The Jobs Debate. Ends or Means?

Most of the confusion in economic policy, both for economists and laymen alike, stems from an unfortunate misunderstanding of what are the ends of our policies.  Obama and Romney alike have fallen prey to this confusion, and, as a result, have been unable to articulate a meaningful plan for economic recovery.  The confusion comes to a head at the importance of job creation.

Our modern politicians proclaim their distinct god-like abilities to create jobs.  That what their policies are geared for, and that's what we want to hear.  It's the most important issue of the election.  But it's also the reason both candidates are completely inept (yes, one far more so than the other).

Jobs are not an end.  They are a means to an end.  The end is economic growth, wealth, value, prosperity.  Jobs are a means to that end, but not a sufficient means.  In other words, increasing the number of jobs does not necessarily increase our prosperity at all!

In the time of the Great Depression, John Maynard Keynes proposed a detailed theory of how to deal with the economic cycle, how it works, how to control it, how to escape a downturn.  The premise of the theory was founded in getting money flowing when it becomes stagnant.  Jobs.  Borrow money to spend it to get people to work.  It doesn't matter what they do, pay them to dig a hole and fill it back up again if necessary (talk about shovel ready).  Once they have money, they can spend it, and the money starts flowing (circularly) again.  This is the birthplace of our misconception.

Let's back up a bit.  Remember that jobs are only a means, not an end.  The end we're looking for is economic growth.  Let's take Keynes's idea of digging a hole and filling it back up again and explore it more deeply.  At this point in the economy, we're in the midst of a downturn, caused largely because we've been overly invested in certain aspects of the economy and the market is correcting.  So now we borrow money and spend it on labor so that the money starts flowing back into those existing channels again.  In other words, we push fund back into the existing economic framework that has just failed because it was improperly balanced.  It should be clear that this is only a temporary patch, and that the adjustment still has to be made.

Let's look deeper.  If we pay a man to dig a hole and fill it back up, who is benefited?  What is the value generated?

Wealth is created.  It is not distributed, it is not taken, it is not even earned.  It is created.  Value comes from the sweat of our brows, the genius of our minds, and the skill of our hands.  We create wealth from nothing by transforming materials that have no immediate use into creations of our own design which solve a need that we ourselves and many others have.  Those raw materials, through our efforts transformed from objects of no use (and therefore no value) to objects of great value to us:  delicious food, comfortable shelter, educational tools, entertainment, beauty, etc.  This is the object of our economic efforts.  Jobs are only a means toward that end.

So when I hear Obama declaring that the government will create thousands of green jobs to get the economy moving, I shake my head in exasperation.  Jobs that create little or no value relative to its opportunity cost (i.e. the best alternative use for those workers/resources) do not generate economic growth, but hinder it.  And all we show for it is a debt to pass on. 

Then I hear Romney declare that he knows how to create jobs, and that we need to get tough on China, and protect our American workers.  I shake my head again.  Protecting jobs of low value by forcing millions of American consumers to pay more for their goods again forces money into old pipes, and comes at an opportunity cost much greater than the saved job.

The job is not the goal!  If jobs become the goal as they have today, our policies will focus on maximum employment at the expense of value.  Like my favorite economist F. A. Hayek (or at least his creative followers) explains in this music video, the argument that World War II created jobs and cut short the Depression is obscene:

Creating employment's a straightforward craft
When we're at war and there's a draft.
If every worker was staffed in the army or fleet,
We'd have full employment and nothing to eat.

The talk of Hurricane Sandy brings this problem again to the forefront of the issues.  I see articles like this, and I can't help but shake my head again.  The idea that destruction gives us a chance to get back to work is a classic misunderstanding of jobs as an ends rather than a means.  If you look at it from the proper perspective, that the ends are prosperity, such destruction is never a good thing.  And it is obscene to put such a false (and political) silver lining on people's tragic loss.

Freedom Fallacies

Once defined simply as lack of restraints, 'freedom' has come to have a list of various and contradictory meanings.  Types of freedom now include the likes of freedom from restrictions, freedom from rules, freedom from hardships, from tyranny, from hate,  and so on.  Thus, the freedom we once fought for has become a muddled mass of confusion, each individual clamoring for more of his preferred type of freedom.

Freedom from rules and restrictions (i.e. anarchy), cannot exist for all, as the granting of such freedom would mean the ability of one to infringe on the freedom of another.  Thus such freedom would only be had by the powerful, who would destroy the freedom of others.

Freedom from hardships, from hate or pain could not exist either.  For such a freedom to exist, there could be no freedom to choose, for such things come as a result of individual choice.  The elimination of choice is impossible, as it cannot be possible for any but God, who has condemned such ideology, to possess such monitoring and controlling power (i.e. Big Brother) sufficient to control all though and action.  Indeed, the very attempt at the monitoring and controlling of some population will certainly be in direct violation of various wants and desires of those whom are controlled, thus creating hardships, hate, and pain.

