utility function would generate that – the income effect (getting richer – allowing you to “purchase” more leisure) is exactly offset by the substitution effect (leisure becoming more expensive as opportunity cost – forgone income). I suppose that might be a reasonable approximation to reality.

on the other hand, there could be reasons why social norms are more important when it comes to holiday allowances than wages. Why are firms more willing to adjust pay than hours? I think Chris Dillow would say it’s to do with the nature of the production technology – somebody working 20% fewer hours than co-workers is more than 20% less productive, and the output is maximized by synchronizing working hours. Still, I don’t buy that story for many industries.

what about the demand side – perhaps despite many people saying they’d accept less pay for fewer hours, the reality is that job applications look at pay first and hours a distant second?

For most jobs, it’s pretty much impossible to negotiate extra holiday when joining/wage-bargaining, whereas negotiating extra pay (which is *the same bloody thing*) is easy and indeed encouraged. I’d happily take a 10% pay-cut for 10% fewer work-days, but there are very few places where this is viewed as a serious option.

Hence, in countries where people can vote for politicians who’ll arrange extra holidays, they get them; in countries where people are left to negotiate themselves, they don’t.

Imagine yourself, for a moment, as omniscient social planner. You know everybody’s utility functions, you know the general equilibrium consequences of legislating extra days paid leave. There is an optimal here, trading off lost income against extra leisure.

What makes you think 10 days is close (enough) to that optimal? Because that’s the outcome that that market has produced. But how do you know that the optimal isn’t a payoff in a game that cannot be reached by rational players, in the absence of some commitment technology like legislation? There are co-ordination problems here, right? If every firm offered 20 days, no firm would be at a competitive disadvantage. But if firms can deviate, and cut costs by cutting holidays, it will put others out of business, and will do so. So how come firms can still recruit, if Americans would really prefer more holiday? I have to admit, I don’t know why, in sectors where firms find it hard to recruit, firms don’t offer more paid holiday alongside higher wages*. Perhaps this does mean Americans do prefer more money to more leisure. At the same time, in the presence unemployment, or say, in banking, many more applicants than vacancies, workers cannot hold out for more holiday because somebody else will take the job. So how do you know the market is able to deliver the point on the trade-off between income and leisure that Americans would choose, if they didn’t have to compete in a real world imperfect job market?

I cannot say either way – I find it hard to believe Americans wouldn’t be happier with more holiday, but perhaps that just betrays my prejudices. I don’t know what the “right model” for explaining the equilibrium number of days holiday in the real world US labour market, is. But I do think that you saying that “of course” 10 days is the right answer, and I also think confusing the competitive equilibrium we observe, with something “everyone seems happy with” and hence the right answer**, betrays your prejudices.

* I presume most jobs don’t like workers taking unpaid leave, so you can’t in effect buy paid leave by taking a higher salary and then unpaid leave

** recall, a Nash equilibrium is a strategy set where everybody is “happy” with their decision, given what everybody else is doing. It does not mean everybody couldn’t be made a whole lot better off, if, say, legislation was possible***.

*** legislation is of course possible; I don’t know why Americans choose not to use it.

yes, 10 days! Do you think that is the market delivering the “right” answer, or of a market failure?

10 days on average.

The best Parkinson is “Parkinson’s Law”.

sorry, yes I appreciate that it’s not a matter of “intervention; good or bad” and I know you favour specific interventions … nonetheless, unless your written output is a misleading guide to your true opinions (which is possible) I don’t think I am imagining a generalized hostility to bureaucrats on your part, and to government agencies legislating on matters that could be left to markets. This is, as you say, a matter of degree, so you may still be wrong in arguing “for intervention a great deal less often”.

I know it cuts both ways, by the way; this is an empirical question about which I might be wrong too.

yes but how much paid holiday do Americans get, thanks to the market?

I haven’t read C. Northcote Parkinson – he’s now on my list.

Whoa, whoa!

Hold your horses there. As I’ve had to explain again and again I’m all in favour of government intervention in the economy, indeed in the wider society. My contentions are always about “this” or “that” intervention, not the idea of intervention itself.

For example, I support carbon taxes as an intervention to deal with the externality of CO2 emissions. I support copyright and patents as an intervention to deal with the thorny issue of the public goods nature of much innovation.

I wholly and fully agree that sometimes markets fail. That sometimes markets are absent and need to be created.

So there is no philosophical argument here about “intervention bad” or good.

There is simply a series of purely empirical observations about whether this specific intervention is good or bad, whether the problem justifies intervention, whether the intervention would solve the problem or even be counter-productive.

I might even argue for intervention a great deal less often than others: but I never argue for no intervention.

“I think things like maternity leave , minimum holidays, working hours, tea breaks, unfair dismissal, pensions etc. are all things where on net we benefit from non-market legislation.”

An empirical answer to that question. The US has no statutory right to paid holiday. Almost all Americans working full time do get paid holiday though.

“Nonetheless you display a pathological hostility to bureaucrats,”

Indeed, for I have read C. Northcote Parkinson. More people should do so.