Friday, January 3, 2014

Job Creation Bean Counting

As I’ve said in a previous post, if we’re trying to figure out how to use public resources effectively, we really shouldn’t use job creation as our guide. Not that job creation is unimportant or that unemployment is not a serious problem. We obviously want everybody who wants a job to have one. But when we do put people to work, what they are working at matters. If it didn’t, any old job in any old useless public project - paying people to dig holes in the ground and fill them up again, say – would be as good as any other. We want people not just to work, but to work at something meaningful and productive.

All that may sound pretty obvious, but it’s surprising how often we hear from policy makers and interest groups and editorial writers that job creation, any job creation, is good, and more job creation is better. Consider, for example, this statement from Rep. Austin Knudsen in a recent Missoulian column, “Environmental review laws are designed to make sure that we’re balancing environmental concerns with job creation.” *

Well, no they’re not, and just a smidgen of thought should make that clear.  If we decide to allow some environmentally destructive activity – draining a wetland, for example – just because there will be lots of jobs created in the process, what we are saying, in effect, is that it’s okay to destroy the environment as long as it takes a lot a work to do it! That’s crazy talk. It’s only what we build in its place that can plausibly justify draining the wetland. It’s not putting people to work that counts, but what those people are doing.

To be fair, Knudsen didn’t invent this kind of job creation bean counting, and he has no monopoly on it. It’s not just developers or their allies who talk about job creation. Environmental advocates do it as well. The result is that our energy policy debates, for example, often consist of arguments about whether there are more jobs in coal, or oil, or wind, or solar, or energy efficiency or what have you.  Apparently without realizing it, the contending parties want us to select as our favored energy source whatever takes the most work and is therefore potentially the most costly!

Don’t get me wrong: government should certainly use its resources to promote job growth, particularly when the economy is in recession, or recovering from a recession “joblessly,” as it is now. One way of encouraging job growth is through fiscal policy: manipulating taxes and government borrowing and spending to stimulate demand for goods and services and the labor necessary to produce them. The question with fiscal policy is how much stimulus is needed, and more than one economist, even Keynes himself, has pointed out that what government spends on really doesn’t matter much; anything will work. As a matter of macroeconomic policy that’s true, but it doesn’t mean that when we decide to spend and put people back to work, we should be oblivious to what they are actually doing.

Well, almost. Back in 2009, when he thought the stimulus bill was too small to produce real recovery from the Great Recession, Paul Krugman wrote that what we needed was the threat, however imaginary, of an invasion by space aliens. That would convince us to start building a multi-quadrillion dollar Death Star, and hire lots and lots of people to do it (if you’re a Star Wars fan, you’ll remember that this puppy was about the size of the moon).

Krugman was messing with us, obviously, but his point was that sometimes, in a recession, if we want to make the spending needed for recovery palatable to fiscal conservatives and budget hawks, we need a cause, however wasteful. Wars fill that bill nicely. It’s like that odd notion that natural disasters are good for the economy because of all the jobs created cleaning up in the aftermath. True, but pretty darn perverse.

* Knudsen in his column is taking on the decision of Washington state regulators to assess the impacts in Montana of increased coal train traffic that would follow the building of a new coal export facility. I commented on that aspect of Knudsen’s piece in an earlier post.

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