True freedom, maximized freedom for all parties, the freedom we ought to pursue with fierce conviction, is that of a personal level.  Under such freedom, there exists a sphere for each individual which is their own.  Within that sphere, individuals may do as they please, to acquire possessions, to pursue their own ends, to live as they choose.  Nothing within their sphere may infiltrate another's sphere without their consent.  Yet, consenting individuals may enter each other's spheres as they see fit.  Thus the pursuit of happiness, as it is so termed, becomes a true freedom for each individual, to pursue such ends in whichever way they choose.

Except in rare cases of mental incapacity, this freedom must be granted to all, else justifications of restricting freedom could have no bounds.  Even those who, as one might perceive, might do harm and evil to themselves, choose to do so because the perceive it to give themselves the most joy within the context of their own situation.  Who are we to say they are wrong?  For their happiness emerges from their own self-concept, from their own perspective.  Forcing one to do right according to another cannot result in happiness, but only resentment and hate, for any and all involuntary action breeds such. 

Laws must exist to protect the spheres of individual freedom.  When laws are issued to violate such spheres, or alternatively when laws fail to protect those spheres, freedom is lost, and with it the chance of happiness of those who lost it.

Agnosticism

Skepticism is a healthy thing.  It helps to prevent mistakes and wasted time and resources in meaningless causes.  I admit to being quite agnostic with respect to many various societal aspects, particularly when it comes to the doctrines expounded by the supposed guardians of societal truths (i.e. journalists, teachers, media), who do nothing more than regurgitate the imaginations of intellectuals who have no recourse for their misguided theories and ideas.

But agnosticism is dangerous inasmuch as it is taken to extremes.  Hayek, one of my favorite economists and philosophers, became a staunch antagonist of what he called scientism, which refers to a faith in science to the point of rejection of anything unobservable.  In his book, The Fatal Conceit, which I'm currently reading, he classifies this ideology into four correlated philosophic concepts, defined here:

Rationalism: denying the acceptability of beliefs founded on anything but experience and reasoning.
Empiricism: maintaining that all statements claiming to express knowledge are limited to those depending for their justification on experience.
Positivism: the view that all true knowledge is scientific, in the sense of describing the coexistence and succession of observable phenomena.
Utilitarianism: 'takes the pleasure and pain of everyone affected by it to be the criterion of the action's rightness'.

These philosophies are very common in modern society, particularly among the so-called intelligentsia.  It should not be surprising, perhaps, that many of the most intelligent among us tend to overvalue that intelligence to the belief that such intellect can grasp vast complexities of the modern world.  But such faith is misguided, as it is impossible, by nature, for one complex system, such as our brain, to fully comprehend a system more complex than itself.  Instead it must rely on simplifications of various types to estimate, guess, or ignore various details that may or may not be of importance to the actual functionality of the complex system being analyzed, inevitably leading to misunderstandings and errors.

What these increasingly popular philosophies have done, as Hayek puts it, is to create "the impression that only that which is rationally justifiable, only that which is provable by observational experiment, only that which can be experienced, only that which can by surveyed, deserves belief; that only that which is pleasurable should be acted upon, and that all else must be repudiated.  This in turn leads directly to the contention that the leading moral traditions that have that have created and are creating our culture - which certainly cannot be justified in such ways, and which are often disliked - are unworthy of adherence, and that our task must be to construct a new morality on the basis of scientific knowledge - usually the new morality of socialism."

Such conclusions, as were growing in popularity when he wrote this summary in 1988, and are nearly dominatingly popular today, "contain the following presuppositions:
1) The idea that it is unreasonable to follow what one cannot justify scientifically or prove observationally.
2) The idea that it is unreasonable to follow what one does not understand....
3) The related idea that it is unreasonable to follow a particular course unless its purpose is fully specified in advance.
4) The idea, also closely related, that it is unreasonable to do anything unless its effects are not only fully known in advance but also fully observable and seen to be beneficial."

To the faith-minded reader, these presuppositions might seem close-minded, or perhaps even evil.  But such arguments do little to persuade the rationalist, who essentially needs to be shown a sign to believe.  Yet, even such should be able to acknowledge two glaring issues with these presuppositions, as Hayek points out.  "First, not one of them shows any awareness that there might be limits to our knowledge or reason in certain areas, or considers that, in such circumstances, the most important task of science might be to discover what these limits are.... Second, one finds in the approach underlying the requirements not only lack of understanding, not only the failure to consider or deal with such problems, but also a curious lack of curiosity about how our extended order actually came into being, how it is maintained, and what the consequences might be of destroying those traditions that created and maintain it."

In essence, it is supposed by such rationalists that the modern order of society, which has survived through the millenia, and advanced mankind out of the dark ages of stagnation, is inept and must be replaced by a more enlightened constructions of the human mind.  Thus the trial and error of generations which have led us to our modern traditions and morals (whether you believe these morals to be developed by human action, or given by the divine as I do), and proven their superiority by natural selection, are eschewed.  Experiments with other societal values have generally failed or underperformed compared to those of the American family.  Yet hastily, intellectuals desire to cast off such pointless values because they do not fall within their science.

It is not unreasonable to believe that religion and its morals are the best values a society should pursue.  Whether a person is agnostic or religious, the evolution of ideas has proven the value of morality.

