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« Spontaneous Order Revealed | Main | Why there will be Gas in Georgia »

02 September 2008


David McGinnis

But what about the people that are completely unemployed. Shouldn't we use tax payers' money to pay them to build pyramids??

Michael Uehlinger

I fear that these workers' resources were not being utilized effectively before the shipyard jobs, hence the term "creation" of jobs. However, the operative word is that the resources "should" have been put to better use, and the fact that they were not is a separate failure. Should this be the case, would such "job creation" (job redirection) serve to just artificially increase wages? The inference is that the high cost of labor is stifling real job creation, and job redirection keeps costs/wages artificially high.

Alastair Walling


I would argue that job redirection does not keep wages artificially high but artificially low. Wages are a function of production—a society consumes what it produces. If a single pioneer enters a new land, then his “wages” are only what he can produce. If another pioneer joins him in the territory, then the wages of their society is the sum of what they can produce. The same is true if you add another 300 million pioneers and recreate the U.S, economy. [For more on this I would recommend F.A. Harper’s Why Wages Rise, available here]. If a society decides to build an aircraft carrier, then the resources used are redirected from producing things actually consumed by the populace (and we can’t eat or wear aircraft carriers). In essence, members of the society are surrendering a portion of their wages in order to produce a public good. Furthermore, underutilized labour usually finds something else to do, and the “saving” of these jobs has served to impede creative destruction and delayed the inevitable reallocation of these labour resources to more value-adding opportunities.

Sorry this was on the fly, but let me know if it doesn’t answer your question.


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