Politicians, Innovation & The Paradox Of Job Creation
from the disruption-and-broken-windows dept
There's been a ton of talk from politicians lately about the importance of "creating jobs." This comes from both major political parties, of course. We've seen the Democrats jump heavily on the jobs agenda and the Republicans have been hyping up their ability to create jobs as well. A few months ago, This American Life produced a fantastic episode on the hilariousness of politicians claiming that they're going to "create" jobs, with a focus on Wisconsin Governor Scott Walker (one of the few stories about him that has nothing to do with unions).All of this talk about "job creation" from politicians has really been bugging me... with the only really "honest" politician I've seen being the totally ignored Presidential candidate and former New Mexico Governor, Gary Johnson. After the National Review praised him for being "the best job creator of them all," (based on jobs numbers associated with all the GOP Presidential candidates), rather than accepting the cheap political accolade, Johnson responded by rejecting the crown:
"The fact is, I can unequivocally say that I did not create a single job while I was governor."Instead, he noted that it was "entrepreneurs and businesses" that created the jobs, and all he tried to do was keep obstacles out of the way.
Still, it is true that governments can create jobs. It's just that they're almost never the jobs that actually help the economy. The government can hire 20 million people to move piles of dirt around or to just sit around if it wants. That will "create jobs." But it won't be good for the economy, because those people are not productive for the economy. They won't be adding value or producing something of value that expands the economy.
This, of course, was famously explained a century and a half ago by Frederic Bastiat, who explained the fallacy of the broken window as an economic or "jobs" stimulator. And, yet, it's still oh so tempting for politicians to jump on this train. But the problem for those who buy into the "broken windows fallacy," is that they make really bad decisions on "jobs," because they create the easiest jobs to create, which will almost always add the least value to the economy (and most likely take away value from the economy).
It's why you get amazing statements from President Obama (who really must know better) in which he talks about ATMs meaning fewer jobs for tellers and auto check-in kiosks at airports that mean fewer jobs for airline employees. But this turns out to be wrong in oh-so-many ways. First, it's just wrong on the facts:
At the dawn of the self-service banking age in 1985, for example, the United States had 60,000 automated teller machines and 485,000 bank tellers. In 2002, the United States had 352,000 ATMs--and 527,000 bank tellers. ATMs notwithstanding, banks do a lot more than they used to and have a lot more branches than they used to.It's "easy" to claim that technology "destroys" jobs, but it's never the case in practice. It may change jobs, but increased efficiency creates jobs through economic growth. There are all sorts of complex economic proofs of this in action, but the simplest way to understand it (and there's lots of both empirical and formulaic proof to back this up) is that when you increase efficiency, you can produce more for less, and thus, by the very definition, you have increased the size of the overall pie. Now plenty of people can (and do!) quibble about how that pie is divided and allocated, but arguing that jobs are destroyed by technology is a red herring.
It's for that reason that I'm a bit surprised to see Jeff Jarvis more or less jumping on this bandwagon by claiming that "we're going to have a jobless future":
Our new economy is shrinking because technology leads to efficiency over growth. That is the notion I want to explore now.While I agree with Jarvis on many, many things, he's missing half of the equation here, and doing a sort of reverse "broken window fallacy." He's looking at jobs that are changing, but not looking at the massive new opportunities it creates. Eric Reasons points me to my own post which touches on this.
Pick an industry: newspapers, say. Untold thousands of jobs have been destroyed and they will not come back. Yes, new jobs will be created by entrepreneurs -- that is precisely why I teach entrepreneurial journalism. But in the net, the news industry -- make that the news ecosystem -- will employ fewer people in companies. There will still be news but it will be far more efficient, thanks to the internet.
Take retail. Borders. Circuit City. Sharper Image. KB Toys. CompUSA. Dead. Every main street and every mall has empty stores that are not going to be filled. Buying things locally for immediate gratification will be a premium service because it is far more efficient -- in terms of inventory cost, real estate, staffing -- to consolidate and fulfill merchandise at a distance. Wal-Mart isn't killing retailing. Amazon is. Transparent pricing online will reduce prices and profitability yet more. Retail will be more efficient.
It's easy to look at how jobs appear to "disappear" in a dynamic market. Whether it's the tellers President Obama is talking about, or the "journalists" that Jarvis talks about. But that ignores all of the new jobs created around the new efficiencies. Take, for example, the fears that a telephone switching network would wreak havoc on our economy, decades ago. After all, telephone companies employed thousands of operators whose job it was to "connect calls." Automate that, and all of those women (and they were predominantly women) were "out of work." Devastating, right? Well, no, actually. Not at all.
A switched telephone network not only made the phone system more valuable and useful (increasing its usage), but opened up all sorts of new opportunities for businesses and jobs. At a basic level, you could just note that call centers were suddenly possible, as was the ability to do customer service (and, annoyingly, telemarketing) on a large scale. But, it also did much more. A switched telephone network also paved the way to an eventual internet system, which has led to a huge revolution, millions upon millions of jobs, and the fact that you are reading this today.
The idea that technology leads to efficiency over growth is preposterous. Efficiency is growth. But it's not always obvious how or where that growth occurs.
And that's why I think there's something of a paradox of job creation. The job creation we really want for the economy is the job creation that initially looks bad. It's the job creation that worries Obama and Jarvis, in that they believe it's somehow "taking away jobs." And yet, it's not. It's actively creating more jobs -- it's just not as obvious how or where, but they are being created, without question. Instead, the focus is put on the exact wrong kinds of jobs. You hear things about stimulus projects that grant money or protectionism to certain industries. On the face, that appears to create jobs, because those companies that are recipients of that support "hire" more people. But it's at the expense of productive and economic growth that would create real long term jobs and real long term opportunity.
So the best way to create jobs is the politically impossible plan of increasing efficiency, which may appear to replace jobs, even as it's creating many more. It means allowing real competition to take place, rather than propping up a few big legacy players. It means supporting true innovation, through encouraging startups and entrepreneurship, rather than rewarding the legacy players who seek to hold back the innovators. Job creation is a paradox. Anything politicians do to try to force it almost always does the opposite.
