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.