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Friday, December 23, 2011

Lawrence O’Donnell and Government Job-Creation

Wrong again, sir.

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. (With the Internet we could all vote on bills from home.)

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.

Widgets or Wudgets?

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? Or neither. If 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: The tools of economic calculation, as Ludwig von Mises called it — that is, prices — are lacking.

It has to be said yet again: In economic terms, a “job” is not mere physical or mental exertion for which one gets a paycheck. Pharaoh’s pyramid builders did not really have jobs in an economic sense. The only consumer being satisfied was the Pharaoh, and he stole his wealth. 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.”

Does not count as labor, Mr. O’Donnell.

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. We live 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.

A Matter of Luck

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. We wouldn’t know what more-preferred products were forgone due to government preemption.

Since whatever resources government consumes in its quixotic job-creation exploits must first be taken from others, even if the government were to get lucky and create a few jobs, it would still come at the expense of others. Scarcity strikes again. It doesn’t matter if the government taxes, borrows, or prints the money. In each case real resources are transferred from the private economy to politicians who have no way of intentionally doing anything economically useful with them. (Doing politically useful things is another matter entirely.)

Persistent 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. The politicians aggravate an already bad situation when they generate a tax and regulatory environment in which anything can happen.

Living in an echo chamber as television pundits do, it’s unlikely this message will penetrate to O’Donnell. But just in case:

Lawrence, you’re a smart fellow. Don’t settle for cheap debating points. Push yourself a little.

  • 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.