On Expectations and Flexibility

by Don Boudreaux on March 11, 2007

in Complexity & Emergence

As Russ (and some of the commentors on Russ’s post) pointed out, this claim by Harold Meyerson isn’t supported by the facts:

Over the past 35 years, the massive changes in the U.S. economy have largely condemned American workers to lives of economic insecurity. No longer can the worker count on a steady job for a single employer who provides a paycheck and health and retirement benefits, too. Over the past three decades, workers’ individual annual income fluctuations have consistently increased, while their aggregate income has stagnated. In the brave new economy of outsourced jobs and short-term gigs and on-again, off-again health coverage, American workers cannot rationally plan their economic futures.

Robert Samuelson, a couple of days earlier in the same newspaper (Washington Post), addressed the same issue, but with much more wisdom than Meyerson displayed.  Here are the key paragraphs from Samuelson’s column:

For Americans, what’s curious is that people seem to feel more economically insecure even though the economy has become more stable. Since 1982, there have been only two recessions, lasting 16 months. In the past 10 years, unemployment has averaged 4.9 percent; in the 1970s, the average was 6.2 percent. Yet in 2006, only about half of workers were satisfied with their job security, reports a poll from the Conference Board. In 1987, when unemployment was higher, about 60 percent were satisfied.

One explanation of the paradox is that the uncertainties and insecurities that assault workers, investors and firms actually foster overall economic stability. There are constant upsets — business expansions and closures; greater competition from emerging technologies and foreign economies; shifting prices for stocks and bonds. These put people on edge. But many small adjustments may smooth out the business cycle. They may minimize deep recessions, stock crashes and panics [emphasis added].

One lesson here is that, rather paradoxically, allowing some expectations to be upset is a means of ensuring that a greater number of other expectations — and, arguably, expectations over more important matters — are more likely to be regularly fulfilled.

Another, related lesson is that a society that aims to prevent any and all expectations from being upset can, in the end, succeed in this quest only by impoverishing itself — but reducing itself to such a level of simplicity that expectations finally can be nearly universally guaranteed to be fulfilled, but only because that society’s division of labor has been dramatically reduced, and because all entrepreneurial dynamism and consumer sovereignty have been snuffed out.  The risk of “job loss” will replaced by a far greater risk of “life loss.”


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