New working paper

Can Active Labor Market Policy Be Counter-Productive?

Excerpt from the introduction:

This paper studies the effect of active labor market policies (ALMP) in a Mortensen-Pissarides style matching model. ALMPs are modelled as a subsidy to job search, and it is assumed that search activity is observed. A key feature of the model is that workers differ in their productivity, and that search takes place along an extensive margin. The model is used to study the effect of ALMP on the equilibrium, on aggregate welfare, and, equally importantly, on the distribution of welfare across worker types (productivity levels) and current labor market status (employed vs. unemployed).
It is shown that in addition to the usual job search externality, there is a “quality” externality. As search is not directed, an additional job seeker affects the average quality of the pool of unemployed, in addition to the job finding rate. As a result, the usual “Hosios” conditions for an efficient outcome — that the bargaining share of workers match their elasticity in the matching function — are no longer valid. For an efficient outcome, the decentralized equilbrium conditions must match the optimal ones for both the job creation margin of firms and the job search decision of workers, and these two conditions cannot be matched with a single instrument. It is shown, paradoxically, that to replicate the optimum one must select a worker share in bargaining which is larger than their elasticity in the matching function, and at the same time one must impose a tax on job search activity.
Clearly, this prediction does not validate the view that ALMPs are a desirable policy tool. The reason is that they raise workers’ outside option in bargaining, thus contributing to wage pressure, while at the same time reducing the average quality of job seekers. The optimal policy outlined above delivers an improved quality of job seeker, due to the search tax, while the bargaining share in excess of the Hosios level compensates for the implied reduction in the workers’ outside option.

Despite their negative effects on aggregate welfare, we can characterize a coalition in favor of ALMPs. These are favored by the least productive job seekers (or “short-term” unemployed”) and the least productive workers. The former gain directly from the subsidy, and the latter gain from an enhanced outside option in bargaining. On the other hand, more productive workers and job seekers lose from it. They are harmed due to the fall in the job finding rate, which reflects in particular the deterioration in average job seeker quality. Finally, the workers who do not search (or “long term unemployed”) only benefit if they are sufficiently close to the extensive margin of searching, that is, sufficiently productive. The least productive long-term unemployed are too far from the extensive margin of job search to benefit from the policy, and suffer from the financial burden of the search subsidy. Consequently, they oppose the policy. Note however that this analysis would be changed if ALMP were explicitly targeted at the least productive unemployed workers. Here, instead, by monitoring job search irrespective of productivity, the policy is implicity targeted at those workers whose productivity level is immediately below the critical search threshold.

Dowload it from here.

Why is state art obscene ?

There has been a little uproar in France about a recent exhibition by contemporary artist Paul McCarthy. In particular, a giant inflatable reproduction of an erotic toy, known as anal plug, was installed on one of the landmarks of Paris’s classical architecture, the Place Vendôme. The artist was physically attacked and the installation subsequently vandalized, i.e. disinflated. Official representatives, such as Mr Hollande, the President, Mr Valls, the Prime Minister, and Ms Pellerin, the Minister of Culture, have reacted with outrage. So has the cultural establishment, which has predictably invoked freedom of speech and the right of the artist to be provocative and to challenge bourgeois social norms.

It should be pointed out that Mr McCarthy cannot conceivably be rebellious, and even less revolutionary. This is State Art. The exhibition is taking place in a public museum and on public places. It is therefore decided by public officials with the agreement of politicians (and funded by the unwilling taxpayer). These public officials have decided to exhibit pornographic objects, among many other possible choices. They are responsible for this choice. The only rebels in this story are those who disinflated the installation.

For centuries, art was about eliciting an esthetic emotion ; it is now defined as an object, or an action, meant to embody a concept. The more « provocative » and « challenging » the concept, the more this is art. According to those standards, obscenity is the apex of art – although, in practice, the entire establishment applauds the obscenity and is outraged when it is being disinflated. So the real artists, by the very official standards, are actually the disinflaters.

Historically, official art always existed ; its purpose, presumably, is to strengthen the power of the elite. This is why official art usually is monumental and loaded with respect. The Arc de Triomphe in Paris is a typical example. It is not particularly beautiful but quite conspicuous and emphatic ; the sculptures are by talented artists whose task was to associate esthetic emotion with patriotic feelings. This is a bit the same technique, if you want, as that of having a woman in swimsuit posing on a car in order to make you purchase this car (although it appeals to higher kind of emotion).

