Tuesday, January 3, 2012

"fewer jobs are precisely the point"

Read these two posts by Alex Tabarrok; the second in particular. With "jobs" so important in national debate right now, it's important to understand this.

A key aspect of economic development is the destruction of jobs: An economy can't produce more and more value per person if everyone continues to do the same jobs; the potential gains in efficiency are very quickly exhausted. True growth comes from transitioning to entirely new modes of production or entirely new industries. In an extremely poor country such as India, fewer jobs in agriculture and small-scale retail and such things is exactly what you'd want if you want to see them transition into a richer modern society.

I caveat that sentence with "In an extremely poor country..." despite the fact that it's true for any country regardless of wealth. I just also think it's reasonable to transition from prioritizing economic development to prioritizing low-risk subsistence for the greatest fraction of the population, once you've grown "enough", whatever you decide enough is (India clearly has not). Economic development means job destruction, and job destruction means that some people lose out hard for the sake of the greater good when their job is suddenly outsourced or automated, and in a country as wealthy as the United States, I'm perfectly fine with providing a basic safety net for those people.

I'm NOT ok with sacrificing growth and economic dynamism in order to artificially preserve those jobs. Provide basic safety nets, but get rid of subsidies and tariffs and stop bailing out dead businesses just because you can't imagine a world without Detroit. The government can temporarily save jobs but only by preventing the market from creating new and better ones. Ultimately, it's a losing battle that they're making only more painful by pretending that they have the power to stop progress and encouraging everyone whose lives are at stake believe it too.*

*The high rate of unemployment now actually makes me optimistic about the eventual recovery of the American economy. It means that the government failed to halt progress and that reemployment will eventually come from true innovation and progress and reallocating labor resources more efficiently among industries. That's a much more solid foundation for the future economy than, say, a bailed-out Detroit...

1 comment:

John D. said...

get rid of subsidies and tariffs

do you know anything about location theory?

did you ever wonder, what happened to Venice, Florence, Naples, etc.?