When demand goes up, they act to gut supply. Thus huge amounts of society's resources are wasted & dissipated. From 2008: There has been some interest in this over on twitter and elsewhere. So time to highlight it once more. From 2008. I think it stands up very well:
Harvard has many interests--too many for the Yugoslav model to fit. Brad's essay assumes that Harvard is being run in the interests of its undergrads. I doubt it. As far as I can see, the relevant decisionmakers of Harvard seem to be: 1.) management of the hedge fund that hoovers up the charitable contributions; 2.) the contributors, who seem more interested in the welfare of the football team or their names on fancy buildings; 3.) the administration, exclusive of the hedge fund; and distantly 4.) senior faculty. All but #2 would seem to be interested in unlimited expansion.
Re: "While a competitive market capitalist firm responds to good news about its productivity and value to society by increasing employment."
Is this actually true? For example, steel companies in the US produce as much steel as ever, but have been cutting employment for decades. In fact, this is a lot of the story of the rust belt which, while increasing efficiency in the 1960s and 1970s, laid off thousands of workers and hollowed out much of the mid-west. It's similar for coal mines as they shifted from hard rock mining to surface mining and left much of Appalachia in terrible shape as the need for labor declined.
Think about the accounting. A profit maximizing firm would only add a worker if they had good reason to believe that they could sell the what that worker produced and that adding a worker was a more efficient way to do this than adding a piece of equipment or restructuring some element of productivity. Further, the market must be robust enough so that new worker's increased production will not lower the price of the product more than increased sales can compensate for.
P.S. Besides, Harvard is trying to be the gold medal at the Olympics picking what they consider the best of the best. There were 241 athletes in the first Olympics and 204 nations in the most recent. Should they have increased the number of gold medals in each event?
US steel companies have to compete with both internal and external competitors. Companies like Bethlehem Steel had to compete with the far higher productivity of Nucor. All US steel companies had to compete with foreign steel, first from Japan, then S. Korea, then China. They were literally forced to find ways to reduce costs, and that meant capital deepening and worker redundacies.
The story with the coal industry is similar, and not unique to the US. Britain's coal industry had a lock on production for energy supply. But questions about coasts were raised when in the 1980s is was suggested Australian coal could be cheaper even if every lump was wrapped in gold leaf. Then North Sea oil and gas undercut the cost of coal and conveniently the once-powerful coalminers union. In the US, coal is now uncompetitive against gas and even renewables. As a result, coal plants are not being built and aging plants shut down. market forces undermined Trump's ridiculous desire to "protect" the industry and coal production declined more quickly than under the previous administration. In a sane world, coal mines would be shut down, coal power plants shuttered, renewables subsidized to ensure the most rapid replacement possible.
The big problem is that coal miners have a macho view of their jobs that makes it hard for them to adjust to taking on other jobs that could replace coal mining. It needs a major education/propaganda effort to change attitudes unless we can afford to wait a generation or two.
But to get back to your original point, don't forget that increasing output and bringing on workers requires an "all things being equal" caveat. Competition must stay balanced. Capital cannot rapidly replace people. Technologies must remain fairly mature. Hairdressing meets those criteria and I doubt there has been much change since I was a child. Men's hairstyles are back to where they were in the 1950s, we just don't slick back hair with creams or oils. OTOH, firms no longer have typing pools, and email has replaced interoffice memos obsoleting much of the mail-boy deliveries. Computers continually erode jobs and threaten to remove another major job category - driving. When that happens, taxi services and car-sharing may rapidly increase, personal car ownership decline, and goods deliveries and shipments increase, yet drivers as a category rapidly decline.
But isn't scarcity the summum bonum for Harvard? I would imagine they would be more inclined to go from 1600 undergraduates to 1200, rather than the other direction.
And given that, it's hardly surprising that the quality of undergraduate education may not match that of their peers, let alone other liberal arts colleges. Again: not the point.
I’ve always been willing to say a few good words about HLS in the early ‘80s, but I was a Midwestern small-town state-university product who was perhaps more open to being impressed by the place. Also, in those simpler days, the first time I even saw the place was the day I moved in. I also recall that many of my peers seemed to loathe the whole project. That said, I think exactly one person in my entering class dropped out before graduation.
