4 ms·

IMHO, the solution is a full employment economy, with government(s) acting as the employer of last resort: http://www.boston.com/bostonglobe/ideas/articles/2009

by lukifer 17y ago

IMHO, the solution is a full employment economy, with government(s) acting as the employer of last resort: http://www.boston.com/bostonglobe/ideas/articles/2009/09/13/why_capitalism_fails/ http://www.boston.com/bostonglobe/ideas/articles/2009/09/13/... While it smacks of communism to some, intuitively it makes more sense to pay the unemployed to do something, particularly if it builds infrastructure or trains workers in new skills.

hga 17y ago
Working against that is the I gather widely held opinion that a lot of people don't get totally serious about getting a job until the unemployment benefits run out. Of course, when you have a secular horrible employment market like today's you've got a different problem. You've got to be careful here, set up the incentives wrong and you get an unsustainable European welfare state (particularly for us, given that we provide so much of the world's security). One other issue WRT a situation like today's: you've got to be careful that governments don't go bankrupt when revenues crater and social payments skyrocket due to a very nasty recession/depression.
- sethg 17y ago
  The last (and, thank God, only) time I was laid off, I was serious about getting a job even before my severance pay ran out. Damn good thing, too, because the search took me ten months.
brc 17y ago
intuitively yes I agree with you, however, the problem is that the building of infrastructure or worker training is done in the abscence of market signals. Hence the likelihood of a bridge to nowhere or an army of trained workers in a useless field is high. Certainly projects like the Hoover dam or interstate system have many positive externalities that last a long time - but it's not always easy to come up with these projects, and the labour involved is only a small percentage. When you divert productive capacity of the economy to unproductive use (such as building an unnecessary bridge) then society as a whole pays because of the diversion of resources (including labour and capital). The problem becomes more acute, because the 'shovel ready' projects are generally uneconomic ones - in many cases, if there was a positive return to be made from undertaking a certain activity, then the private sector will already have undertaken it. I think the best use for the paid-unemployed is in things that are labour intensive and help with society. Helping clean houses for new mothers with small children and old people would be one thing, because these activities are economically unviable and you wouldn't be putting anyone else out of work.
- ewjordan 17y ago
  When you divert productive capacity of the economy to unproductive use (such as building an unnecessary bridge) then society as a whole pays because of the diversion of resources (including labour and capital). Do you really think the average unemployed American is doing something any more productive than building an unnecessary bridge? Also, these projects happen anyways, since in the absence of a US-level program to allocate underutilized human capital our representatives fight like hell to get funding for ridiculous projects in their states, for the sole purpose of providing employment. I'd personally prefer if these projects were devised and approved out in the open by a group responsible for their choices, rather than slipped into important budget bills at the last minute and rammed through Congress because nobody can do anything about it.
  - ericd 17y ago
    Useless bridges are of NEGATIVE value. They use resources (which raises the market price of resources for actual, useful projects), take up funding which comes from tax dollars of firms doing useful work, they need to be maintained, and they eventually need to be decommissioned. So yes, the average unemployed American watching the grass grow is doing something more productive.
    - ajross 17y ago
      No. That's simply not true by any macroeconomic definition of "value". You're making the classic (and wrong) assumption taht there is only a certain amount of "stuff" available, and spending it in one place means that you can't use it elsewhere. That works for checkbooks. It doesn't work for economies.
      - ericd 17y ago
        There is a finite amount of funding in the federal "checkbook"/budget for a given year. Spending that money means that it can't be used on projects that will pay much better dividends in the future, even if it just means paying off a debt, reducing future interest payments. A useless bridge will be a drain on the budget in subsequent years for little economic payoff in terms of improved productivity. It's an extremely inefficient allocation of resources, to the point that it's very likely that it's worse than almost all alternatives that don't involve building something.

by lukifer 17y ago

hga 17y ago

Working against that is the I gather widely held opinion that a lot of people don't get totally serious about getting a job until the unemployment benefits run out. Of course, when you have a secular horrible employment market like today's you've got a different problem. You've got to be careful here, set up the incentives wrong and you get an unsustainable European welfare state (particularly for us, given that we provide so much of the world's security). One other issue WRT a situation like today's: you've got to be careful that governments don't go bankrupt when revenues crater and social payments skyrocket due to a very nasty recession/depression.

sethg 17y ago
The last (and, thank God, only) time I was laid off, I was serious about getting a job even before my severance pay ran out. Damn good thing, too, because the search took me ten months.

brc 17y ago

intuitively yes I agree with you, however, the problem is that the building of infrastructure or worker training is done in the abscence of market signals. Hence the likelihood of a bridge to nowhere or an army of trained workers in a useless field is high. Certainly projects like the Hoover dam or interstate system have many positive externalities that last a long time - but it's not always easy to come up with these projects, and the labour involved is only a small percentage. When you divert productive capacity of the economy to unproductive use (such as building an unnecessary bridge) then society as a whole pays because of the diversion of resources (including labour and capital). The problem becomes more acute, because the 'shovel ready' projects are generally uneconomic ones - in many cases, if there was a positive return to be made from undertaking a certain activity, then the private sector will already have undertaken it. I think the best use for the paid-unemployed is in things that are labour intensive and help with society. Helping clean houses for new mothers with small children and old people would be one thing, because these activities are economically unviable and you wouldn't be putting anyone else out of work.

ewjordan 17y ago
When you divert productive capacity of the economy to unproductive use (such as building an unnecessary bridge) then society as a whole pays because of the diversion of resources (including labour and capital). Do you really think the average unemployed American is doing something any more productive than building an unnecessary bridge? Also, these projects happen anyways, since in the absence of a US-level program to allocate underutilized human capital our representatives fight like hell to get funding for ridiculous projects in their states, for the sole purpose of providing employment. I'd personally prefer if these projects were devised and approved out in the open by a group responsible for their choices, rather than slipped into important budget bills at the last minute and rammed through Congress because nobody can do anything about it.
- ericd 17y ago
  Useless bridges are of NEGATIVE value. They use resources (which raises the market price of resources for actual, useful projects), take up funding which comes from tax dollars of firms doing useful work, they need to be maintained, and they eventually need to be decommissioned. So yes, the average unemployed American watching the grass grow is doing something more productive.
  - ajross 17y ago
    No. That's simply not true by any macroeconomic definition of "value". You're making the classic (and wrong) assumption taht there is only a certain amount of "stuff" available, and spending it in one place means that you can't use it elsewhere. That works for checkbooks. It doesn't work for economies.
    - ericd 17y ago
      There is a finite amount of funding in the federal "checkbook"/budget for a given year. Spending that money means that it can't be used on projects that will pay much better dividends in the future, even if it just means paying off a debt, reducing future interest payments. A useless bridge will be a drain on the budget in subsequent years for little economic payoff in terms of improved productivity. It's an extremely inefficient allocation of resources, to the point that it's very likely that it's worse than almost all alternatives that don't involve building something.