Despite the focus on ‘jobism’, jobs are a cost of production and consumption, not a benefit, and should be minimized
AEIdeas
In a 1992 WSJ op-ed (“Help the Economy: Destroy Some Jobs”) featured last August on CD, economist Richard McKenzie criticized the misguided obsession with what he referred to as “jobism” — the modern public-policy philosophy that mistakenly focuses on of the number of jobs as being the “key measure of a country’s economic success or failure.” Here’s a key excerpt of Professor McKenzie’s op-ed:
Job creation (and protection) is a favored goal of our leaders because it appeals to existing political interests and is seductively misleading and counterproductive. It is also one of the easiest goals to achieve. To create or protect jobs, all Congress has to do is to obstruct progress and kill or retard opportunities for competitiveness and entrepreneurial spirit.
For example, if Congress outlawed the tractor and modern farm equipment tomorrow, it would create millions of new farming jobs. If Congress outlawed robotics and other advanced manufacturing processes tomorrow, it would create millions of new factory jobs. If Congress banned all imports tomorrow, it would create millions of US jobs in manufacturing, farming, and transportation industries. If Congress banned power tools and modern equipment for road building and construction, it would create millions of new US jobs.
The fundamental flaw of “jobism” that Professor McKenzie is pointing out that makes “jobism” a misguided public policy goal is that it treats jobs as a benefit, when in fact jobs are a cost or price of production and ultimately of consumption. It also fails to properly recognize that economic competitiveness and progress requires widespread job destruction. Further, job losses should be treated as a measure of great success, not failure, when a US industry like agriculture or manufacturing dramatically improves its productivity and is able to produce greater and greater levels of output over time with fewer and fewer workers.
Although he didn’t use the term “jobism,” here’s how Milton Friedman explained in a 1980 lecture (at about 19:25 in the video) how jobs are a price (not a benefit) and why the appropriate national economic objective is to have the fewest, not the most, jobs:
Public discourse tends to be carried out in terms of jobs, as if a great objective was to create jobs. Now that’s not our objective at all. There’s no problem about creating jobs. We can create any number of jobs in having people dig holes and fill them up again. Do we want jobs like that? No. Jobs are a price and we have to work to live. Whereas if you listen to the terminology you would think that we live to work. Now some of us do. There are workaholics just like there are alcoholics and some of us do live to work. But in the main, what we want is not jobs, but productive jobs. We want jobs that will be able to produce the goods and services that we consume at a minimum expenditure of effort. In a way, the appropriate national objective is to have the fewest possible jobs. That is to say, the least amount of work for the greatest amount of products.
And more recently, here’s Don Boudreaux making a similar point that jobs are a cost not a benefit, and why the economic goal should be to minimize, not maximize, the number of jobs required to produce output in an industry like pharmaceuticals:
The pharmaceutical industry employs high-skilled people and, in doing so, increases their prospects of innovating in ways that improve human well-being. This feature of the pharmaceutical industry is indeed a positive. But what good economists understand and what most non-economists (including the economically ignorant Trump) don’t, is that the pharmaceutical industry would be an even more valuable part of the U.S. economy if it generated its important innovations with fewer high-skilled workers. Indeed, if the industry were such that its current stream of breakthroughs in medications and medical devices could be kept going, but with the employment of only one unskilled worker, that would be close to ideal.
Put differently, while the innovations generated by the pharmaceutical industry are indeed important and unquestionably beneficial to humankind, the fact that many high-skilled people are employed to generate these innovations is a cost, not a benefit. It’s a cost worth incurring. But it’s a cost nevertheless.
If those same innovations could be generated with fewer high-skilled workers, humankind would be even better off. We would have an undiminished flow of innovations from the pharmaceutical industry plus whatever innovations and products would be produced by the workers who would – but for the fact that they now work in the pharmaceutical industry – be working in other industries.
Bottom Line: Because the philosophy of “jobism” is fundamentally flawed, deficient and misguided because it treats jobs as an economic benefit rather than as an economic cost, the public policies based on “jobism” and efforts to create/save US jobs (e.g. tariffs, protectionism, presidential bullying, tax breaks/incentives to save/create US jobs, etc.) are destined to make the US economy worse off (and weak), not better off (and great).
Interestingly the US had a protectionist trade policy for most of its history, at least from 1789 (the first congress) thru at least 1913 and possibly into the 1930s. While you can’t say definitely what would have happened if it had not, yet in terms of what did happen over the long term the wealth of americans drastically improved.
Looking at the history of free trade it work in the UK while the UK was the worlds dominant power (1841 to about 1900)
Look up Joseph Chamberlin and his position on Tariffs when he said in a party that Winston Churchill was at ” “You young gentlemen have entertained me royally, and in return I will give you a priceless secret. Tariffs! They are the politics of the future, and of the near future. Study them closely and make yourself masters of them, and you will not regret your hospitality to me. By 1902 the UK had rivals for the leadership of the world starting with the US and with Germany coming up from behind.
