Daniel Kuehn writes a short criticism of what he deems a poorly reasoned article (and, I am in complete agreement with this assessment) by Timothy Noah, at the New Republic (“Steve Jobs, Jobs-Creator“). But, he tries to link job creation by part of Steve Jobs (which was both direct and indirect) to that of the Obama administration and the stimulus program. This inspires me to emphasize a tangential point. You cannot judge the two on the same metric, because while Jobs preformed wealth creation Obama is pursuing capital consumption.
In the case of Obama, it is not about jobs created versus jobs saved. It is about opportunity cost. And, neither is it about whether or not Obama can create a short-run positive increase in employment. For the sake of simplicity, less us assume that private investment is zero for a period of six months. If government redistributes this capital from entrepreneurs to the public sector and then invests it in some form of public work there will likely be net job creation during that period of time. But, if we were to judge this in terms of benefit to the economy as a whole we would be mistaken to correlate job creation with economic growth.
The point I try to make in my article “Government Spending is Bad Economics” (that government cannot economize) is lost here. It is not about job creation. It is whether or not the job creation that comes from government spending, if any, is worth the loss which is represented by what could have been had that capital not be redistributed towards less preferred ends.
The calculation debate is not just about socialism, it is about calculation in a capitalist economy. Steve Jobs was not just a job creator. He positively contributed to adding to the world’s stock of wealth. Obama may be a job creator in the short-run, but he is negatively contributing to the world’s stock of wealth.
For those who have not read these pieces, but are interested in the topic of calculation, I suggest these two articles in this order: “The Foremost Austrian Contribution to Economic Science” & “Government Spending is Bad Economics“.
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While reading few of Steve Jobs’ best quotes I stumbled across this one:
“For something this complicated, it’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”
I find it a very apt summary of his philosophy at apple. I also found it to be a sound refutation of Keynesian rejection of Say’s Law from a businessman respected by both the left and the right.
No matter the era, in the burgeoning industries responsible for the majority of economic growth, people don’t know what they want until an entrepreneur gives it to them. A focus group is not going the create the GUI or the iPod, such a fundamental revolution, be it in tech or Ford assembly line takes a dreamer – a businessman.
Say’s Law is often popularly expressed as “supply creates its own demand.” What then can Steve jobs teach us about the effectiveness of stimulus? We can scratch government directed stimulus off the list immediately. This is the first sentence that has ever used the words bureaucrat and dreamer in the same sentence. But what about the stimulus that simply gives everyday Americans a few extra dollars in their pocket? Can demand create its own supply? No, not it any meaningful sense if the goal is the kickstart the economy. Keynesian is ass backwards. Every stimulus dollar comes out of either the value of existing dollars or out of the capital investment potential of creators like Steve Jobs.
Take it from Jobs, people don’t know what they want until someone shows it to them and it’s the creation of things people didn’t even know they wanted that drives growth and escape from hardship.
The only reason why people talk about Daniel Kuehn is because people talk about Daniel Kuehn.
The title of the article should be “Jobs vs No Jobs”
I didn’t read after the Daniel stuff, since I find the guy in need of a mental check, but nice comment from axiomata. Sometimes the quality of the comments is way above that of the posters.
Steve loved Atlas Shrugged and even went to première dispite his health problems. I think that saus enough…
re: “In the case of Obama… It is about opportunity cost.”
This isn’t just true of Obama – it’s true of Jobs too or anyone generating any jobs.
re: “It is whether or not the job creation that comes from government spending, if any, is worth the loss which is represented by what could have been had that capital not be redistributed towards less preferred ends.”
Why do you think this is lost? Isn’t this exactly the point I always make Jonathan? You seem to have stopped agreeing with me too soon in this post.
No, I have never seen you make that point. In fact, I only saw you disagree when that article I link to was published.
OK, well I say this in all the reviews of the empirical analyses of fiscal policy I make. The point you make here about opportunity cost is crucial.
I’m not sure how you would even consider what I’m talking about in an empirical study. You can’t make an empirical comparison, because you simply have no idea what could have been. And it’s not what could have been at any specific moment in time, but what could have been had those resources been economized over an undefined period of time. Furthermore, it’s what could have been without certain impediments to economization (like taxes and regime uncertainty, for example).
Yes, it’s about opportunity cost with anyone, but with Obama the consumer isn’t making the choice with their money. There are instead people making choices with their votes, but they have less incentive to educate themselves on the potential negative effects of their choices. Additionally, it’s not like they choose each policy or job that is created to the same degree they do when they make a purchase. Instead, favored companies get government contracts to make different improvements or new projects.
“Why do you think this is lost?”
I think it seems lost because when you first refer to opportunity cost you seem to equivocate Obama and Jobs, as though you don’t recognize the distinction.
Matthew,
You are correct in what you write, but he simply didn’t get the point in the first place. I wasn’t talking about opportunity between different means/ends combinations in economization, but the opportunity cost between rationing and economization. This is basically what you said, but I wanted to emphasize the difference between rationing and economization, which is something Daniel has failed to really address.
How have I failed to address this? Without the price mechanism rationing is a less efficient allocation mechanism because subjective preferences do not determine allocation.
When have you ever known me to deny this point, Jonathan?
We do not disagree about economic calculation – we disagree about the welfare implications of certain actions under depression conditions.
You know we don’t disagree about allocation by rationing or fiat. Why do you act like we do?
Because you think that the laws of economization no longer apply under certain economic conditions, which is absurd.
I’m not sure what to tell you, Matthew. I’ve always maintained that the lack of a price mechanism in government allocation is an important distinction between public and private expenditures, and a reason why we expect crowding out in most circumstances. I’ve never held a different opinion, so I suppose we agree.
There are differences, of course, over whether there are certain circumstances where public expenditures can be welfare enhancing.
There are no differences of opinion, to my knowledge, on the points you have here about economic calculation. If you know of any feel free to let me know, but you are saying things I agree with.
This is not an issue of crowding out. Even if you don’t presently crowd out resources, it still means that at some point in the future these resources won’t be available for economization (when their economization is more sensible than their attempted economization under past conditions). That’s why government spending doesn’t make sense under “liquidity trap conditions”.
They promote labor for the sake of labor, production for the sake of production, and entirely ignore the whole role of economic coordination and entrepreneurship altogether. It’s the ultimate Keynesian fallacy; the very crux of their untenable framework.
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