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Filed Under: broken windows, economics, efficiency, job creation, jobs, politicians, politics, productivity
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Infrastructure spending
I'm not talking about boondoggles and "bridges to nowhere" (those are broken window fallacies). I'm referring to real infrastructure spending that encourage efficiencies. In some cases it could be mass transit (subways, light rail) to more efficiently move people from where they live to where they work. Another might be upgrades to the electrical lines so that less electricity is lost through transmission. I'm sure other examples can be found. Where does this fit in?
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Re: Infrastructure spending
That's a good point, but Mike did say the gov't "almost never" creates jobs that are good for the economy. We heard a lot about "shovel-ready" infrastructure projects, when the last big stimulus was being proposed, but a majority of the spending did not go to such projects. Politicians generally use big spending opportunities to reward or pay off constituent groups -- not promote productivity, efficiency, or growth.
Should there be a role for the gov't in funding such projects? That's open for debate. But it never seems to be what politicians actually do when trying to "create jobs."
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Re: Re: Infrastructure spending
If anything, the Obama stimulus was focusing too much on "shovel-ready" infrastructure projects: the stimulus was designed for a short recession (with a correspondingly short time horizon) when we should have been more worried about a "lost decade", where bigger, more important projects would have been fine even if they'd taken a few years to get started.
To give an example previously advocated by this site, the government stimulus could have been building the "last-mile" of super-high-speed internet access in every major city and town across the USA: sure, a huge undertaking like that would have taken a couple years to get started, but it would produce a lot of jobs once it did. There are truly huge numbers of far less exciting infrastructure projects simply involving replacing aging infrastructure that still (barely) works that were likely passed over because they weren't sufficiently "shovel-ready."
Of course, such projects are very costly in terms of capital (e.g. the cost of fiber optic cables for a broadband project) and hence would require a huge amount of government borrowing to create a relatively small number of jobs. In normal times, that might be a good reason for the government not to do it, but right now interest rates are incredibly low. Indeed, TIPS yields are negative, so an infrastructure project would only need to have a positive real ROI to be worth it, even ignoring any stimulus effect on the economy.
Of course, with the private sector operating so below capacity due to depressed demand, what the economy has really needed is a ton of government jobs. The problem would be how to use millions of people effectively, rather than just have them break and fix windows. By some good fortune, the government did have a sort of mini-WPA in the form of the census, but that's over, along with anything resembling a recovery.
(Of course, given political realities, this is all irrelevant: the actual debate is about what the government should cut when it should be about which choices of massive short-term spending would have the best long-term benefits.)
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Re: Re: Infrastructure spending
Some smart person near the top of the food chain needs to make light of the situation.
If a few hogs get a pass at the trough, then that's just a necessary bit of overhead.
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Re: Infrastructure spending
Yes, infrastructure spending *can* certainly help productivity. It's just that in practice it turns much more into the boondoggles and bridges to nowhere that you talk about. There are exceptions, and many of the exceptions tend to be more focused on local rather than federal.
It's one of those benevolent dictator things. If you have the perfectly intelligent and all knowing and all powerful benevolent dictator, that's probably the best form of government. The problem is that that ideal is impossible, so instead you get the other kind of dictator which is worse than democracy.
Same thing here. You can have smart infrastructure spending. It's just rare and almost always ends up as a boondoggle.
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Re: Re: Infrastructure spending
I think that is the nub of the point. The dichotomy is not state vs private rather it is small vs large. How often do we see large established companies acting as stupidly as the state often does. The key is to get the people at the bottom involved in seeing and taking the opportunities. That is why organisations like the John Lewis partnership and the Mondragon co-operatives are so effective. State organisations can do this too - it is a matter of organisational principles rather than public vs private ownership.
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Re: Re: Re: Infrastructure spending
Quite often - automobile industry, telephone industry, oil companies, American steel industry, agribiz.
There stupidities are things like failures to innovate, pollution, litigating away competition, consumer fraud, valuing short term profit above all else, cults of management personailty, etc, etc etc
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Re: Re: Infrastructure spending
You mentioned the internet as creating massive amounts of jobs. Built specifically by the government as were most of the computer/networking advances that allowed for it (directly through gov workers or through grants).
Police/military provide security for specific locations as well as the whole of society - allowing for all manner of transactions to safely happen.
Public education allows for an educated workforce - probably the single greatest job creating/efficiency force on the planet.
Grants for all manner of scientific advancement. Telecommunication infrastructure (lines and satellites).
The list goes on and on. Id say the gov mostly creates massive amounts of productivity enhancements, but the relatively small boondoggles get the attention.
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Re: Re: Re: Infrastructure spending
This is almost invariably the FIRST thing cut when budget issues arise. It seems illogical to provide less education if you desire society to continue to advance. Frustrating doesn't even begin to describe this sacrilege.
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Re: Re: Re: Re: Infrastructure spending
We have smart people making teaching even better (Khan Academy) and yet we don't want to work on it because of traditions. Hello, people? Can we allow a little more common sense in schools?
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Schools (Re: Infrastructure spending)
That's the big thing to take away from the whole situation. Throwing money at the problem really isn't terribly useful. You've got to have a smarter approach to education.
Most problems are like that in fact.
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Re: Schools (Re: Infrastructure spending)
I'm not sure that is true. But also, you have to factor in the reality that private schools don't have to take problem kids (there are some that do, and they charge a ton of money to do so). Public schools have to provide for kids with learning disabilities, kids who require assistants, kids who many not be able to speak English, etc.
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Re: Re: Re: Re: Re: Infrastructure spending
You must not live in California. Every year they make the budget there are teachers waiting to see if their job will be the one cut. We have a lottery in CA that was SUPPOSED to SUPPLEMENT the education budget. Instead, what we got was the lottery earnings are REPLACING budget dollars so the state can make up for shortfalls in other places. Anything being done in education is usually done by issuing bonds now.
