Jobs Created/Saved
All too often now, we await breathlessly the next month’s job creation/job loss number on the new or in the paper. Heck, our President claims to save or create jobs (with our tax dollars mind you) but, when it comes down to those numbers are meaningless. They used to mean something, when the government wasn’t such a trillion-dollar player in the economy thanks to the Democrat’s stimulus bill but, now jobs are created by the government at the cost of $134k a pop for “green energy” jobs or even more for some of the new Healthcare bureaucracies!
When the government creates jobs, most of them don’t add value, they manage paper, decide how to spend money, service taxpayers and generally are administrative dead weight that would be unnecessary if our government was much smaller and limited in the way our founding fathers meant it to be.
So here is what I would like to see from the Department of Labor:
Public Jobs Created/Lost - The number of jobs lost, created or saved in the government or with taxpayer funds
Private Jobs Created/Lost – The number of jobs lost, created or saved in the private sector as a result of better business, more innovative products and American ingenuity.
GDP
I am going to hand this first part of this assessment off to the economist Capitian Capitalism:
“Understand the goal of economics is NOT to increase GDP, but rather to increase standards of living. We simply USE GDP as a measure of all the goods and services produced within an economy, ASSUMING those goods and services when consumed help increase our standard of living. That by eating the grapes we produce and watching the movies we produce, we get utility from that, enjoyment from it, and therefore we enjoy our lives more, thus increased standards of living.
This is a logical assumption in that typically, TYPICALLY, we produce what we want to consume. We produce things that are only going to benefit us. Nobody produces ebola for consumption on account that why would we? Nobody produces styrafoam dogs. Nor do we make our roads out of cake. It not only would not benefit us, it just plain doesn’t make sense.
However, this assumes an INCREDIBLY important assumption about how we go and produce things. We ASSUME that the free market is going to be in charge of what is produced. We assume that a free people, in control of their own money, is going to decide how many Big Macs we should make, how many I-Pods we should produce and how much sushi we should make. But what if this assumption is faulty?
The reason why it is faulty is the progressively less and less money is being spent by the people. A higher and higher percentage of our economy is being spent by the government. Going from essentially 3% of GDP in 1900 to 46% today.
…
GDP = Private Consumption + Government SPending + Investment +/-Trade Balance
it is a mathematical fact that these government spending plans will increase GDP, however they won’t increase standards of living simply because NO UTILITY IS BEING DERIVED FROM IT.”
So again, I would like to see a real metric with Government Spending removed from the equation above to truly understand our economic trend.
I doubt I will see these distinctions drawn on the nightly news anytime soon however.
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In general an excellent article that explains increased happiness from an economist’s perspective. I would note that people are better off today then they were in 1900, partly because of increased government involvement in the regulation of business (along with advances in medicine, education, and technology). Most of the regulations between 1850 and 1950 we consider standard practice and good for the economy (think, child labor, more fair wages, standard work week, better environments,…etc) . In fact, many economist would argue that due to increased regulation on market power, tax loop holes, and negative externalities GDP increased by more than it would have. That does not necessarily mean that more regulation will increase utility more. I say that more accurate language and specifics on what part of government you want removed would be more enlightening. Just as much as those that support increased government involvement, should explain where, why, and how they will pay for it. I support increasing government funding for education for anyone that wants to go. Why? Because only fools think our future rests anywhere but in higher education. We will not cure diseases, explore space, or achieve world peace through fear mongering and war. How do I propose to pay for it? How about we stop subsidizing agro business, and large banks and distribute those funds to prospective students. How about we actually make corporations pay taxes on all their assets, instead of allowing them to hoard money in off shore bank accounts.
So I ask you, what in particular do you want to see cut in government? And bare n mind any negative externalities that may arise due to such cuts.
This post is absurd. You’re basically attacking an ‘other things equal’ assertion, which is what jobs saved is all about.
Here is Milton Friedman, by way of Brad DeLong, in “The Great Contraction,” arguing that supporting the banking system with extra open-market operations in 1931 after the shock of the British abandoning the gold standard would have saved a lot of jobs:
Suppose the [Federal Reserve] System… had accompanied the measure by purchase of government securities [for cash]… as called for by the “classic” remedy for an internal drain…. [L]et $1 billion be the amount…. What would have been the consequence?… Reserve purchases of $1 billion… would have meant an increase of $1,330 million in high-powered money… would have permitted a multiple expansion of deposits…. Even if… the deposit ratios would have fallen as much as they did–and for the deposit-currency ratio, the fall in so short a time was the largest on record–the result would have been to cut in half the decline in the stock of money…. Only a moderate improvement in the deposit-currency ratio–a decline from 8.95 to 7.10 instead of 6.47–would… have enabled the stock of money to be stable…
If the concept of jobs saved doesn’t exist or is a stupid metric, why would Milton Friedman have made this argument?
It makes perfect sense to question how many more people are working than would have been the case without a given policy. During and after the 2001 recession, did not the Bush Administration claim that without their tax cuts, the recession would have been much worse? While I don’t think their assertion at the time or even today was or is true, I certainly would not reject an other things equal argument on its face value, as you and other non-sensical ideologues have done of late.
Furthermore, your GDP portion from Captain Capitalist is regurgitated straight from Mankiw’s blog on 22 DEC 09(http://gregmankiw.blogspot.com/2008/12/how-not-to-stimulate-economy.html). Next time, stay in the shallow end of the pool or let Dan Suhr post on something original.
Hello Warrior Economist,
Thank you for your thoughts.
First, I am not arguing against the entire idea of measuring jobs being saved or created, if you had actually read my post I am arguing for splitting the metric into government jobs created and private jobs created. I think the huge number of none value-add bureaucratic jobs the government is creating skews the metric as it currently stands and misleads the public.
Second, I apologize for the broken link on the second section of my post, it did link to captain capitalism’s post on the subject which I did quote in order to lay out the base idea of the argument. Here again, I ask that we separate the metric to accurately communicate with the public.
I appreciate your comments but I hope you will reconsider my post a little more slowly this time, I think we probably agree on most things but, you seemed to have missed some of my message in your haste.
Thank you for your readership,
Brandon