Even Nobel laureates forget their economic fundamentals sometimes. Paul Krugman, who knows better, recently fell for the broken window fallacy in a post at his New York Times blog. He argues that the tsunami that hit Japan last year has boosted the economy. An error that basic demands correction; my attempt ran today in The American Spectator:
Imagine for a minute that the tsunami never happened. Japan’s GDP growth would probably be slower; Krugman is almost certainly correct on that. And yet, a tsunami-less Japan would be better off. For one, the survivors wouldn’t have 15,000 holes in their hearts where their families, friends, and neighbors used to be.
As far as the economy goes, all that reconstruction spending would instead go to creating brand new wealth, as opposed to merely replacing what people already had to begin with. It is better to build than to rebuild.
Read the whole thing here.
Have a listen here.
In a recent NBC interview, President Obama blamed ATMs for taking away bank tellers’ jobs, and computerized airline check-in kiosks for eliminating aviation jobs. Communications Coordinator Lee Doren points out that innovation doesn’t affect the number of jobs so much as the types of jobs. Accomplishing more while using less labor is actually the key to prosperity. People looking for an explanation for today’s high unemployment need to look elsewhere.
Posted in CEI Podcast, Economics
Tagged atms, basic economics, cafe hayek, causes of unemployment, Don Boudreaux, econ 101, economic fallacies, Economics, jobs, jonah goldberg, lee doren, luddites, obama, obama atm, president obama, unemployment
My colleague Ryan Radia and I recently sent this letter to The New York Times:
Editor, New York Times:
Catherine Rampell’s September 7 article, “Once a Dynamo, the Tech Sector Is Slow to Hire,” mourns the recent decline in U.S. data processing jobs. She blames much of the decline on the automation of previously tedious tasks.
May we suggest one way to get those jobs back: No more automation. Ban the use of computers for data processing. Imagine how much information flows through today’s global economy in an average day. Computers handle most of the load. That costs millions of jobs.
The effects would reverberate far beyond the tech sector. The paper, pen, and pencil industries would also boom.
Companies are dead-set on doing more with less. True, that creates more jobs in the long run by freeing up resources — and employees — for new ventures. But if only they would consider doing less with more, they could create more data processing jobs.
Ryan Young and Ryan Radia
Competitive Enterprise Institute
Posted in Business Cycles, Economics, The Market Process
Tagged basic economics, catherine rampell, creative destruction, data processing, econ 101, Economics, economics 101, employment, high tech jobs, jobs, new york times, outsourcing, progress
As the House gets ready to pass the health care bill today, I’m reminded of one of the first lessons in economics I ever learned. Milton Friedman put it best:
There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.
The biggest problem with health care today is that patients only pay 12 percent of costs out of pocket. As far as each individual is concerned, it’s basically on sale for 88 percent off! No wonder we spend so much on health care.
Today’s bill consists almost entirely of spending other peoples’ money on other people. If it becomes law, that 12 percent figure will fall even further. This is no way to keep costs under control. However noble Congress’ intentions may be, its bill will not work as advertised. Human nature won’t allow it.
Posted in Economics, Health Care, Spending
Tagged basic economics, econ 101, Economics, economics 101, hcr, Health Care, health care bill, health care reform, milton friedman, obamacare, spending, spending other peoples' money
Here is a letter I sent recently to The New York Times:
February 17, 2010
Editor, The New York Times
620 Eighth Avenue
New York, NY 10018
To the Editor:
Michael Cooper’s article, “Stimulus Jobs on State’s Bill in Mississippi” (February 16, page A1), lists several people who have directly benefited from the stimulus package.
The article names none of the roughly 300 million people directly hurt by that same stimulus package. The money that pays for Roshonda Bolton’s factory job was taken away from other people. They would have spent that money in other job-creating ways.
The stimulus doesn’t actually create jobs. It rearranges them. The best possible result is no net effect. Stories touting jobs saved or created by government are at best incomplete.
Warren T. Brookes Journalism Fellow
Competitive Enterprise Institute
Posted in Correspondence, Economics, Stimulus
Tagged bastiat broken window, bastiat broken window fallacy, broken window, broken window fallacy, creating jobs, econ 101, Economics, economics 101, economy, jobs, mississippi, new york times, roshanda bolton, saving jobs, Stimulus, the new york times, unemployment
Teenage unemployment is 25.5% — an all-time high, and nearly triple the general unemployment rate.
Maybe the fact that the minimum wage has increased three years in a row has something to do with it. Why would an employer hire someone unless they produce at least what they’re paid?
A lot of younger people have little experience and no marketable skills. Such things take time to develop. Until they do, they will remain unattractive hires unless they can be paid what they’re worth. Minimum wage laws, of course, make that illegal in many cases.
Another case of good intentions gone awry.
Posted in Economics, Price and Wage Controls
Tagged econ 101, Economics, economics 101, good intentions, jobs, minimum wage, price controls, regulations, teen unemployment, unemployment, wage controls