Harvard has many interests--too many for the Yugoslav model to fit. Brad's essay assumes that Harvard is being run in the interests of its undergrads. I doubt it. As far as I can see, the relevant decisionmakers of Harvard seem to be: 1.) management of the hedge fund that hoovers up the charitable contributions; 2.) the contributors, who seem more interested in the welfare of the football team or their names on fancy buildings; 3.) the administration, exclusive of the hedge fund; and distantly 4.) senior faculty. All but #2 would seem to be interested in unlimited expansion.
No! No! Not its undergrads, its professors and deans—they are the ones who split the surplus!
Re: "While a competitive market capitalist firm responds to good news about its productivity and value to society by increasing employment."
Is this actually true? For example, steel companies in the US produce as much steel as ever, but have been cutting employment for decades. In fact, this is a lot of the story of the rust belt which, while increasing efficiency in the 1960s and 1970s, laid off thousands of workers and hollowed out much of the mid-west. It's similar for coal mines as they shifted from hard rock mining to surface mining and left much of Appalachia in terrible shape as the need for labor declined.
Think about the accounting. A profit maximizing firm would only add a worker if they had good reason to believe that they could sell the what that worker produced and that adding a worker was a more efficient way to do this than adding a piece of equipment or restructuring some element of productivity. Further, the market must be robust enough so that new worker's increased production will not lower the price of the product more than increased sales can compensate for.
P.S. Besides, Harvard is trying to be the gold medal at the Olympics picking what they consider the best of the best. There were 241 athletes in the first Olympics and 204 nations in the most recent. Should they have increased the number of gold medals in each event?
US steel companies have to compete with both internal and external competitors. Companies like Bethlehem Steel had to compete with the far higher productivity of Nucor. All US steel companies had to compete with foreign steel, first from Japan, then S. Korea, then China. They were literally forced to find ways to reduce costs, and that meant capital deepening and worker redundacies.
The story with the coal industry is similar, and not unique to the US. Britain's coal industry had a lock on production for energy supply. But questions about coasts were raised when in the 1980s is was suggested Australian coal could be cheaper even if every lump was wrapped in gold leaf. Then North Sea oil and gas undercut the cost of coal and conveniently the once-powerful coalminers union. In the US, coal is now uncompetitive against gas and even renewables. As a result, coal plants are not being built and aging plants shut down. market forces undermined Trump's ridiculous desire to "protect" the industry and coal production declined more quickly than under the previous administration. In a sane world, coal mines would be shut down, coal power plants shuttered, renewables subsidized to ensure the most rapid replacement possible.
The big problem is that coal miners have a macho view of their jobs that makes it hard for them to adjust to taking on other jobs that could replace coal mining. It needs a major education/propaganda effort to change attitudes unless we can afford to wait a generation or two.
But to get back to your original point, don't forget that increasing output and bringing on workers requires an "all things being equal" caveat. Competition must stay balanced. Capital cannot rapidly replace people. Technologies must remain fairly mature. Hairdressing meets those criteria and I doubt there has been much change since I was a child. Men's hairstyles are back to where they were in the 1950s, we just don't slick back hair with creams or oils. OTOH, firms no longer have typing pools, and email has replaced interoffice memos obsoleting much of the mail-boy deliveries. Computers continually erode jobs and threaten to remove another major job category - driving. When that happens, taxi services and car-sharing may rapidly increase, personal car ownership decline, and goods deliveries and shipments increase, yet drivers as a category rapidly decline.
But isn't scarcity the summum bonum for Harvard? I would imagine they would be more inclined to go from 1600 undergraduates to 1200, rather than the other direction.
And given that, it's hardly surprising that the quality of undergraduate education may not match that of their peers, let alone other liberal arts colleges. Again: not the point.
I’ve always been willing to say a few good words about HLS in the early ‘80s, but I was a Midwestern small-town state-university product who was perhaps more open to being impressed by the place. Also, in those simpler days, the first time I even saw the place was the day I moved in. I also recall that many of my peers seemed to loathe the whole project. That said, I think exactly one person in my entering class dropped out before graduation.