Please don't get me wrong, I'm not at all for just throwing money into the education "well" and expecting everything to be better in the morning. However, in CA, we have one of the lowest (bottom 20%) spending per student budgets around. (http://www.edsource.org/data-ca-per-pupil-exp-compare-states.html) From the cited report:
"EdSource examined the available data sources and interpretations with care and also consulted extensively with experts when we encountered questions or inconsistencies. Throughout this report, you will find straightforward explanations of what we found and—as necessary—notes about the data we chose and why we chose it. Based on our research, we feel confident in reporting the following:
California's public schools serve the country's largest student population, one that is quite diverse and faces substantial challenges. (Page 3)
California's effort to support its schools financially does not quite match its capacity. (Pages 4-6)
California's per-pupil expenditure lags the national average, and the gap grows if labor costs are considered. (Page 7)
California's high labor costs and modest per-pupil expenditures mean that its school districts have low staff-to-pupil ratios compared with the country as a whole, with some staff categories particularly low. (Page 8)
California school districts are for the most part similar to the rest of the country in their spending patterns, with about two-thirds of funds going to instruction. (Page 9)
These conclusions are largely based on data from the 2007-08 school year, the most recent year for which reliable data are available. Significant cuts to education in California and many other states that began in fall 2008 are not reflected in these figures or comparisons."
So, while spending in some OTHER states may have increased that is not the case where I live and where my children go to school.
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Re: Re: Re: Infrastructure spending
Not *all* projects are a boondoggle. I'm not saying cut out all gov't spending. But very few "jobs" programs are actually focused on real infrastructure.
You mentioned the internet as creating massive amounts of jobs. Built specifically by the government as were most of the computer/networking advances that allowed for it (directly through gov workers or through grants).
Indeed, but the project was not designed as a "jobs" project at all.
Police/military provide security for specific locations as well as the whole of society - allowing for all manner of transactions to safely happen.
Public education allows for an educated workforce - probably the single greatest job creating/efficiency force on the planet.
Grants for all manner of scientific advancement. Telecommunication infrastructure (lines and satellites).
None of which are "jobs" projects.
I agree that a functioning government can create the factors that lead to jobs, especially in clearing the way for infrastructure on which others can make use of. But those aren't "make jobs" programs for the most part.
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Re: Re: Re: Re: Infrastructure spending
You said:
I was arguing that there are TONS of examples of the government doing exactly that.
You also said:
I was pointing out that from my point of view, government infrastructure spending has been pretty damn awesome.
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Re: Re: Re: Re: Re: Infrastructure spending
Focusing on building and upgrading expensive, naturally monopolistic networks (such as road systems, electricity grids, networking infrastructure, water distribution networks, sewage systems) is a good way to increase the chances of getting smart infrastructure spending from governments. But focusing on "job creation" as the primary motivator for government infrastructure spending is unlikely to be a good way to allocate resources.
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Re: Re: Re: Re: Re: Infrastructure spending
Er, Mike did. It was the main point of the post you're now commenting on. In in the first sentence even.
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Re: Re: Re: Infrastructure spending
Assuming the private sector couldn't create roads itself, and do it cheaper, thus saving money for other productive ventures.
Public education allows for an educated workforce - probably the single greatest job creating/efficiency force on the planet.
Assuming our failing, massively expensive, one-size-fits-all education system doesn't crowd out private educational systems that could do a better job of educating our kids for cheaper.
This seems to be related to a particular blind spot that appears when people talk about government services: "If the government is doing it now, it must therefore be true that it would never happen without the government."
It's like someone in soviet Russia claiming that the government creates jobs by running supermarkets, because otherwise, there would be no supermarkets and everyone would starve to death.
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Re: Re: Re: Re: Infrastructure spending
Ask Chicagoans how privatized parking is going. Ask Indiana how it likes privatized tolls. Anyone remember way way way back when AOL had a privatized interweb? yeah, me either.
These are all concrete real world examples... who has the blinders on?
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Re: Re: Re: Re: Re: Infrastructure spending
Our schools are getting worse while they're getting more expensive. I'd like to save the money that currently goes towards our failing public schools and instead put it to work in a school that competes for my dollar through actual results. Why is that a bad thing, exactly? Why raise utter failure up as the standard for what we should strive for?
Also, I love paying tolls where I live. Tolls mean that I pay for exactly what I use, rather that the state taking some random number of dollars from me at gunpoint whether I use the roads a lot or a little. I wish every road was a toll road.
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Re: Re: Re: Re: Re: Re: Infrastructure spending
You know, that is a reasonable request. But that was the goal of "No Child Left Behind," and what we got were schools educating for tests and in some cases cheating to pass those tests. We haven't created the perfect system yet that links financial rewards to results because we're not always sure what the results should be and when we try to define them, we end up with people trying to game the system.
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Private Roads ( Re: Infrastructure spending )
>> efficiencies which allow for more productivity in the
>> private sector
>
> Assuming the private sector couldn't create roads itself, > and do it cheaper, thus saving money for other productive > ventures.
Yeah. That's just what we need. It's not bad enough that the local cable or phone monopoly owns the road to the Internet. Now Walmart or McDonalds is going to own the road to the Interstate or even the Interstate itself.
Some things just should not be in private hands. The temptation for corruption is just too great.
Rail versus the Interstates is a great example of why having private interests own infastructure is ultimately a bad idea. Having a neutral third party involved avoids certain inevitable economic inefficiences.
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Re: Private Roads ( Re: Infrastructure spending )
You know, "the government" is not some sort of an independent entity which only wants to do good in this world while having heaps of knowledge nobody else has. It's just a bunch of private parties acting with certain powers.
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Re: Re: Infrastructure spending
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Re: Re: Infrastructure spending
Plus you are discounting the multitude of small and large private companies that go out of business everyday many because they are so poorly run. Does the seed/investment money end up being wasted on a "boondoggle". What is the measurement for boondoggle?... the end goal or the ongoing journey?
The Interstate program of the 50's - 70's was akin to replacing the phone switch operators. Without an easy to use physical goods transport system massive distribution centers for Amazon would be feasibly cheap. (not to mention it created a lot of jobs locally).
Wouldn't spending money on a national train system that is even more efficient for moving goods be even better.
