Free Jobs for Everyone!

It seems that every new program Obama wants to enact comes with the promise of new jobs.

Health care reform will create new jobs!
Green energy will create new jobs!
The economic stimulus bill will create new jobs!

It doesn't make sense that government programs would be required to create new jobs. If there's untapped demand in the economy, then the private economy is the best way to respond to that demand and create new jobs. Exceptions might include genuine public goods, but none of the things Obama talks about are public goods.

For example, exactly how will green energy initiatives create new jobs? Presumably, taxes will fund such initiatives. Taxes hamper economic growth and leave less money from which to pay employees. Perhaps there will be subsidies for green companies. All this does is divert business from non-green companies to green ones, at best a net push with respect to jobs.

If there was a demand for green energy, there would already be jobs being created in that industry. It may be that though green energy harms the economy, it's necessary and vital for other reasons, but it shouldn't be sold on the idea that it creates jobs.

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I think a reductio ad

I think a reductio ad absurdum is most effective in this case, which is generally the first salvo Bastiat gives. We can create even more jobs by requiring that people working in the green industry use only their left hand. We can also mandate that any petrol exploration be done with a shovel, etc.

Shills

One depressing thing is that you just know that economists are lining up to shill for it.

Exactly- they just

Exactly- they just conveniently leave out the fact that the taxes and regulation that create those jobs, in fact destroy jobs. It is really just the broken window fallacy at its greatest...

No they don't. It's not a

No they don't. It's not a matter of jobs gained or jobs lost. If that were the case, there could be debate as to where the balance is. That's also why I take issue with Johnathan claim that the private sector can best create jobs etc. Jobs are not nice binary unit (job/no job), what matter is wages. The problem is not people not working, it's people not making a living. Once it has been acknowledged that this is the problem, the make work solution shows it's real color. It's about giving tax money to people, that's all. That money will be taken from other people, which will be poorer (but not necessarily jobless).

Thinking of people as producers and consumers in the economy leads to double count. To be rigorous, one needs to only look at the effect of policies based on their effects on consumers.

In fact, when liberals talk about creating jobs, they're not *THAT* stupid. They don't really mean creating jobs and people know that, sort of. What they mean is that artificially increasing the demand for labor will lower the rate of return on capital and increase wages temporarily. It's a wealth transfer from capital owners towards workers.

Rent seeking

It doesn't make sense that government programs would be required to create new jobs. If there's untapped demand in the economy, then the private economy is the best way to respond to that demand and create new jobs. Exceptions might include genuine public goods, but none of the things Obama talks about are public goods.

I'm pretty much in agreement with you here. But I wonder if there isn't a second possible exception. Now don't get me wrong; I agree with whomever it was who observed that health care reform has become the Democrats' version of supply-side economics -- a Magical Fairy Dust Program(TM) that gets you everything you want and even pays for itself.

That said, isn't it possible that there is a fair amount of dead weight in the health care industry (obviously you'd know this better than I)? And isn't there also an argument to be made that at least some of that dead weight is the product of rent-seeking by vested interests (I'm looking at you AMA)? If that really is the case, then at least some reforms in health care really could result in lower costs for the same services.

Yes, I realize that, at the end of the day, this amounts to a transfer of wealth from one sector of the economy to some other sector. But isn't this how capitalism is supposed to work? Innovations make goods/services cheaper in established sectors of the economy, freeing up capital for the creation of entirely new sectors.

One can argue (with some plausibility) that rent-seeking in the health care industry is stifling innovation. Admittedly, the rent-seeking is possible only because we've already allowed too much regulation. But public policy kind of has to take the world as it already is rather than how we'd like it to be. And I feel pretty sure that the AMA will voluntarily disband the day after Obama has GM turning a profit again.

(Note: none of this is to say that I think current plans for health care "reform" are likely to be all that effective. I'm simply arguing that combating rent-seeking seems like a second possible exception to the private economy is always better argument.

