The latest Ideas Matter update from Max Borders features his response to the recent video clip from Duke professor Michael Munger on government efforts to create jobs.
Transferring resources and people from the productive sector to the less-or-non-productive sector destroys prosperity. So sayeth Michael Munger. He’s right of course. But what’s so sad about this fact is that political incentives drive politicians into accepting what Munger calls “a politically convenient fiction.”
Consider one of the four major biases Bryan Caplan identifies in his book The Myth of the Rational Voter. The idea is most voters think that governments can “make work.” It’s no wonder, every eighth grader reads such nonsense right there in his or her history book. Remember? FDR created jobs through large public works projects. Oh yeah. So whether we’re taught it in our Deweyite education system or we’re born with make-work thinking, it’s a bias to be overcome. (We also have Keynes to thank, of course.)
Until it is overcome in the popular mind, the unemployment rate will continue to be the metric by which politicians are measured. And politicians know this. Even politicians on the right who support more government austerity realize that jobs can be a lagging indicator of economic performance due to a good policy prescription. That’s why in the U.S. you’ve seen Republicans opting for quick monetary stimulus even as Democrats opt for fiscal stimulus. Who has suggested we do what is right and necessary?
At some level stimulus is stimulus. It’s a steroid that hides the true pathologies of the economy. One kind of stimulus is a transfer of resources from more productive uses to less productive uses in the name of “creating jobs.” The other is a means of hiding the true value of goods and services so that people make decisions en masse that create bubbles. Bubbles get you to the next election cycle. The trouble is neither of these is working even as a palliative anymore. The only option left is for the government to stop spending money.
