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Could We Have More Jobs Than We Ever Hoped For?

The Jobs Summit

by Fred E. Foldvary

President Barack Obama will be hosting a White House forum on jobs in December 2009. Unemployment continued to rise during 2009, and the president seeks to stoke the economy to create more jobs, jobs, jobs.

The summit will gather together people from diverse fields: economist gurus, the small-business bourgeoisie, grand poobahs of big business, financial fat cats, and union bosses. Evidently, Obama forgot to also invite some actually unemployed workers. He also left out psychologists, priests, community organizers, political pundits, and plumbers.

Despite this lack of full diversity, the gathered will discuss how to accelerate job creation. The federal government has put the unemployment rate at 10.2 percent as of November 2009, but if one includes those who would like to work but have forsaken job search, and those who are underemployed, the jobless amount to about a fifth of the labor force. Thus there is political pressure for the president to appear to be doing something. A gathering to discuss the problem will be splashed in the media and create buzz.

But asking how to create jobs has it backwards. The fundamental question is not how to create more jobs, but how to stop government from destroying jobs. It is like hunters who go into a field and shoot every deer in sight, and then hold a meeting on why the deer have disappeared.

Henry George had a parable about the unbounded savannah. Suppose there is an infinite field of free land in which farmers could apply their labor to grow corn. Would there be any unemployment? Of course not, since anybody could get some land and employ himself to grow corn. When there is unrestricted access to natural resources, there is no unemployment.

In primal human society, villagers could go into the fields to hunt and gather. Sometimes they might not find enough food, but there was no lack of work, since one could keep on searching, digging, and foraging, and then do some crafting and trading.

Now, in the 21st century, employment should be much better, but instead, it is worse. It is illegal to pick the berries. Suppose a man goes down the street peddling goods to the public. A police officer arrests him, because this is illegal. The jobless man offers to pull weeds in the gardens of folks too busy to do it, and he would do it for a few dollars per hour, but it is illegal to hire workers at that low wage. He can’t go into the fields, he can’t freely offer his labor, and if he does work, he is poor because he can’t keep his full wage.

Primal man could get housing by going into the field to gather some sticks and fronds and build a house at the edge of the village on free land. The 21st-century homeless unemployed man gets some cardboard out of a garbage bin and builds himself a little house in a vacant lot, but is then fined for trespassing and for violating the building code.

Humanity has advanced from primal times when there was full employment and unlimited housing to the 21st century world of high technology where over a tenth of the population has been locked out of employment and can’t find a place to live. The modern world has more natural resources than the ancient world, because modern technology can make greater use of natural materials. Employers should be screaming for more labor. Instead, we have workers crying because they can’t get jobs, even while factories languish. Folks can’t find housing, while millions of homes sit empty.

There is in nature no reason for unemployment. Human desires are unlimited, so there is always a demand for something. The only reason an unemployed carpenter cannot trade with an unemployed tomato grower is that some force has imposed a barrier preventing them from trading tomatoes for chairs. The only agent that has the power to prevent trade is government.

Government imposes restrictions and costs on enterprise and labor, requiring expensive permits, licenses, badges, and taxes. Primal man had access to communal land, but modern man has lost free access. It goes back to conquest, as the land was taken by the war chiefs and then the peasants had to pay rent plus taxes.

The land titleholder exclaims that he bought the land with his own money, so why should he not have exclusive access? In olden days the slave owner too claimed that he bought the slaves with his own money, so he is entitled to the gains from their labor. Religious folks go to church clutching their Bibles, in which it is written in Ecclesiastes 5:9, “the profit of the earth is for all,” but when this is pointed out, they instantly become atheists.

The role of the economist gurus in the summit is to declare to the media, “The issue is complex. There are no easy answers.” That leaves the government blameless.

But the economic answer is clearly evident. We can restore full employment by going back to the rules of primal economies. Let anyone go into the field and apply his labor freely. We cannot now have unlimited access to natural resources, but we can have the possessors compensate the rest of society for exclusive access. The righteous market, with unchained labor and an equal sharing of nature’s bounty, will eliminate unemployment.

Subsidies to landowners, including cheap credit, generated the real estate bubble that burst and made workers lose their jobs. Instead of preventing the next boom and bust by shifting taxes from wages to land rent, the jobs summit will propose low-interest loans to business, and limited tax credits. But land rent will rise to absorb the gains, and there will still be imposed costs in hiring labor, so in the end, the proposals of the jobs summit will fail.