But what about private businesses building toll bridges and roads you ask?... well they would probably need to be given gov monopolies to operate anyway (needing oversight).
As you can tell I am fan of Government investing in our country, not just our businesses. And not fan of trickle down, but rather of trickle up.
Now if the public scrutiny of infrastructure oversight was the same as things that were very influential and important as say tax law or congressional funding behaviors... oh wait... we are screwed.
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Re: Re: Re: Infrastructure spending
There's a lot of money going to military expenditure, yet we have little to go to build our infrastructure, here in the US. When money goes to transportation, what exactly does it do that actually makes safer roads from the federal level to state level? I recall that Chicago has a certain cement mixture, they use for roads, that is extremely poor. Rather than use a better mixture that would last for decades, the state chooses to use the same poor solution that chips and is basically a safety engineer's worst nightmare to keep jobs. Better option would be this: Have someone come in with a better mixture, enjoy benefits as people spend more time at work and you can tax more people. Yes, some people lose their jobs. But they were paid for that work. They don't *need* the safety of that job.
"Plus you are discounting the multitude of small and large private companies that go out of business everyday many because they are so poorly run."
So? The businesses that don't do well, fail. The ones that adapt succeed. Having the government prop up the ones it think should succeed distorts the incentives created from that Darwinism at play.
"Wouldn't spending money on a national train system that is even more efficient for moving goods be even better."
It would, but the government is spending $8 billion so far for the train system. Here's a really good question... Who uses the train when air, and transport by trucks is so much better? The thing is, governments can invest. It just does it rather poorly.
"But what about private businesses building toll bridges and roads you ask?... well they would probably need to be given gov monopolies to operate anyway (needing oversight)."
How about no? How about avoid such things and find better methods of creating revenue, such as taxing businesses 1% more or something along those lines?
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Re: Re: Re: Re: Infrastructure spending
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Re: Re: Re: Re: Infrastructure spending
Sure there are lots of time the government has screwed up, but so has private business (Enron, BP, Ford, GM). it can happen anywhere, but what venue can have the best controls to limit greed from ruining quality.
Nobody said anything about "proping" anybody. A valid job is work. My point was that failure is everywhere and it shouldn't be the only reason not to do something.
Train travel is far more efficient then trucks and airfreight (just slower).
You can't have a toll road without gov say so since you generally have to use public land and eminent domain. there is no point in having two private toll roads that parallel each other. barriers to entry causes an monopoly to whoever gets the gov nod first.
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Re: Re: Infrastructure spending
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Re: Re: Re: Infrastructure spending
Lack of demand of... What? What exactly is there a lack of demand of?
In copyright issues, the government is enforcing those copyrights at the behest of copyright holders, at consumer expense. That's $144 Billion dollars (Pdf) used in various ways as ICE is now Disney's security force.
Goods, people still spend on it. People are spending on entertainment. What magic force of nature is lack of demand that it clouds the minds of people in regards to inflation?
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Re: Re: Re: Re: Infrastructure spending
The argument actually reminds me of an episode of Always Sunny in Philadelphia where the gang tries to emulate Dave & Buster's and hand out hundreds of free drink coupons. The bar fills up with people drinking their booze for free and then everyone departs, leaving the gang with all their coupons back, no money, and a lot less alcohol.
To the degree that there is a lack of income to spend with, that's true...but the answer isn't to do what the Always Sunny gang did, it's to allow for investment and entrepreneurship to develop and with it new jobs.
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Re: Re: Re: Re: Re: Infrastructure spending
People are not "sitting around". They are trying to find work. As for food and shelter, good thing government provides a safety net or many people would have neither. As for free, thats the money big banks are getting...at virtually zero interest, and turning around and buying treasuries (even at AA+) and making a nice little safe profit
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Re: Re: Re: Infrastructure spending
That's nonsensical. There is no such thing as putting money into the economy. The economy is people carrying out mutually beneficial transactions exchanging and transforming resources. The savings rate was too low for too long. Too many people sold claims on future resources and those claims are being called in. Unfortunately, there are not enough resources to meet all these claims. The result is quite simple: we end up having to save in order to pay down debt instead of investing which means GDP growth falls.
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Re: Infrastructure spending
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Re: Re: Infrastructure spending
What is needed is to give more control to the people at the bottom. Except of course this doesn't work when the idea of giving control to the people at the bottom is itself an idea that came from the top (David Cameron please note).
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Re: Re: Infrastructure spending
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Re: Re: Re: Infrastructure spending
The private sector is made of people just like in government, and the vast majority of them wish to have a positive impact on the world and donate extensively to charity. They are also better able to determine the impact of a given investment on their own future - there is plenty of money and willpower should that investment be desirable or there would be no airlines, for example. The 1978 Airline Deregulation Act was spectacularly successful.
And those roads can very well pay for themselves, or be paid for at a local enough level that its effectively the same. Just because the government currently pays for it does not mean that they must be the ones to pay for it; what kind of an argument is that?
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Re: Re: Re: Re: Infrastructure spending
Not everyone would agree with that, including me. Having come from a military family, and seeing some of the abuses I see done by private companies, I fundamentally trust government (but not politicians, who I think work for corporate interests these days) more than for-profit companies.
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Re: Re: Re: Re: Re: Infrastructure spending
Wait what? You can't separate government from politicians. Politicians are government.
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Re: Re: Re: Re: Re: Re: Infrastructure spending
You know those polls ask people who they trust and the military comes out on top and the politicians come out on the bottom, that's how I see it too. What politicians have to do to get elected is vastly different than what a career military person or a career foreign service person or a national parks ranger does.
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Re: Re: Re: Re: Infrastructure spending
> monopoly on force and to enforce personal and
> property rights - that's it.
That idea died with with the founding of the Republican party. Modern day Robber Baron wannabes should remember that.
Airlines don't build their own infastructure either. They use facilities that would not exist under your idea of government.
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Re: Re: Re: Re: Re: Infrastructure spending
With government in general (and WW2 in particular) air travel would mostly be by flying boat - as in the 1930's.
