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Productivity kills Jobs?

Recently Congressman Jesse Jackson Jr. (D-IL) remarked that Apple’s iPad was “probably responsible for eliminating thousands of American jobs.” Further, he tried to link it to the recent bankruptcy of Borders Books as well, quipping that “Why do you need to go to Borders anymore? …just buy an iPad and download your book…”

Wow.

Such an expression of sheer ignorance of basic economics is astounding. And from a sitting U.S. Congressman no less makes it all that much more sad and appalling. But I guess I shouldn’t be too hard on Jesse. This fallacy has been with us for a long time. Every time some new tool that enhances productivity (and thus lowers costs) is introduced it is decried as terrible because it will put so many out of work. The benefits (lower prices) are ignored. But after awhile the controversy dies down and we’re all much happier to be paying less for our robot built cars, our sewing machine made clothes and our machine harvested food.

So why does this myth persist? Well quite simply because it is true – people do of course lose their jobs – in the short term. However it is disingenuous to evaluate productivity gains over a narrow time frame and summarily conclude the outcome as negative because a few will lose jobs.  That’s like planting seeds and a day later noting that nothing has yet sprouted therefore the seeds must be worthless. Productivity gains take time to take root and spread their fruit of lower prices throughout the economy. As people spend less money on the newly cheaper goods they now have more money to spend on other goods. The increase in demand for these “other goods” drives job creation. Of course it does take time for people to retrain or to move to where the new jobs are, it doesn’t happen overnight. That’s why we have Unemployment Insurance. In the “big picture” there are no job losses, in fact there will be net job gains if the productivity enhancements are sufficiently large.

But some inevitably want to prevent the process from ever starting because of short term fears, thus they use the power of government to act as a break to these productivity gains. Government will either subsidize the outmoded industry or attempt to penalize the new entrant through punitive taxes or burdensome regulations. This only happens of course if the “harmed” industry has a sufficiently well funded lobbyist group. This explains why sugar is more than twice as much in the US than in all other countries (due to the trifecta of tariffs, quotas and subsidies) whereas typewriters have practically gone the way of the Dodo. Government meddling in the market simply makes the process take even longer (we’ve been waiting since 1812 in the case of sugar!) by eliminating most if not all of the cost savings achieved and thus the net additional jobs that could have been created.

What is a “Right”?

In a recent editorial I obliquely referred to the concept that healthcare is not a “right.” I would like to flesh out that concept more fully in order to substantiate the concept that healthcare is not a right any more so than food, housing, transportation, clothing, television, or any other consumer good.

Yes, I can hear the protests now, “Of course healthcare, food and housing are rights! We need these things to live, to survive!” Yes, that is true, we do need these things. But that does not make them rights. They are requirement to survival, but they are requirements we are to provide for ourselves.

So, what is a right? There are actually two types of rights: negative and positive. Negative rights are also known as Natural rights whereas positive rights are those conferred by decree (Fiat rights). Negative rights transcend time and place. For negative rights to be upheld requires NO action on the part of anyone else. We all have a right to our life, or stated conversely, we have the right to not be murdered. For us to not be murdered requires only the inaction of others. We have a right to our property (i.e. those things produced by us through work). Inaction of others ensures our property will never be taken. We have a right to free speech. This means that we can speak our mind publicly and not be silenced by force; it does not (and never has been interpreted to) mean we must be provided a means by which we can disseminate that speech. In the same way our right to life does not mean we must be provided with the tools necessary to maintain that life. If we are to be provided with such tools that implies someone must provide them.

Positive rights are those rights that by their nature require that someone else DO something to provide that right. If healthcare were actually made a right by decree, then this would mean that it MUST be provided to all. The problem with this concept is what do you do if no one or nearly no one wants to provide this service? If it is a “right” then it must be provided, and if it must be provided then the government must through force or coercion compel someone to provide this right. The coercion may be direct (i.e. the state dictates what your profession will be) or indirect (i.e. the state takes money from one group against their will to give to another group in order that they may obtain their “right”). Some may see this as “ok” because collectively, we, as society might be better off (e.g. the concept that “healthy Americans benefit the country”).

That is a dangerous road to travel. If we can justify any action based on the concept that society benefits then what is to stop us from establishing laws that require people be licensed before they can have children (so that the state can ensure they are “ideal” parents) or dictate how many children we can have… or perhaps sterilize those with undesirable genetic traits (they simply lead to higher health care costs, and anything that lowers health costs is good for society, right?). Well, I for one vehemently disagree. This is where all government intervention errs (beyond the core duty of protection of our natural rights) – the intentions are good but they are never thought out to their logical conclusion. That conclusion being that in fact the good of the many does not outweigh the needs of the few or the one (with apologies to Mr. Spock).