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The commercial seems like a parody, but that sure looks like Lawrence O’Donnell of MSNBC’s “Last Word.” In the spot O’Donnell mocks politicians who say that “government can’t create jobs.”

“The government created your job!” O’Donnell fires back, smiling triumphantly.

Imagine: In a battle of wits with a phantom politician, O’Donnell lost. Of course he doesn’t know it.

On the off-chance this is not a “Saturday Night Live” bit, let’s take a closer look.

First—I don’t even know where to start—it’s so ridiculous. How about this? The claim that government can’t create real jobs is not refuted by the existence of politicians. Must that really be explained?

Perhaps O’Donnell would applaud a proposal to make every adult American a member of Congress, paid a salary drawn on the Federal Reserve. Unemployment would vanish overnight.

But maybe that wouldn’t satisfy him. He might want at least some people working to make useful things. What do politicians make? Besides messes, that is.

But what things? Here’s where it gets tricky. Alas we live in a world of scarcity. People making widgets can’t also be making wudgets (a similar but not identical product). Should the government create widget-making jobs or wudget-making jobs? Neither? Some of each? How many? And how would the program administrators even go about making the decision?

In a freed market a process exists for answering those questions. Prices generated by free consumer purchases and producer competition for inputs guide decisions about what to make, how to make it, and in what quantities. In contrast, government “job creation” is like flying in a heavy fog without instruments: Prices—what Ludwig von Mises called the tools of economic calculation—are absent.

It has to be said yet again: In economic terms a “job” is not mere physical or mental exertion for which one gets paid. As someone once put it, “A thing cannot have value, if it is not a useful article. If it is not useful, then the labor it contains is also useless, does not count as labor, and hence does not create value” (emphasis added).

Karl Marx said that. Yes, Mr. O’Donnell, Karl Marx understood that exertion aimed at making things no one wants is not real labor. When I say “things no one wants,” I don’t mean intrinsically useless things. In a world of scarcity, if we consumers believe we have enough widgets but not enough wudgets, then efforts to produce more widgets at the cost of wudgets are counterproductive. Inputs are transformed into things we want less badly (if at all) than other things those inputs could have been transformed into. Value is destroyed when it could have been created.

Admittedly it is technically wrong to say, “Government cannot create jobs.” We must concede there is some slim chance that a government program could finance a project that would have been undertaken in the freed market. But it would be pure luck, and we couldn’t know for sure it had happened even after the fact because government, which procures its resources at the point of a gun and doesn’t have to offer its “services” to consumers free to say no, faces no market test.

Persistent high unemployment does not demonstrate a need for government to create jobs. On the contrary, it demonstrates a need for government to get out of the way so the market process can undergo the correction called for by the earlier government-induced boom, which itself was an unsustainable jobs-creation program. Politicians aggravate an already bad situation when they generate a tax and regulatory environment in which anything can happen.

* * *

The Austrian theory of the business cycle famously blames the inflationary boom for causing malinvestment in the capital structure. What’s less often noticed is that the boom also creates a mismatch between the type of labor supplied and the type demanded. Robert Murphy explores this aspect of the business cycle.

Unless the Supreme Court invalidates Obamacare, the multifaceted law will soon be kicking in. Medical rationing, Chidem Kurdas says, is in our future.

With government spending out of control, the search for ways to rein it in goes on. James Payne has a suggestion to at least get people thinking about what underlies all government spending.

One thing on the minds of Occupy Wall Street protesters is the income gap between the superrich and the rest of us. Is this something advocates of freedom need to be concerned about? Max Borders takes a close look.

James Madison’s warning about contentious factions is often invoked. But despite his prediction a large-scale republic did not prevent special interests from using the levers of power to obtain privileges at the expense of the people. Richard Fulmer ruminates on corruption in America.

More than 80 years later a debate still rages over the infamous Smoot-Hawley Tariff’s role in the Great Depression. Was it a major or minor factor? Or none at all? Thomas Rustici, Theodore Phalan, and Deema Yazigi make their own assessment.

Politics and Las Vegas casinos are filled with zero-sum games. Losers provide the winners with their rewards. Not so in the free market, says Jason Riddle.

The new Dodd-Frank financial regulations feature the Volcker Rule, proposed by a former Federal Reserve chairman. What’s the rule about, and is it a good idea? Warren Gibson takes us through the maze.

Our columnists are on point as usual. Stephen Davies thinks people compare the current economic quagmire to the wrong past depression. Thomas Szasz explores self-responsibility and the law in celebrity drug deaths. John Stossel asks businesspeople about the costs of Obamacare. David Henderson wonders about the wisdom of economic sanctions against Iran. And Roy Cordato, encountering the claim that the Buffett Rule for taxing the rich will create jobs, responds, “It Just Ain’t So!”

Book reviews this issue cover Adam Smith, homeschooling, post-disaster recovery, and Austrian economics.

—Sheldon Richman

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Sheldon Richman
Sheldon Richman

Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.