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Re: Re: Re: Re: Infrastructure spending
Much of the so called private sector is merely a charade. Everything you cannot do without and which has relatively few players is effectively in the public sector whether you like it or not. Look at the big UK banks. - we thought they were private companies - but then, when they failed - we discovered that they weren't - they had been in the public sector all along.
You can create the fiction the vital utilities are in the private sector - but it is just a fiction - and usually it is an opportunity for corruption too.
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Re: Infrastructure spending
Better transit of power, data, people, anything really has a /potential/ for good ROI; but the projects should be completed based on that ROI and run like the public utilities roads are recognized to be (well at least on the west coast of the US; on the east coast it's so densely populated and the red tape is such a nightmare that they've apparently decided utility ownership is OK in the form of turnpikes/etc).
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Re: Infrastructure spending
The thesis isn't that infrastructure spending doesn't create something of value. Roads are clearly valuable. Rather the notion is that this value doesn't create *more* value for the cost than would otherwise be present. We take money from the taxpayers that might otherwise be spent on things of value like groceries and health care and spend them instead on a different thing which also has value, the road.
The things created may be of different value in different ways, but the idea of pointing only to the immediate effect of "it creates jobs" has an implication that more value is being created than otherwise would, which is a fallacy. If it were true, we should immediately conscript 100% of the population to building roads, or operating switchboards, or improving the electrical grid, so that everyone would be employed and we would produce unlimited value.
So any argument based solely on the fallacious notion that an activity would be good simply because it creates jobs (or conversely, bad because it eliminates jobs) should be rejected, because it is not an argument that is looking at the whole picture.
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About Circuit City...
The boycott from the public outrage at this maneuver is what killed Circuit City. You will see Best Buy and Circuit City stock had a similar trajectory following the economy. After the announcement, CC's stock kept dropping and never recovered.
Now back to the rest of the story.
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The two inter related questions being debated in the markets is "What is money ?" and "What is slavery?"
For the first we must go back a century to the debates between the goal and silver advocates, spice, and paper, fiat money.
For the second a visit to Ann Rand at Atlas Shrugged is in order with the realization that money, in the form of wages, and labor, in the form of time, are one and the same thing for most people. If you take the money that I work for in the form of an involuntary payment then since money is time you have taken part of my life away in the form of involuntary servitude. And, since involuntary servitude is a form of slavery what is being discussed is really how much of a slave you are to the state.
As far as employment is concerned employment is not going to increase as long as the political climate is that all your labor belongs to us [meaning the government or society].
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Re:
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Borders
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Old Fashioned
I say mostly because I think that there is still a market for dead tree books because it currently has advantages over digital books, that will allow them to survive in larger markets for the forseeable future.
The advantage being that paper books are completely DRM free.
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Re: Old Fashioned
I'm sure they are working on that.
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Re: Re: Old Fashioned
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Re: Re: Re: Old Fashioned
If only that were true, it would never self destruct!
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Re: Old Fashioned
So, while I can concede that digital is probably the better long-term solution, it does sadden me to know that something that has been such a part of my life is likely to change so drastically into a form I find less desirable.
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Re: Old Fashioned
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Re: Infrastructure spending
I hear that there is great opportunities for packet transportation, I just have to figure out how to fit a vehicle into that fiber optic.
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Re: Re: Infrastructure spending
OR
Lay fiber-optic cables and connect them with hi-speed DOCSIS3.0 switches and provide the best ratio of cost/bandwidth/speed over your cables--if you build it, they will come.
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"productiivity" is NOT "efficiency"
Statisticians look at "productivity" as how much work is produced in a workday.
A workday is, supposedly, eight/nine hours.
However, most people get a straight wage, which means no matter how many hours they actually work, they get paid only for that eight/nine hour day!
So, even if it takes an employee 10-12 hours to do a task, it APPEARS to only be eight hours "on the books"!
(And how many people ACTUALLY work only "9 to 5" anymore?)
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Entertainment and sports are not /productive/ jobs, either.
That aside, I don't see where you state the obvious way that gov't can promote current AND future prosperity: building projects such as in the New Deal, highways and dams, or anything useful and lasting. -- Yes, there were make-work projects, but those were relief to people who had a strong /work ethic/ and didn't want to just sit around and get money for doing nothing. That attitude has changed now: most people want to win the lottery and sit around in idle luxury commanding the labor of others. It's the perversion of The American Dream.
It's The Rich who actually get tax money funneled to them. Note that the New Deal included that The Rich should be taxed heavily: they've benefitted the most, and it's not sheerly on merit so it's fair to tax them more heavily -- and they're still left well off, merely their excesses are reduced. Most of The Rich nowadays, though I know will be disputed, inherit almost feudal entitlements rather than labor sunup to sundown. We need to reduce the number of those parasites and their ability to loot the economy. THAT would help more than anything.
Oh, I want to address the silly notion that The Rich create jobs: nope, they exploit labor, reward it as little as possible. I have plenty of "jobs" for anyone who wants to work: pays all the beans that you can eat, and all the water that you can drink, plus a gallon to cook the beans in. -- What you people mean by jobs is A FAIR DAY'S PAY FOR A FAIR DAY'S WORK. That's been wrested from the grasping Rich by bloody struggles, and it's now being lost because all the idiot libertarians think that the current highly unusual, actually "socialist", conditions are the norm in human societies.
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Re: Entertainment and sports are not /productive/ jobs, either.
oh wait, out_of_the_blue? didn't read anyway.
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Re: Re: Entertainment and sports are not /productive/ jobs, either.
I passed economics 101 AND 102 with a C average to cover my 'liberal arts' credits so I know what I'm talking about.
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Turnpikes, toll bridges, private fire departments, etc.
Haliburton certainly ripped off the US government over in Iraq, so the for-profit system doesn't necessarily reduce costs.
Personally I think we'll start selling lots of public assets and the Chinese will buy them. And I'd rather have Chinese-funded cleantech infrastructure than none at all.
Here's how it's done in India. In Gurgaon, India, Dynamism Meets Dysfunction
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Re: Turnpikes, toll bridges, private fire departments, etc.