It's possible

A bloated inefficient program (the status quo) being replaced by a more streamlined program, I suppose, could result in more jobs. Since we're talking about broken windows, this is akin to my view that yes, sometimes war can create wealth if the regime being overturned is bloated and corrupt.

No. Unless it results in

No. Unless it results in more people it won't result in more jobs. It may result in higher demand for labor though.

I don't follow...

Wouldn't this be true only in a world with full employment?

If I take the money I save from slightly cheaper health care, pool it with money from all my neighbors and use it to fund the factory to produce my newly-invented gotta-have-it widget, then it's not clear to me how this isn't an increase in employment, as opposed to a shifting of it. Unless you want to argue that I put exactly the same number of people out of work that I just employed. That, however, seems like it would be coincidence rather than somehow driven by theory, no?

Squeezing out inefficiencies and then reallocating the funds into private-sector growth seems like what capitalism is supposed to do, right? If rent-seeking is blocking that path, then wouldn't it follow that eliminating rent-seeking would be a good thing? One can obviously do this by eliminating the conditions that made the rent-seeking possible. But where that turns out to be impractical, is there an in-principle reason for thinking that one can't also mitigate it via regulation? It's hardly ideal. But there's that whole saying about the perfect and the good and enmity.

Wouldn't this be true only

Wouldn't this be true only in a world with full employment?

What is the cause of less than full employment ?

If I take the money I save from slightly cheaper health care, pool it with money from all my neighbors and use it to fund the factory to produce my newly-invented gotta-have-it widget, then it's not clear to me how this isn't an increase in employment, as opposed to a shifting of it.

What were those workers doing prior to that? Why were they unemployed?

Employment is not the relevant quantity, it's total wages payed.

If rent-seeking is blocking

If rent-seeking is blocking that path, then wouldn't it follow that eliminating rent-seeking would be a good thing? One can obviously do this by eliminating the conditions that made the rent-seeking possible. But where that turns out to be impractical, is there an in-principle reason for thinking that one can't also mitigate it via regulation?

Is there any reason to think that, in the real world as it is, a call to have the same government responsible for the rent-seeking in the first place create yet more regulations and programs, this time for the announced purpose of reducing rent-seeking, would actually contribute to that goal?

Sure

Regulations frequently do a decent-enough job targeting the rent-seeking that they are aimed at. They also nearly always create entirely new avenues for rent-seeking. But it takes time to figure out what those are going to be and start exploiting them. In the meantime, you're somewhat more efficient.

Again, you'll not get an argument from me that this is a better solution than simply deregulating lots of industries in the first place. But I return to my earlier point: give me some indication that that's likely to happen in health care. Since it's not, some new regulations might be less-bad than the status quo.

Meanwhile

Meanwhile the regulations build up, and it becomes more and more expensive for people to deal with them. The environmental impact statement, for instance, has become notorious for adding cost and deterring development. So has Sarbanes Oxley.

Locally, friends were adding a room to their house, and they went with a certain contractor because of his experience with the local government. Local building regulation has granted him and a handful like him monopoly power by raising a barrier to entry.

Self-contradiction?

Admittedly, the rent-seeking is possible only because we've already allowed too much regulation.

...

I'm simply arguing that combating rent-seeking seems like a second possible exception to the private economy is always better argument.

If it's only because of regulation, then it's not an exception to the private economy is better argument. It's supporting evidence.

Non-ideal theory

Yes, it is.

But, as I'd said, we have to take the world as it is rather than as we'd like it to be. And in the world as it is, I submit that it's vanishingly unlikely that the health care industry will get deregulated in any significant way.

My suggestion was that, given the non-ideal conditions of the world as it exists, regulation/programs that cut against rent-seeking might turn out to increase wealth by freeing up dead weight that can then be put to more productive uses.

Possible

It's possible, and it's also possible that, given that the state dominates primary education, an additional layer of government such as national testing could relieve some of the government-created problems. But given the track record of government actions that looked good on paper, I'm not sure that's any more likely to both happen and work out as intended than politicians catching the deregulation bug once again.