Free Markets, Free People

What part of “production” don’t these people get?

In today’s NY Times, Robert Schiller laments the lack of jobs brought by the “stimulus”.  Essentially, he posits, government focus is on the wrong thing.  Instead of boosting the GDP, the “stimulus” should be focused on creating jobs.  And where should government be focusing that effort?

Why not use government policy to directly create jobs — labor-intensive service jobs in fields like education, public health and safety, urban infrastructure maintenance, youth programs, elder care, conservation, arts and letters, and scientific research?

Would this be an effective use of resources? From the standpoint of economic theory, government expenditures in such areas often provide benefits that are not being produced by the market economy. Take New York subway stations, for example. Cleaning and painting them in a period of severe austerity can easily be neglected. Yet the long-term benefit to businesses from an appealing mass transit system is enormous. (This is an example of an “externality,” which the market economy, left to its own devices, will neglect.)

The problem with this idea, of course, is nothing is really produced.  In fact, the focus on kicking up the GDP isn’t the wrong focus.  And trying to produce make-work jobs or “service” jobs don’t help with that.  They certainly would keep those who got the jobs busy, but a clean subway will not lead to more jobs elsewhere.

The tendency to think like this is apparent among a certain set who believe that spending money on jobs, whatever the sector and whatever the labor, make a difference.   A job is a job is a job.

But it isn’t.  Government jobs are not jobs that “produce wealth”.  They consume wealth.  And they don’t certainly don’t produce jobs that do produce wealth.

That comes in the private sector where people produce things – to include services – that other people want and that old “voluntary exchange of value between two people” takes place and produces wealth, which in turn kicks up the GDP.

It is wrong-headed to think the government can “stimulate” employment by employing people in non-productive, busy work jobs.

If government has a role in a recession or depression it should be to clear the way with less regulation and provide the incentives through tax breaks for businesses to hire and expand. 

What is hold all of this up at the moment is the unsettled tax picture and regulation regime as well as new legislation the business world is still trying to digest and pending legislation which would further complicate recovery.  It isn’t rocket science.  Until the marketplace is much more settled than it is now, no jobs are going to be created and now businesses are going to expand.

You can paint and clean all the subway systems in the US and it won’t make any difference.  The mid-term elections, however, may.  If the GOP takes the House and closes the gap in the Senate, you may start to see some hiring and some expansion, based on the belief that the worst is over  – governmentally that is – and perhaps it is now safe to begin the long, slow process of recovery.

~McQ

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10 Responses to What part of “production” don’t these people get?

  • Cleaning and painting them in a period of severe austerity can easily be neglected. Yet the long-term benefit to businesses from an appealing mass transit system is enormous.

    There is a statement worthy of Erp.  So terribly wrong…and on so many levels…it is hard to fully unpack its stupidity.
    And, like Erp, the author did at least use a economic-ish buzz-word of the Collective to at least suggest he knows some damn thing; “externality”.  But his use in the same paragraph where he argues for sub-way scrubbing stimulus makes it clear he doesn’t even know what he’s arguing.

  • More govt workers = more people in govt worker unions =  More people dependent on bigger govt = more democratic voters.

  • The real problem is that during a “recession” businesses retract or recede due to overextension , but government seems to think that they are immune to overextension and therefore they see no need to retract or recede.
    When historical taxation levels are 18% to 20% of GDP, spending of 25% of GDP is an overextension.

  • You can paint and clean all the subway systems in the US and it won’t make any difference.

    Right sort of target but a less than satisfactory explanation. Businesses do painting and cleaning of their operations too. The difference is that this is easily seen as not their product. It is a “operations cost” equivalent to using electricity or supplying parking for their employees. It by no means is a product (unless you happen to be the painter or cleaner).

  • Hey, give the guy credit for at least suggesting that people do more to work for their check from Uncle Sugar than just walk to the mailbox!

    Why not use government policy to directly create jobs — labor-intensive service jobs in fields like education, public health and safety, urban infrastructure maintenance, youth programs, elder care, conservation, arts and letters, and scientific research?

    First of all, this is evidence that at least some libs are starting to realize and admit in a roundabout fashion that Porkulus didn’t work: for all the hype about “jobs created and saved” and “shovel-ready projects”, Porkulus bombed.  Schiller seems to grasp the fundamental facts that too many people are out of work for too long, and that just handing out checks does nothing to really stimulate the economy and provide long-term employment that people really need.  My guess is that he’s come to this epiphany out of political calculation: the dems are getting killed in large part because people are hurting economically.

    Secondly, he’s proposing to put people to work either to fill positions that already exist or else that government has no business filling in the first place because it has no way to know where these people are needed.  In many cases, the positions require some combination of education and character that many people simply don’t have.  Do we really want, for instance, to put the wrong people into uniform as police officers?  Do we really want to put just anybody in front of a classroom in the name of providing jobs?

    Bah.

    What Schiller doesn’t get is that government has no magic wand to create jobs.  The best it can do is to create a legal framework (public safety, contract enforcement) that allow businesses to operate in peace and otherwise get the hell out of the way.

    • “Hey, give the guy credit for at least suggesting that people do more to work for their check from Uncle Sugar than just walk to the mailbox!”

      As usual, you dense righties are completely out of touch with the modern welfare state. Most of them have direct deposit.

  • The government providing direct jobs would actually hurt long turn recovery. For every job that a  government worker does that is one less position that the private sector can take. If the government puts people to work painting then the private sector painting companies will have less work to get and put a greater strain on them to keep their current employees busy.

  • What Schiller doesn’t get is that government has no magic wand to create jobs.  The best it can do is to create a legal framework (public safety, contract enforcement) that allow businesses to operate in peace and otherwise get the hell out of the way.

    But that doesn’t provide for union and government types to get their grubby mitts on everything. That being the be-all and end-all.

  • I believe it  was Hayek tha t said “There is no formula by which government can centrally plan wealth creation”.