In fact, an independant review of military contracting in general would go a long way to productivity. Just be careful no the cut any actual inovation.
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Job "destruction"
There is job destruction: of jobs that can be replaced by a machine. The new jobs created by growth require new skills, and a lazy subset of people want jobs that don't require them to change & remain relevant.
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Re: Job "destruction"
If you were skilled at making buggy whips, that skill was obsolete & those jobs were destroyed.
Jobs as automobile makers were created, but the old jobs were certainly destroyed, not just "changed".
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Re: Job "destruction"
If you are only looking a small subset of the whole that may ring somewhat true. You have to look at the complete picture though.
Let's look at the automation of the automobile manufacturing factories as an example. Sure, quite of few auto workers on the production lines were displaced. But, at the same time, many new opportunities opened up in the engineering, design, manufacture, software programming and maintenance of the robotics being implemented. I really don't have the figures handy, but I would bet the loses and gains in jobs were fairly equal. The one thing that did change was the skill level of the workers though. Less unskilled labor jobs were available.
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Re: Re: Job "destruction"
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Re: Re: Re: Job "destruction"
"There's some lovely filth over here!"
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Re: Re: Re: Job "destruction"
Certain disruptions may seem to obviously move job opportunities from unskilled to skill portions of the market, or vice versa, but it definitely does not follow that total unskilled jobs must then decline. Who will build, supply, and service the new offices for those engineers? Who will transport the machinery and install it at the new factories? The skilled workers and the industries surrounding them will continue to need unskilled workers. Nobody is getting screwed. In fact, society benefits greatly by the increased profusion of the new good that is available.
It's moronic to extrapolate a simple analogy far beyond its relevance merely to see it break and think that proves anything.
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The best suggestions I have seen
charles hugh smith-You Want to Create Jobs? Here's How
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Machines tend to replace lower skill workers, or narrow focus workers. That makes it much harder to get them into new jobs. So it isn't like 1000 people lose their job today, and 1000 people start a new career tomorrow.
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Re:
http://www.despair.com/motivation.html
http://www.despair.com/innovation.html
http://www.d espair.com/adaptation.html
http://www.despair.com/worth.html
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Necessary jobs not being rewarded
While machines have taken over many jobs, we still need people to take care of children, the elderly, and the disabled. But we don't want to pay very much to the people who do those jobs. On the other hand, people who shuffle money around, but don't actually create much value in terms of quality of life, are hugely rewarded. In fact, some people have pointed out our best mathematicians are now being hired by financial firms rather than going to work in universities and other research centers. Money is redirecting talent, but not necessarily in directions that enhance civilization.
Now we can argue that as more effort and funding are going into speculative endeavors rather than quality-of-life improvements, the entire system will collapse, and then when things get bad enough, we may take some action. Personally I think the world is headed that direction. The financial markets are making a mess of the world economy right now.
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Of course....
Of course, some jobs are destroyed and others are created. Why do you think I call for more entrepreneurial support in my post?
I'm saying that there will be fewer jobs. Look at the examples I give: The book industry is crowing this week that total sales of books are up but, thanks to technology, employment in the publishing industry is down (let's go see what the prices are down to at Borders!).
Never take a headline too literally. It's making the point that we're not going to have a jobless recovery but that this is the structure of the economy to come.
I'm not even saying that's good or bad. I'm saying that it's reality. And for politicians to act as if they can wish jobs to emerge out of thin air is nothing but rhetorical bullshit. They don't make real jobs, only temporary ones.
Read the rest of my post, then, about what I say is necessary in policy and education to support the kinds of jobs that technology does create.
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Re: Of course....
I think you're wrong, and history supports that.
Look at the examples I give: The book industry is crowing this week that total sales of books are up but, thanks to technology, employment in the publishing industry is down (let's go see what the prices are down to at Borders!).
But that ignores how other jobs are created. Yes, employment in the narrowly defined "publishing" industry is down... but the rise of technology and ebooks means that more people can make a living as *authors* today than ever before. It also creates new jobs in other areas (people building kindles, people writing ebook software for devices, people who get involved in social media marketing for new books). I think you're defining the jobs too narrowly, and in the end you're wrong. There will be more jobs because of this.
Never take a headline too literally. It's making the point that we're not going to have a jobless recovery but that this is the structure of the economy to come
And I agree with most of what you write, almost every time, which is why I'm surprised I disagree so strongly on this. Efficiency creates more jobs. The structure of the economy is that we will have more jobs.
I'm not even saying that's good or bad. I'm saying that it's reality
Neither did I. I'm saying the "reality" you're talking about doesn't match up with the data.
Read the rest of my post, then, about what I say is necessary in policy and education to support the kinds of jobs that technology does create
I know. I agree on that part. I didn't state nor imply that I disagreed with the implications of your post or the idea that technology and entrepreneurs create jobs. I obviously don't. I disagree with the simple point that there will be "fewer" jobs because of this.
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Re: Re: Of course....
There is no simple way to say that ebooks will suddenly employ as many people as is lost on the other side. How many people did Borders put on unemployment?
Yes, I know - you cannot stop technology. But you can stop being an apologist for it. Technology costs jobs, and with the unemployment rate at a high rate, and employee productivity at a near all time high in the US, it's pretty clear that technology is either putting people out of work or keeping at least some of them out of work.
Yes, I know - effeciency is great, but only to a point. When you start to impact the overall employment numbers, you are hurting the very markets that are needed to make this all go, which means that you have a fairly large failure in the economy.
Would you care to explain why productivity is at an all time high but unemployment is so high as well?
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Re: Re: Re: Of course....
My theory on why productivity is so high while unemployment is as well?? Because people have to work 60-70 hour weeks to do enough work for their company to not get fired and replaced by some cheaper import. People are working harder to keep their jobs, but out of fear of losing them, and nothing more. This doesn't make them better workers. Maybe productivity is up, but I highly doubt a non-biased study would conclude that the quality of work is at an all-time high... And yes, if you think about it, one person working 70 hours in a week gets as much done as two people working 35 hours in a week...the correlation should be blatantly obvious just on that fact alone. Especially when you consider some European companies have 35 hour work week maximums.