Most of “contemporary art” is similarly oversized, which confirms its official nature. However it does not convey respect and consensus ; instead, it is supposed to be disrespectful and divisive.

The authoritarian regimes of the twentieth century were predictably keen on official art. Like the Arc de Triomphe, their official art was meant to strengthen society by uniting it in a common emotion. The regime hoped to get approval through the admiration for the representation of muscular aryan or proletarian heroes saturated with willpower. Of course, inevitably, commissioned artists are mediocre more often than not, but this is not systematic. The masterpieces of Eisenstein, Prokofiev, and Shostakovich were propaganda pieces. The regime of Louis the XIV repressed many artists by giving monopoly to a clique (for example, Lulli had the monopoly of Opera) ; but the members of the clique were themselves talented. Fascist architecture has been influential and admired in the democratic world.

Most interestingly, the Soviet and Nazi regimes were very keen on eliminating provocation, absurdity, and obscenity from their official art. Dadaism, cubism, surrealism, expressionism were censored and called degenerate by the Nazis and bourgeois and decadent by the Soviets. Presumably, they thought that this kind of art was ultimately harming them, perhaps because it would breed cynicism in the population, and because that cynicism would eventually be turned against the regime.

So we are faced with a paradox : why would a rational, self-interested elite promote obscenity in lieu of art ? How can they possibly benefit from offending many people with their own taxpayer money ?

Private individuals might want to do so, if only to advertise themselves. And actual art can occasionally be obscene, confer Courbet’s Origin of the world or many paintings of old lesbians and prostitutes by Schiele. However, in those examples, obscenity is not the point ; rather, an obscene subject is treated in an artistic way. In contrast, in McCarthy’s work, obscenity is the whole point. It is because they are obscene that these sculptures fit the official definition of art, because obscenity is the concept.

A naive explanation is that obscenity is what the elite actually likes. But it is hard for me to imagine Mr Hollande or Ms Pellerin purchasing a sex toy to ornate their bedroom. They, at least from the outside, look like reasonably banal individuals with a rather conservative and austere lifestyle. If they own dildos it is unlikely to be for artistic reasons and they are unlikely to publicly boast about it (and rightly so). The former minister of culture Jack Lang was one the key promoters of conceptual art and rebellion ; he was in power when French cities were being devastated by graffiti that, in addition to be mass vandalism, all looked the same. He famously approved of those graffiti as a form of art. Vandalism is art when the Party says so. Vandalism is vandalism when it is the Party’s art which is being vandalized. Yet to my great surprise, I came across Mr Lang while visiting one of the most outdated conservative museums in France, namely Pierre Loti’s house in Rochefort. As an official, Mr Lang was inaugurating conceptual gigantism and praising the vandals. As a private person, Mr Lang was indulging in exquisite late nineteenth century eclectism. From this I conclude that current State Art does not match the tastes of the elite any more than socialist realism fitted those of the Soviet apparatchiks.

If we want to understand why official art is obscene, we have to start discussing what it actually does.

If I was exhibiting the kind of object that was installed on Place Vendôme on my desk while talking to students, I would for sure be indicted for sexual harassment. But when public officials do the same to thousands of passers-by, the notion of sexual harassment suddenly disappears. Some people are more equal than others with respect to criteria for misconduct.

Why do modern western societies criminalize sexual harrassment ? They do so, among other things, on the basis of the feelings of the victim. The victim feels violated in her intimacy, uncomfortable, and insecure. In other words the victim feels bad.

So here we have a clue : obscene pictures make people feel bad. This is why many societies repress obscenity, although one should concede that what constitutes obscenity varies considerably across cultures. In many Asian countries a couple cannot kiss in public. Move an Afghan peasant to a European city, and he will think he is in a whorehouse. In any case, even by common western standards, Mr McCarthy’s works are obscene — granted, these standards are quickly vanishing, but this may actually be intended by the likes of McCarthy.

So we have to ask : Why does the elite want the people to feel bad ?