This article first appeared in the Progress Report, Reprinted with permission.

Dr. Fred Foldvary teaches economics at Santa Clara University and is the author of several books: The Soul of Liberty, Public Goods and Private Communities, and the Dictionary of Free-Market Economics.

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Big problem with free access, is overuse of resources, we see that in fishing.

Imagine this, you surround a table with a group of people, and drop a pile of $100 bills on the table and walk away, when you come back all of it will be gone as people would have rushed in and grabbed, allowing free access would result in a mad grab to get the resources and use them before others did, and would leave nothing behind.

On the other hand, if you were to say, for every $100 that remains on the table when I get back, I'll add in an extra $200 to the pile, you'd see the pile was largely untouched, any money taken would be only what was vitally needed and the rest would be left.

This is why free access cannot happen as it will leave us without resources in a few years

# posted at by Avinash_Tyagi

You are forgetting the "primal" lesson of economics: there is no free lunch. Supply and demand regulate the economy and prevent free access. If everyone rushed to catch as many fish as possible, the supply would far outweigh the demand and prices would plummet, which would cause most fishing folk to find a more lucrative activity. And most do. This happens until the economy is in equilibrium --- and not just any equilibrium, but one chosen by people's individual choices. Thus, it is socially optimal.

Capital is free to invest in any enterprise with great velocity, why not allow labor the same privilege? Instead, interest groups block labor by lobbying for licensing requirements, usually under the guise of quality control, to hold salaries for those grandfathered into the requirements artificially high. Formal education is an even larger ruse and barrier to labor mobility. Almost all of the return on a college education comes from employers requiring degrees for employment, not because college actually makes people more productive. Employers understandably see college as a signal of professionalism and determination, but schools have ruined the system by requiring about 2 years of gen ed credit (and thus more tuition revenue). Banks love it because it is easy money and employers require it because it legitimizes the business and anyone with that much debt will probably work harder for less. They also don't like sifting through tons of applications. A lot of it is also psychological. Remember that while a business wants to maximize profit, people do the hiring and there is a cognitive dissonance created when someone who is "under qualified" gets a good job with decent pay. There is this idea that you have to pay your dues, regardless of your actual skills.

Income inequality is created, in part, because of these labor market barriers. The only long term solution to breaking these barriers down is to stop legislating occupational licensing and other job requirements. In place of them, we should provide consumers with a method for rating business transactions or subsidize existing solutions (yelp, better business bureau, amazon, ebay). We should also support optional certification, requiring everyone to plainly state whether or not they are certified in a field before engaging in an economic transaction. This will let customers decide if certification is necessary while letting labor enter and exit any market seamlessly just like capital. If we allow capital to invest in the most productive areas of the economy but make labor wait, then we will always have a labor problem --- either too little or too much labor for any given profession (see the Cobweb Model). I understand that people suffer when the economy recalibrates itself and that re-tooling yourself when you have kids at home, a mortgage payment, and a car payment is difficult. Making labor more fluid will decrease the time it takes to re-tool. I support unemployment benefits to help people out that have been laid off due to structural shifts in the economy. Give them time to re-tool and get back in the game. I am much more with comfortable bailing out actual hard working people than I am with bailing out failed business models and "zombie" corporations.

# posted at by Devin

Avinash_Tyagi wrote:
"Big problem with free access, is overuse of resources, we see that in fishing."

Funny you should bring that up...

Here's a story of what actually happened in Canada. No intellectual theorizing here...

"So Long And Thanks For All The Fish!"

Whenever you use coercion to enforce a monopoly, things just don't work out well.

Feel free to rebut the ideas in this article, if you can.

# posted at by OJ

Gucci shoes claim to desigh their shoes ‘‘from inside out’’and in this image of the heeled version of their 3-tiered Soleplex design,you begin to see why.In this image,tiers 1 and 2 make up the ‘‘Footbed and Stabilizer’’level.

The only way an LVT would work would be to pair it with a Citizen Dividend. I rarely hear Dr. Fred talk about this. Also, when so many people are underwater on their mortgages, the last thing we need is to force down property values with an LTV by extracting all the value.

Six years ago, a Land Value Tax would have been a good idea. Not so much now.

As to the job summit, it won't do much because those assembled have no stake in employee ownership and control of the workplace, which could be use to reduce barriers to entry by providing a way to train more people in what they are talented to do without their having to raise the money for that education.

Until we can develop a party of the "upper left" we will pretty much get what we already have.

# posted at by Michael Bindner