Sunday, 9 May 2010

Unemployment solved !!!

Don Boudreaux has written an open letter to Ezra Klein of the Washington Post on the topic of productivity and employment:
Dear Mr. Klein:

You allege that when unemployment is high, a slowing of productivity growth is “good news” for the economy (“When bad economic news is good news,” May 6). The reason, according to you, is that the greater the number of workers required to produce a given amount of output – everything from a Starbucks’ latte to a Boeing 747 – the higher is the is the demand for workers.

The relationship between productivity and demand for workers isn’t this simple. (If your employer, the Washington Post, suddenly lost access to the Internet and found itself stuck with vintage 1890 printing presses, are you sure that the Post would hire more workers to compensate for its drop in productivity?) But assuming your premise to be true, why rely only upon unguided forces to reduce worker productivity? Shouldn’t government help this beneficial process along – say, by requiring that each employee drink three martinis before reporting to work?

Not only are drunk workers less productive than are sober ones, they’re also more likely to damage equipment. So mandating employee intoxication promises a helpful double-whammy during these recessionary times: employers would hire more workers to produce any given amount of output, and employers would hire more workers to repair damaged equipment. Presto! Unemployment problem solved!

Shall we drink to this proposal, Mr. Klein?

Donald J. Boudreaux
I wonder why we didn't just outlaw all mechanical devices and computers. Surely this would drive down productivity and increase the need for workers. The unemployment problem would be solved in an instant. Then all we would have to do is solve the standard of living problem.

I guess we should be pleased to learn that its not just New Zealand newspapers that have crap economics written in them.

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