Thursday, September 4, 2008

Was Keynes wrong on leisure and work?

Here is a nice piece from the guardian. Elliott argues that Keynes' prediction that rising income would result in less working hours and more leisure has simply failed because he concentrated his analysis on the lifestyle of the elites, not that of those struggling to eak out a living. Keynes failed to take account of distribution of income.

...Back in 1930, Keynes predicted that the working week would be drastically cut, to perhaps 15 hours a week, with people choosing to have far more leisure as their material needs were satisfied. The world was then gripped by a dreadful slump but in the long run Keynes was sure mankind was solving its economic problems. Within a hundred years, Keynes predicted, living standards in "progressive countries" would be between four and eight times higher and this would leave people far more time to enjoy the good things in life.

...Keynes also got it spectacularly wrong. Rising living standards have not led to people deciding that they can satisfy their material desires through a much truncated working week. The number of hours worked in the United States has remained pretty much steady for decades, and is 30% higher than in Europe. Europeans tend to use up all their holiday entitlement; Americans, even though their vacations are shorter, do not.

...Keynes's big failure was to recognise that distribution matters. The economic problem will not be solved while a quarter of the world lives in abject poverty, nor while a good slice of those living in developed countries are not sharing in economic prosperity or feel they need to spend longer and longer on the treadmill just to make ends meet.