The Economist says, of the state of economics education in France and Germany, "I desperately hope it's not really this bad." Unfortunately, I think it's really that bad. When the 35 hour work week was proposed, I was talking to someone in the French consulate who did economics and trade. "Aren't you worried that this will raise employer's costs and lead to business failures or higher unemployment?" I asked.
"That's just Anglo-saxon economics" was his rather stunning reply. Apparently, in France, demand curves do not slope downwards.
It's amazing, but consistent, that people don't want to learn from the experience (both the successes and the mistakes) of others. I taught finance in Hong Kong, a small open city-state economy, and many of the students didn't want to learn even about other financial markets in Asia, much less the US and Europe. They liked to believe that the experiences of other countries didn't matter to them because of 'cultural differences'.
Economic, political, legal and financial systems should be viewed as technology. People in France (Germany, China, Japan, the US...) don't argue that cell phone technology is different because of their culture, but they're much too quick to believe that basic economic rules are deeply, fundamentally different for them than for anyone else.
When I was in school a kid started a business selling candy out of his locker. He got in trouble because "It's wrong to sell something for more than you bought it for."
I had a friend who had to take a class on how to run a "sustainable, socially conscious, progressive, green" etc. etc. small business. He loved the class because if you just did the opposite of what they taught you, you'd be well on the road to success.
Absolutely. I'm so glad that this fact is finally getting some attention.
If anything, the economics article underestimates the problems in Germany. Economics in high schools is virtually unheared of and the "Keynsian"-Statism of Controlling the Economy that is taught in high schools is presented as state-of-the-art knowledge.
Max Schwing,
Karlsruhe, Germany
Also, the state of metallurgy and astrology education in Germany and France is terrible, too.
Why do we need to concern ourselves with the pursuit of an entire field of theory based on demonstrably false assumptions? So long as France and Germany are quite able to handle the study of statistics, psychology, and business organizations (business in Europe is taught as an academic, not a professional, subject), they will be fine.
"metallurgy and astrology education"
What? Metallurgy is a science. Astrology is a hoax.
I don't know why I would believe metallurgy is particularly bad in Germany anyway. They make some pretty sophisticated knives, for example. The GE engine alliance worked out well, unless jet engines aren't good enough examples of sophisticated metallurgy. Their partner is French.
During a recent trip to Paris, I had a chance encounter with a small business owner and his wife (very nice people, as were all the French I met). He did not stop complaining about the 35 hour work week and the mandatory 7 (or whatever it is) week long holiday. He said that it was nearly impossible for him and other business owners to make any profit under such a system. Needless to say, he had a very high regard for the American work ethic.
I don't necessarily disagree with this, but I'm personally more worried about the state of economic ignorance in this country. Just look at the stupor-inducing astonishingly obvious wrongness of anything those Ron Paul guys say about economics. And how many of those guys there are. And their penchant for mindless propagandizing. And how quickly they were able to popularize such nonsense.
Germany copes with its lack of a regiment of economists by having brigades of fine engineers. France copes, I assume, by book-keeping fraud. But aren't the women chic?
A new world,
Megan has disputed a lot of the Ron Paul economic policy here, but I would hardly label the supporters as a demonstration of economic ignorance in our country. It's nice if you're able to disprove someone's specific beliefs about fiat currency vs a gold standard, but I bet more than 50% of the population doesn't even know what "fiat currency" means.
"in France, demand curves do not slope downwards."
Neat!
Sorry, I meant alchemy, not metallurgy. My apologies for the confusion.
During a recent trip to Paris, I had a chance encounter with a small business owner and his wife (very nice people, as were all the French I met). He did not stop complaining about the 35 hour work week and the mandatory 7 (or whatever it is) week long holiday. He said that it was nearly impossible for him and other business owners to make any profit under such a system. Needless to say, he had a very high regard for the American work ethic.
As a small business owner, undboutedly. But if he were an ag worker living off the teat of farm subsidies, or a corporate work mule or civil service technocrat ignorantly drawing payroll from some mysterious cauldron of money located deep in the back office, he'd have probably been whining about Sarkozy.
Re: When the 35 hour work week was proposed, I was talking to someone in the French consulate who did economics and trade. "Aren't you worried that this will raise employer's costs and lead to business failures or higher unemployment?" I asked.
Why is a 35 hour week a calamity when a 40 hour week is OK? I can testify from most jobs I've done that except at rare crunch times, there's easily more than five hours of down time in the work week right now. And in the years since 40 housr became the standard has productivity not increased enough to allow the work week to downsize?
Just compare the German wikipedia article about "John Maynard Keynes" with the international version. Nuff said...
"Once is happenstance, twice is coincidence," they say. And at least "twice" predisposes me to start thinking about a pattern. So: how come it took so long for someone to write about this?
It's a question that's on my mind because of the Ron Paul revelations. In both this case and that one, the key soundbite punchy part of the reporting is (at least judging by reaction of all blogs I read) the widely distributed published material. In the RP case, the old newsletters are probably very hard to stumble upon directly, but Virginia Postrel's remarks made it sound as though key pointers were in _Texas Monthly_, and that's not hard to find and is probably even online searchable. And in both cases, the key published stuff is likely to anger enough people in the long tail that I'd rather expect reporters to be spontaneously contacted by people grouching about it. Why wasn't such material dug up quickly? In the Paul case, why wasn't it dug up at least as early as, e.g., photos of racist extremists attending Paul events?