I wonder if the US having passed thru its period of world dominance is now in a similar position where with challengers free trade is no longer in our interest? One should look at the UK history and ask how much that applies to the US now.
lyle-
this argument really holds no water. it’s the equivalent of claiming that because you kept rolling down a hill in your car while pressing the brake that the brakes make you go forward.
there were lots of completely ridiculous and wrongheaded claims made about economics during the mercantile era. they were not true then nor are they true now.
all tariffs, always, at any time and in any place, harm economic growth and the prosperity of citizens. all tariffs create a deadweight loss on the imposing country.
it is a mathematically provable fact.
http://thismatter.com/economics/images/economic-effects-of-tariffs.gif
arguing that this is somehow not so is like arguing against gravity.
the history is clear as is the economics: tariffs hurt the imposing country. to be sure, other things can swamp that harm just as a steep hill can overcome the force of your car’s brakes, but that does not mean they are not slowing you down.
“Job creation (and protection) is a favored goal of our leaders because it appeals to existing political interests and is seductively misleading and counterproductive. ”
This thesis on jobs is very good, but completely useless, and therefore will be ignored, politically.
Yes, the statement above is correct, job creation/protection is favored because it appeals. But the use of “existing political interests” is deceptive. Job creation/protection appeals because it involves the most valuable, and often the only productive, asset of that massive political interest known as voters, individually and collectively.
It is near impossible to sell how wonderful and prosperous it is that production only requires one or a few low skilled jobs when the voters aren’t making any money.
So first you need to sell the wider populace on the idea of the government providing food, shelter, healthcare, etc., in whatever the State decides is the best quality and quantity for most while a few, “owners”, enjoy freedom and liberty by making money to provide for themselves as they see fit.
And the leaders know that those who want and will work are best provided with productive work. If the “hardworkers” are left idle, they will become politically restive and unlike the idle protestors now, they will be productive in making changes. See the Tea Party. Yes, they marched in Washington as so many do. Many tried to claim leadership, as the political class do. But those who were restive went home and got to work, slowly, methodically, but productively.
If you want to educate that jobs are a cost, you will be received better if you don’t ignore that a job is often the only productive asset (incompe producing) a person has and at least salve the immediate concern that rises in a reader.
As for “leaders” just accept that jobs means voters, voters like jobs, more jobs, more voters, more campaign contributors. No politician will spend much time contemplating jobs as a cost when they are such a benefit to themselves and their voters.
I see 6, you see 9. Econ 101 names the factors of production as land, labor and capital. Ideally each should be fully employed. In reality there are trade-offs between labor and capital. Labor occupies a privileged position because human misery is not easily quantified and doesn’t fit into those neat and tidy equations that economists are so fond of.
michael-
you seem to have missed the important part of this argument.
it is PRECISELY the limiting of labor needed to produce things that prevents human misery.
would you rather farm with your bare hands or with a tractor?
if we all farmed bare handed, we’d have MANY more jobs. we’d all be so busy trying to keep fed that we’d have virtually no free time at all.
does that seem like a way to reduce human misery?
there is NOTHING privileged or inherently noble or desirable about labor.
if labor were so efficient that you could work 1 hour a day and have everything you want, that would be amazing. that takes capital.
you’d really rather work 16 and get less? that seems “privileged” to you?
i do not think you understand even the basics of what you are talking about here.
capitalism is the greatest invention in all of human history for eliminating human misery.
nothing else even comes close.
In reality there are trade-offs between labor and capital.
This really isn’t true, however. Capital augments labor but is not a straight substitute for it.
Think of the factors of production as a recipe for making something. You need so much land, so much labor, so much capital. Simply replacing one with equal amounts of the other won’t do you any good.* There are some trade-offs, yes, but it is a gross and very dangerous (and poverty-inducing) mistake to contend labor and capital are direct substitutes.
*This should not be interpreted to say that any of the factors cannot be replaced. Given a high enough relative price, substitutions can always be made.
If it were jobs/labor that made us better off, a nation could become wealthy by having some people dig holes in the ground and other people fill them up. It’s what you produce with your time that creates wealth. Generally, the more capital you add to the mix the more productive your time becomes.
Back to the old conundrum of is the glass half full or half empty thinking. Depends how you want to look at it. Today there are two kinds of capitalism, the social democratic type and the neo liberal financialization type. The wealth rigging wrongly structured globalism has put MSV and monopoly over worker rights and innovation. The concentration of wealth has always produced instability. Also note that all the countries with protectionism have no trade deficit. Is that a coincidence?
The wealth rigging wrongly structured globalism has put MSV and monopoly over worker rights and innovation.
There’s a lot of contradictions in this sentence. “Globalism,” which in this case I can only assume you mean “globalization,” is inherently anti-monopolist and pro-innovation and worker-rights. Protectionism, on the other hand, is staunchly and by definition, defends and promotes monopolies and is anti-innovation and anti-worker rights.
The concentration of wealth has always produced instability.
This doesn;t seem to be the case. rather, it is how the wealth was concentrated that seems to matter more.
Also note that all the countries with protectionism have no trade deficit. Is that a coincidence?
No. That’s how protectionism works. You can make your people worse off by raising prices, reducing the amount of goods coming into the nation (imports) and thus reducing the amount flowing out (exports). This will reduce/eliminate the trade deficit, to the detriment of all.
Does this mean that things will improve indefinitely as more and more people are replaced by machines? How is that going to work?
Does this mean that things will improve indefinitely as more and more people are replaced by machines?
Yes. More work by machines means we all get more stuff for less effort on our part.
“ How is that going to work?”
Eventually, the point will be reached where every possible thing we want is supplied to us by machines, for no effort on our part in return. That means prices will have decreased to zero.