Power Cravings

It would seem, generally, that people tend to have 2 different cravings for power. First, there are those who crave control. These tend to be highly educated, successful, and driven, everything we generally associate with leadership. But I wonder if they are not so more because they wish to be leaders than because they wish to be successful. In other words, perhaps they are driven by power, rather than being driven by success. This presents a problem for those looking for a leader. How do you distinguish one who is seeking power from one who is successful?

It could be argued that it doesn't matter, for the reasons which a person becomes successful, whether it be for power or glory, are the very reasons that person will continue to act in the same manner once he's achieved it. But this is not truly the case, for power, once given, is often very difficult to take back. One who craves power, and thus achieves it, will especially be hard set in keeping it. He may be driven to act properly by controls over the power, but a power-driven megalomaniac has incentive to skirt these controls or destroy them. This is the way dictatorship emerges.

Thus is is truly vital that men seek out leaders who are not power-driven. This brings us to the second type of power craving: those who crave an authoritarian leader to look after them. This, I believe, is not a small minority. There are many who find themselves struggling to make ends meet, who either don't care enough to make themselves successful or are incapable of such. A vast majority of these types fall into the former category, though they would have you believe otherwise. People of this type do not want authority, they want to be taken care of. I hesitate to call it laziness, but it is a neediness not because they are incapable of providing for themselves, but because they enjoy being looked after. It makes them feel cared for and important. I would suspect it derives from an emotional disorder likely caused by poor or abusive parenting. The numbers in this category, I proffer, far exceed those in the first category.

Both of these types, unfortunately, typically crave authoritarian rule. One to be the authority, and the other to be cared for. Even counter-authoritarian ideology is often derived of those who would like to have power, but do not, and thus resent the power someone else holds over them. They are few who feel comfortable caring for themselves, but do not wish to have power over others. Americans, at least those whom I consider true Americans, constitute one of the few cultures which promote such balance. We fear power, because we know what it can lead to. We believe that Lord Acton was wise in his pronunciation that "power corrupts, and absolute power corrupts absolutely".

But we are waning, and power is becoming popularized again. The country is becoming dominated by those who wish to be cared for. I blame it on the corruption of the family, and kids now grow up to be dependents. It will likely take the experience of tyrannical rule to convince them otherwise. What can we possibly do to save ourselves from that fate?

Morality and Prosperity

I've been reading a very interesting book by one of my favorite scholars, F.A. Hayek, called The Fatal Conceit, so named to describe the illusion that men may completely control their future. The basic premise of the book is interestingly founded in the concept of morality, holding that progress, knowledge, intelligence, etc. are products of traditions of morality that evolved spontaneously (by spontaneous we mean uncontrolled, not sudden). The basic premise of socialism is the reversed causality, that intelligent people create morality, that we can progressively create a moral society with our knowledge and wisdom. I haven't yet read Hayek's argument for why this is wrong and that morality is spontaneously emergent, but it makes sense.

Anyway, the point of this post was to tie this knowledge into our modern society. Moral society emerged as a result of traditions passed on from generation to generation. Specifically, as I believe, a moral code was given mankind of divine origin, and the tradition was held onto by some, and disregarded by others who, instead, created their own moral traditions. But social characteristics such as honesty, charity, trust, and respect for our fellowman produce efficiencies in market transacting. If honesty is not a social virtue, traders would not be able to trade efficiently, and expensive protections would be necessary for all transactions. If there is little respect for fellowman and their property in society, expensive protections must emerge to guard each individual's livelihood from theft. Thus, moral societies excel because of the efficiencies it produces, while the immoral societies flounder. Survival of the fittest allowed the most moral of traditions to endure, while those immoral societies could not.

This brings us to today. The moral system that our founding fathers developed gave us produced such efficiencies as to lead us out of the enduring agricultural system which had us constant fighting for survival. Innovative developments moved us from a society where 90% of us were farmers in order to produce sufficient food for society, to where less than 5% are, and we have far more than any of us need. We do not fear weather, we do not build our own homes, and we are free from the shackles of producing our own sustenance to pursue other life-improving ideas that make everyone better off. We have the time and freedom to pursue knowledge and scientific discovery, which has accelerated our development further.

Yet it is a fragile system, dependent on the efficiencies of the moral traditions of our forefathers. If we begin to abandon those traditions, the costs of economics rises, the profits drop, the costs of food and energy increase because we simply do not trust each other. And it becomes a cycle. We do not trust others, which makes prices high and unaffordable, which creates additional incentives to be dishonest or steal, and so on.

We are in at a precarious point, were we still have trust in our protections, but are abandoning them little by little in the name of the greater good. We take from each other with government force to feed those who do not feed themselves, not by charity, but by theft. We are beginning to eschew the family, the foundation of traditions, for a more "enlightened" society. If the family becomes inconsequential in teaching morality, our youth will grow up with no traditions to hold onto, no moral code to live by, and our society will collapse.

If our society continues to abandon moral traditions that have created our wealth and knowledge, we will have no choice but to separate ourselves from them, and establish a new order by which we may reestablish moral traditions to live by. May it not come to that.