Often I find it unsurprising when publishable stories go unpublished for an arbitrarily long time. When the key information is a document that's never been released or an interview or photo that hasn't been taken yet, it makes sense: reporting seems like a very time-consuming and scattershot process. But hasn't library research become awfully efficient?
"And in the years since 40 housr became the standard has productivity not increased enough to allow the work week to downsize?"
Not if people prefer to use that increased productivity to get more stuff. When the 40 hour week became the standard (the 1930's), middle class families struggled to pay for a refrigerator and one car. If they got a bit of money ahead, they might buy a clothes washer, too. Dryers and dishwashers were rare. Very few homes had air-conditioning. TV was experimental, and home video recording or playback simply unimaginable.
And that was the people fortunate enough to have a "good" job, or to keep their small business afloat.
JOnF writes: "Why is a 35 hour week a calamity when a 40 hour week is OK?" I hope against hope that with "35," "calamity," "40," and "OK" you're actually quoting some critic blowing off steam, rather than putting your own straw man formulation into the mouths of critics.
As to why people might react more strongly to 35 than 40, I can think of various reasons; try these two.
1. While many people profess to believe that the demand curve doesn't slope downward as long as the effect is small enough to be hard to measure, most seem to agree that reality does apply for large enough changes. My impression is that for a proposed change as great as a 20 hour per week limit, few either in or out of France would dispute that it would be a disaster. If I'm right that even boosters concede that a value of 20 would be disastrously too far, then when you go 25% of the way toward such a value, you shouldn't be too surprised if skeptics find it alarming.
2. Admittedly economies don't *need* to react smoothly. E.g., tipping points can exist, or maybe some major international secret society considers 35 an especially lucky or unlucky number, so under the new proposal France's economy will boom or tank in ways that it wouldn't at 34 or 36. But ordinarily when we see a messy system we expect it to react continuously (in informal language; in math jargon, "continuous" means something different and the idea I'm referring to is more like "analytic"). And the general tendency when you force a continuous system away from its equilibrium is for the effects to increase as (at least) the square of the displacement. So if one roughly estimates the equilibrium as (at modern GDP per capita) between 40 and 50 hours per week (perhaps from eyeballing the US economy and noting it's uncommon for workers to choose extra jobs to push their workweek above 45 hours per week), one can easily be at least four times as impressed by a 35 hour restriction as by a 40 hour restriction.
For comparison (both on point #1 and on point #2), imagine the reaction to a proposal to reduce a mandatory retirement age from 65 to 60.
While I personally approve of the 35-hour week, because I believe that people work and consume too much, and spend too little time with their families and too much time polluting the planet, it is certainly true that the French law was passed with voodoo economic arguments.
One was: "productivity increases will offset the higher hourly costs for employers". But by that same reasoning, there would have been no job creation (the stated reason for the law), since workers would be producing in 35 hours what they had been producing in 39 (which was previously the workweek in France, and still is in many economic sectors).
Another jewel: "the public sector can't adopt the 35-hour work-week yet for budgetary reasons, but the private sector doesn't have this problem".
It was deplorable and a fine illustration of France's basic economic problem, which is that legislators don't know what they're talking about. All of them are products of the public sector and they haven't even begun to imagine the harm caused to private companies, especially small ones, by over-regulation. One example: when I moved from Holland to France, as a self-employed professional, my bookkeeping expenses increased by a factor of 15 (that's right, fifteen).
I still love France, though.
Yes, “fiat currency” means “the person who used use the phrase ‘fiat currency’ in a conversation with you is someone you should get away from as quickly as possible.”
I thought the main problem with the French 35 hour work week was the draconian limitation on allowing workers to work overtime.
Here's the most succinct run-down I can find:
http://blog.mises.org/archives/003897.asp
The main problem with the "35 heures" is, workers end up with a big number of extra vacation days through a mechanism called RTT ("Récupération du Temps de Travail"). It can make it hard for a business to get enough personnel to work on Fridays for instance, and that's much more disruptive to a business than 7 vs 8 hours of work per day smoothed through the week. Even scheduling meetings is impaired when you have people spreading more than 6 weeks of vacation over the year.
The other issue is that pay already sucked in France and downsizing the work week nailed the coffin on consumer purchasing power. Sarkozy campaigned on that theme to get elected, only to say now that his hands are tied because of lack of funds. This is of course hilarious given he was Finance Minister in the previous (Chirac) administration.
Anyway, you've got to be masochistic to be a consumer and entrepreneur in France, which is precisely why I left the country. Go there on vacation (if you can dodge strikes) and pity the collective delusion on economic matters.
Hans B -
Nice post! Even if someone agrees with a policy, they should still be wary of inappropriate arguments in its favor, as you clearly are.
The phrase 'Anglo-Saxon economics' is as much an offence against reason as the phrase 'Jewish physics'.