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Re: Of course....
That would make a lot of sense if people did not want to have more stuff. But they do want to have more stuff. So those people who used to be employed making paper books will have their labor go towards a different endeavor.
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Growth fueled jobs, but the frontier is now overseas
Now, many of those job-creating opportunities are overseas. Just as jobs shifted from the rust belt cities to elsewhere in the US, now they are shifting from the US to other countries.
I envisioned cleantech infrastructure as creating jobs in the US. If you need to rewire buildings, lay more transmission lines, install wind turbines, you are creating jobs. But the companies that have a vested interested in the old systems have no strong interest in funding the new ones. And the government doesn't have the money. And the investors would rather fund the next social media network than large solar projects.
So yes, technology can create jobs, but not necessarily in this country.
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Re: Growth fueled jobs, but the frontier is now overseas
I would argue the rules don't correlate to allowing these solar projects. People are currently working on new energies, but you fall into issues of patent law against certain technologies (IIRC, BP or Chevron have patents that prevent new technology to flourish), or you have a US work force that can't work in particular fields because they're hot button issues.
Pharmaceutical drugs can't be worked on because of the mire of patent law. There's also overcriminalization of low income workers, which hurts our work force considerably. There's a number of factors to consider before saying jobs here are dwindling because they're going overseas.
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Re: Re: Growth fueled jobs, but the frontier is now overseas
If IP laws are the problem, then it doesn't really make sense for investors to expect much from Pandora, and yet that company's IPO did okay.
I think US investors want quick returns and see more opportunities in Internet companies than cleantech companies. China sees an opportunity to become the dominant country in cleantech and is moving aggressively in that direction.
I think the US as a whole is driven by short-term results. We want it now, even if we're going to be at a disadvantage 10 years from now.
I have no problem at all if you want to get rid of IP laws in this country, but until you change the way laws are made in the US, it is not likely to happen. Saying that IP laws hamper growth in the US means nothing to politicians who are funded by companies with a vested interest in preventing competition.
We already know that many politicians have absolutely no interest in creating jobs. They just want to get reelected. They will happily support the laws their financial donors give them. I think it is reasonable to assume that in fact if it serves their purposes, they will act in ways that intentionally harm the economic future of the country.
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Re: Re: Re: Growth fueled jobs, but the frontier is now overseas
Has cleantech investing lost its glamour?
I can also provide links to articles about China's dominance in cleantech if anyone wants to see them.
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Infrastructure + Public Education
Further studies have shown public transportation systems (particularly rail based) to be one of the most effective uses of those funds.
I live in Texas, where the roads are pitiful, and we just had massive cuts to education.
America in particular has had a very hard time learning from it's own past of late. From the failed experiment of prohibition, to the great depression, we are in a cycle of repeating our mistakes without learning from them.
WWII was the shot in the arm that restarted America's economy (what... government spending, huh how bout that).
Let's hope that we can learn to reinvest in ourselves and our future without having to kill 60 million people this time.
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Re: Infrastructure + Public Education
Someplace in this system we allow private companies to defraud the people by bidding one thing and charging another.
At this rate, will rail still be as viable?
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Please explain what you mean by "clouds the minds of people in regards to inflation"; it's not even clear from what you wrote whether you think the current inflation rate is too low or too high.
As for demand, unemployed people don't buy as much stuff, especially if they think they may need to live off their savings for an extended period before finding another job. People buying less stuff (i.e. lower demand for all sorts of goods and services) means businesses don't invest and expand and may even lay off under-utilized employees, which in turn leads to more unemployment and less aggregate demand. In the Great Depression, this led to a disastrous cycle of deflation.
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Re:
" People forget that these are real jobs that put real money into the economy. When you are in a liquidity trap (which we are a la Japan's lost decade). When there is no sign of inflation (just the opposite is a real threat). The LAST thing you'd want to do is cut spending. The best way to erase a deficit is growth. Private industry isn't spending. Consumers aren't spending. The government needs to increase demand. That in fact is more the problem...lack of demand from consumers."
That "irrelevant copyright material" you cut is showing that the government continues to spend money frivolously instead of creating jobs. Which has already been shown to be a myth by the articles linked.
So the "clouds the minds of people" is talking about politicians and policy makers. Somehow, all of this lead to a "lack of demand from consumers", which I find questionable since consumers want goods in various industries. It's just very difficult to follow his argument when consumers have to spend money on certain goods and suddenly, he's saying consumers aren't spending.
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Anyway, from the comments, I take it that $TechDirtAuthor is basically saying that the government can only create jobs when it's not actually trying too hard to create jobs for the sake of creating jobs/stimulating the economy. Is this correct? Because if it is, I think the original post needs to be edited to make this clearer, because I disagreed with the post when I originally read it, but the comments from $TechDirtAuthor helped me turn around to agreement.
I'm reminded of two PhDComics: one about how grad school enrollment tracks unemployment, and the other about how professors appear near you when you least need them.
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Re:
I used to argue in favor of jobs training for "displaced" workers, but another recent Planet Money report looked at such programs and found that you're actually less likely to get a job if you go through one of those than if you don't. It's kind of insane. So I agree that job training is important, but I get the sense that the government is really, really bad at that.
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Four Steps to an Improved Economy
2. Shorten Patent and Copywrite to a 14 year period, no exceptions. Start creating, other reforms welcome.
3. Define competition as 10, not 3 in a market, and that like kinds do not suffice as competition, whereas similar kinds are competition (dsl does not compete with cable, 10 dsl and 10 cable etc...).
4. Fix the infrastructure.
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Re: Four Steps to an Improved Economy
The fourth item might cost something, but if they don't dig ditches but do something productive (as discussed above), the first three will allow enough growth to cover the investment in the fourth.
IMHO
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What kills jobs
If Obama wants to create jobs, he needs to tell his Hollywood friends to kiss off, reduce patents, reduce copyrights and spread the wealth.