One answer which is partly correct, is that we are faced with the political agenda of cultural Marxism. Cultural Marxism wants to eliminate bourgeois society from the inside by deconstructing its values. If you constantly attack bourgeois values such as the family, the nation, hard work, and so forth, you are making it weaker, and ultimately less likely to resist the establishment of a collectivist society. This rests on the brilliant observation that since collectivism makes people feel miserable, the only way to bring it about is to make them feel even more miserable in bourgeois capitalist society.  It is an uphill fight, but you never know…

So we can speculate that the cultural Marxists, having conquered a number of key positions, in particular since 1968, are using those positions to promote their agenda. This means, in particular, “deconstructing ” common bourgeois aesthetic standards, i.e. exposing people to a hefty dose of compulsory “contemporary art”. The depressed people, then, will have lost any defensive instinct when the revolution comes.

The problem with this argument is that it rests on the assumption that the cultural Marxists are already in power. If this is so, by weakening society they weaken themselves. They may well be wiped out by the revolution. It is not rational for them to depress people ; instead, they should find some self-congratulatory device that makes people feel good. Like the Arc de Triomphe or the muscular optimistic Aryan or Proletarian.

In fact, there are plenty such devices in operation. Take Paris-Plage, for example. Every summer, the Paris municipality dumps sand on the expressway along the Seine and installs palm trees and recreational devices such as volley-ball grounds. As in The Truman show, everybody smiles and is happy. And the happy people reward the Paris mayor by voting for her. By taking you to the beach, the Paris municipality acts like your mother and makes you feel like a happy little kid. In return, you love them just like you love your mother.

So, the elite does not systematically make people feel bad. More accurately, it makes them feel good in some places, and bad in other places. You feel good in Paris-Plage and you feel bad in Place Vendôme. Could it be that contemporary art is deeply intertwinned with geography ?

This leads us to our next question : Where is contemporary art ? Which places are targeted by contemporary art ? What is the characteristic of Place Vendôme which makes it a specific target ?

The Palais Royal courtyard has a permanent installation, called “colonnes de Buren”. It consists of a series of plain black and white truncated columns, with a lighting that makes it look like an airport track at night. It sparked much protest when Mr. Lang imposed it back in the eighties.

The Louvre courtyard has a glass pyramid, so that you can no longer see its façade.

The Versailles castle is regularly blessed with contemporary exhibitions, that make it impossible to enjoy the decoration of the rooms without at the same time enduring oversized provocative  “installations”.

What do the Place Vendôme, the Louvre, the Palais-Royal, and Versailles have in common ?

They all epitomize the official art of the “old regime”, and by old regime I mean not only the brilliant society of the XVIIth and XVIIIth century, but also the republics that followed, and that were keen on endorsing those symbols so as to benefit from the prestige and boost their own legitimacy.

But now we are in a “new regime”, i.e. the post-modernist faction which took over after 1968. While this faction would not go as far as the Taliban with the Bhuddas, they are nevertheless keen on polluting the official art of the preceding regime with their own “provocations”. The message is clear: this official art of the past is no longer official, and you are not supposed to enjoy it.

This leads to our last puzzle: why can’t the new “regime” do the same as the preceding ones and recycle the official art of the past for its own benefit? Answering such a question would be key to our understanding of the interaction between ideology and power.

In the past, the elite derived its power from being able to unite people, often against some external enemy. Now, post-modernist elites derive power from identity politics, i.e. dividing people between competing groups based on race, “gender”, disability, sexual orientation, etc. So it is somewhat important that official art should be divisive;  the goal is to please the grievance groups upon which the power of the new elite rests, while humiliating and harassing the others.

We observe that each grievance group is targeted with a specific form of “art”. For example we have rap music for blacks and various forms of obscene artifacts (such as Mr. McCarthy’s anal plug) for “LGBT” people.  In both cases, the mainstream, or the former mainstream, is meant to be insulted. Do the members of these grievance groups genuinely enjoy their group-specific form of art? What would Louis Armstrong and Oscar Peterson have thought of rap music? What would Oscar Wilde and Marcel Proust have thought of the giant anal plug? Or do they “enjoy” it only because it is an aggression against the mainstream, i.e. because it artificially unites the group against an “external enemy”?

New forms of power produce new forms of propaganda, and propaganda works as beautifully as ever.