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Re: What kills jobs
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Perhaps the response is that WWII wasn't a jobs program... but it isn't hard to look at that plot as a politician and decide deficit spending on wars is an economic panacea (if only they'd look at the Vietnam-era plot, too...).
But actually, WWII was a jobs program, and I'm not referring to the troops. The US government paid companies to train people on new technology so they could contribute to the war effort. Government spending was massively increased, and it was a huge success.
Then again, maybe the difference is you have to destroy as much developed nation infrastructure as you can so you can float loans and sell technology to cash in on their rebuilding of it...
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I expect better than this on TechDirt
US population (1985): 237.9 M
US population (2002): 287.7 M
Expected # of tellers in 2002: 582,000
Actual # of tellers in 2002: 527,000
"Missing" tellers: 55,000
Source for US pop: http://tinyurl.com/3uv5ao6 (Google visualization of US Census data)
Reasoning: Bank services can reasonably be modeled as a per-capita business. More people require more services. Of course there is a network effect but for a first cut it's not a bad assumption. (And one would expect that, as population grows, the network effect would imply more bank services required.)
If things were the same, we would expect nearly 60,000 more tellers in banks than we saw. Something changed and reduced the tellers per capita. It doesn't seem outrageous to think that it might in fact be the ATMs that reduced the need for human tellers. I have used a human teller approximately zero times in ten years, and I know I am not alone. Are banks really still paying for all of the tellers they would have? As population grows and new areas open to development, do banks really construct new branches ... or do they plant a lot more ATMs and keep their branches more centralized?
I really do expect better on Techdirt than mere "Look, a number changed!"
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Re: I expect better than this on TechDirt
Once again, that is looking at only a small subsection of the whole.
How many new jobs were created in the manufacture, installation & maintenance of the ATM machines? What about the network infrastructure and software to connect the ATM's? And don't forget about all armed security guards in armored trucks to refill those machines with cash.
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Mark Cuban's suggestion
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Cool presentation on the history of ecoomics and the future
This explains why Mike and I differ on some ideas. I think he hopes to combine a post-IP age with a capitalist view of scarcity.
I think the concept of scarcity is not going to serve us well in the future. Sure, there are going to continue to be scarce resources, but I think we won't have a scarcity of labor or consumable items, so the value of those will go down and we'll need a different system to provide a basic standard of living to the average person.
I don't bother to talk about IP issues because I think the system will take care of itself in time. I'm more interested in the bigger picture of how one might restructure government/politics in this country so we can better respond to the economic changes happening around us. You're not likely to eliminate or modify IP laws if the politicians only feel accountable to companies and wealthy individuals who want to protect their turf and grab even more for themselves. IP laws are just a small part of that picture.
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Job Paradox: Gross Jobs vs. Net, Domestic Jobs vs. Foreign
MIT Tech review editor, David Talbot, came to a similar conclusion according to a ZDNet piece that references the book "Race Against the Machine". The Singularity movement also posits the same eventuality (sci-fi though it may seem). "The Lights in the Tunnel" is another such work. Such questions bear asking because the verdict isn't in yet. The risks of glossing over the tough questions --- and particularly a failure to ask the right questions --- are simply too great.
Let me be clear: Nobody is arguing for a return to the Stone Age. Neither should we be beholden to the naive or the convenient, placing "faith" (in old economic dogmas) over modern-day facts (which may necessitate a new model). How many bad ideas in science and technology have moved forward "just because it's there" and "just because we can"? That 1940s-era, kid-in-a-scientific-candy-store mindset --- believing that progress is inherently harmless or worthy --- is how we ended up with the atom bomb. The brilliant minds who unleashed man's biggest hot potato and potential planet killer later came to regret it! It's time our sociological stance "evolved" in this regard. It's okay to be discriminating, to ask whether the "greater good" --- for the greatest number of people --- is, in fact, served!
It may not be accurate to argue that technology does away with jobs as much as it moves the remaining "decent jobs" just out of arm's reach. As technology drives higher-skill, higher-education and higher-creativity/intelligence occupations, it stands to reason that unless we endorse eugenics and genetically engineer the pool of human talent to increase the percentage of the population who will enter the workforce with the innate capacity to push the bounds of innovation --- and satisfy the demands of an ever-sophisticated market --- the number of people capable of creating and supporting future technology may become limited in time ("the bottleneck").
Suppose we at some point have a glut of jobs for which average people are not qualified and for which the economically disadvantaged and/or intellectually average cannot obtain? The bifurcation or polarization of the workforce, thanks to automation, broadband, cloud computing and the like, is one of the most under-appreciated factors behind persistently high unemployment and a lagging world economy overall. This period in history is what Kling dubbed the "Great Restructuring". My own characterization is that we have not merely suffered a "Great Recession" but have crossed a threshold into the "Great Realignment". Yes it's scary as hell to contemplate, but how else are we supposed to take the reigns if we close our eyes and simply hang on for dear life?
President Obama's attempt to draw attention to the structural employment problem may have been clumsy in his reference to ATMs but by the same token it is a diversionary tactic to fixate on what is wrong with the specifics of the President's analogy even as the overall point --- about the domestic and international job market being higher-skilled and more competitive than ever --- still stands. (Regardless, your numbers on how many bank tellers there were years ago vs. now means little in absence of *a ratio of bank tellers in 1985* to the population at the time vs. current population/teller ratios --- but I digress.)
The matter of efficiency, moreover, should not be taken out of context. To the extent broadband enables the outsourcing of middle-skill jobs in administration or high-skill jobs in healthcare (radiology, nurse case managers, etc.), the question must be further qualified by the issue of *domestic job creation* (which in turn becomes a trade/policy question). Princeton economist and former vice federal reserve chairman Alan Blinder has indicated that the Internet and off-shoring, when taken together, represents a GROSS loss to jobs here in the states, net gains notwithstanding.
I see where you're headed here but the argument is not inclusive and therefore draws a conclusion that comes up just short. At best the case can be made that future jobs will favor some portions of the population more than others --- and there's evidence it's already happening.
I've written about the topic on my own blog with all the aforementioned sources cited (linked).
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